EXHIBIT 10.53

                               SEVERANCE AGREEMENT

      THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of July 29, 1998, is
made and entered by and between RAILTEX, INC., a Texas corporation (the
"Company"), and RONALD A. RITTENMEYER (the "Executive").

                                   WITNESSETH:

      WHEREAS, the Executive is a senior executive of the Company and has made
and is expected to continue to make major contributions to the short-and
long-term profitability, growth and financial strength of the Company;

      WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as defined below)
exists;

      WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum severance
benefits for certain of its senior executives, including the Executive,
applicable in the event of a Change in Control;

      WHEREAS, the Company wishes to ensure that its senior executives are not
practically disabled from discharging their duties in respect of a proposed or
actual transaction involving a Change in Control; and

      WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the employ of the Company.

      NOW, THEREFORE, the Company and the Executive agree as follows:

      1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:

            (a) "Base Pay" means the Executive's annual base salary rate as in
      effect from time to time.

            (b) "Board" means the Board of Directors of the Company.

            (c) "Cause" means that, prior to any termination pursuant to Section
      3(b) or Section 3(c), the Executive shall have committed:

               (i) conviction of a criminal violation involving fraud,
      embezzlement or theft in connection with his duties or in the course of
      his employment with the Company or any Subsidiary;
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              (ii) intentional wrongful damage to property of the Company or any
      Subsidiary; or

             (iii) intentional wrongful disclosure of secret processes or
      confidential information of the Company or any Subsidiary;

      and any such act shall have been demonstrably and materially harmful to
      the Company. For purposes of this Agreement, no act or failure to act on
      the part of the Executive shall be deemed "intentional" if it was due
      primarily to an error in judgment or negligence, but shall be deemed
      "intentional" only if done or omitted to be done by the Executive not in
      good faith and without reasonable belief that his action or omission was
      in the best interest of the Company. Notwithstanding the foregoing, the
      Executive shall not be deemed to have been terminated for "Cause"
      hereunder unless and until there shall have been delivered to the
      Executive a copy of a resolution duly adopted by the affirmative vote of
      not less than three quarters of the Board then in office at a meeting of
      the Board called and held for such purpose, after reasonable notice to the
      Executive and an opportunity for the Executive, together with the
      Executive's counsel (if the Executive chooses to have counsel present at
      such meeting), to be heard before the Board, finding that, in the good
      faith opinion of the Board, the Executive had committed an act
      constituting "Cause" as herein defined and specifying the particulars
      thereof in detail. Nothing herein will limit the right of the Executive or
      his beneficiaries to contest the validity or propriety of any such
      determination.

            (d) "Change in Control" means the occurrence during the Term of any
      of the following events:

               (i) The acquisition by any individual, entity or group (within
      the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
      "Person") of beneficial ownership (within the meaning of Rule 13d-3
      promulgated under the Exchange Act) of 20% or more of the combined voting
      power of the then outstanding Voting Stock of the Company; provided,
      however, that for purposes of this Section 1(d)(i), the following
      acquisitions of Voting Stock of the Company shall not constitute a Change
      in Control: (A) any issuance of Voting Stock of the Company directly from
      the Company that is approved by the Incumbent Board (as defined in Section
      1(d)(ii), below), the consideration for which consists principally of
      property other than cash, (B) any acquisition by the Company of Voting
      Stock of the Company, (C) any acquisition of Voting Stock of the Company
      by any employee benefit plan (or related trust) sponsored or maintained by
      the Company or any Subsidiary, or (D) any acquisition of Voting Stock of
      the Company by any Person pursuant to a Business Combination that complies
      with clauses (A), (B) and (C) of Section 1(d)(iii) below; or

              (ii) individuals who, as of the date hereof, constitute the Board
      (the "Incumbent Board") cease for any reason to constitute at least a
      majority of the Board; provided, however, that any individual becoming a
      Director subsequent to the date hereof whose election, or nomination for
      election by the Company's shareholders, was approved 

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      by a vote of at least two-thirds of the Directors then comprising the
      Incumbent Board (either by a specific vote or by approval of the proxy
      statement of the Company in which such person is named as a nominee for
      director, without objection to such nomination) shall be deemed to have
      been a member of the Incumbent Board; or

             (iii) consummation of a reorganization, merger or consolidation, a
      sale or other disposition of all or substantially all of the assets of the
      Company, or other transaction (each, a "Business Combination"), unless, in
      each case, immediately following such Business Combination, (A) all or
      substantially all of the individuals and entities who were the beneficial
      owners of Voting Stock of the Company immediately prior to such Business
      Combination beneficially own, directly or indirectly, more than two-thirds
      of the combined voting power of the then outstanding shares of Voting
      Stock of the entity resulting from such Business Combination (including,
      without limitation, an entity which as a result of such transaction owns
      the Company or all or substantially all of the Company's assets either
      directly or through one or more subsidiaries), (B) no Person (other than
      the Company, such entity resulting from such Business Combination, or any
      employee benefit plan (or related trust) sponsored or maintained by the
      Company, any Subsidiary or such entity resulting from such Business
      Combination) beneficially owns, directly or indirectly, 20% or more of the
      combined voting power of the then outstanding shares of Voting Stock of
      the entity resulting from such Business Combination, and (C) at least a
      majority of the members of the Board of Directors of the entity resulting
      from such Business Combination were members of the Incumbent Board at the
      time of the execution of the initial agreement or of the action of the
      Board providing for such Business Combination; or

              (iv) approval by the shareholders of the Company of a complete
      liquidation or dissolution of the Company, except pursuant to a Business
      Combination that complies with clauses (A), (B) and (C) of Section
      1(d)(iii).

            (e) "Employee Benefits" means the perquisites, benefits and service
      credit for benefits as provided under any and all employee retirement
      income and welfare benefit policies, plans, programs or arrangements in
      which Executive is entitled to participate, including without limitation
      any stock option, performance share, performance unit, stock purchase,
      stock appreciation, savings, pension, supplemental executive retirement,
      or other retirement income or welfare benefit, deferred compensation,
      incentive compensation, group or other life, health, medical/hospital or
      other insurance (whether funded by actual insurance or self-insured by the
      Company or a Subsidiary), disability, salary continuation, expense
      reimbursement and other employee benefit policies, plans, programs or
      arrangements that may now exist or any equivalent successor policies,
      plans, programs or arrangements that may be adopted hereafter by the
      Company or a Subsidiary, providing perquisites, benefits and service
      credit for benefits at least as great in the aggregate as are payable
      thereunder prior to a Change in Control.


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            (f) "Exchange Act" means the Securities Exchange Act of 1934, as
      amended.

            (g) "Incentive Pay" means an annual bonus, incentive or other
      payment of compensation, in addition to Base Pay, made or to be made in
      regard to services rendered in any year or other period pursuant to any
      bonus, incentive, profit-sharing, performance, discretionary pay or
      similar agreement, policy, plan, program or arrangement (whether or not
      funded) of the Company or a Subsidiary, or any successor thereto.

            (h) "Severance Period" means the period of time commencing on the
      date of the first occurrence of a Change in Control and continuing until
      the earlier of (i) the second anniversary of the occurrence of the Change
      in Control, or (ii) the Executive's death; PROVIDED, however, that
      commencing on each anniversary of the Change in Control, the Severance
      Period will automatically be extended for an additional year unless, not
      later than 90 calendar days prior to such anniversary date, either the
      Company or the Executive shall have given written notice to the other that
      the Severance Period is not to be so extended.

            (i) "Subsidiary" means an entity in which the Company directly or
      indirectly beneficially owns 50% or more of the outstanding Voting Stock.

            (j) "Term" means the period commencing as of the date hereof and
      expiring as of the later of (i) the close of business on August 24, 2003,
      or (ii) the expiration of the Severance Period; PROVIDED, however, that
      (A) commencing on August 24, 2003 and each August 24 thereafter, the term
      of this Agreement will automatically be extended for an additional year
      unless, not later than one (1) year and ninety (90) days before August 24,
      2003, or before any anniversary date thereafter, the Company or the
      Executive shall have given notice that it or the Executive, as the case
      may be, does not wish to have the Term extended and (B) subject to the
      last sentence of Section 9, if, prior to a Change in Control, the
      Executive ceases for any reason to be an executive officer of the Company
      and any Subsidiary, thereupon without further action the Term shall be
      deemed to have expired and this Agreement will immediately terminate and
      be of no further effect.

            (k) "Termination Date" means the date on which the Executive's
      employment is terminated (the effective date of which shall be the date of
      termination, or such other date that may be specified by the Executive if
      the termination is pursuant to Section 3(b) or Section 3(c)).

            (l) "Voting Stock" means securities entitled to vote generally in
      the election of directors.

      2. OPERATION OF AGREEMENT. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the 

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occurrence of a Change in Control at any time during the Term, without further
action, this Agreement shall become immediately operative, including without
limitation, the last sentence of Section 9 notwithstanding that the Term may
have theretofore expired.

      3. TERMINATION FOLLOWING A CHANGE IN CONTROL.

            (a) In the event of the occurrence of a Change in Control, the
      Executive's employment may be terminated by the Company or a Subsidiary
      during the Severance Period and the Executive shall be entitled to the
      benefits provided by Section 4 unless such termination is the result of
      the occurrence of one or more of the following events:

               (i)  The Executive's death;

              (ii) If the Executive becomes permanently disabled within the
      meaning of, and begins actually to receive disability benefits pursuant
      to, the long-term disability plan in effect for, or applicable to,
      Executive immediately prior to the Change in Control; or

             (iii) Cause.

If, during the Severance Period, the Executive's employment is terminated by the
Company or any Subsidiary other than pursuant to Section 3(a)(i), 3(a)(ii) or
3(a)(iii), the Executive will be entitled to the benefits provided by Section 4
hereof.

            (b) In the event of the occurrence of a Change in Control, the
      Executive may terminate employment with the Company and any Subsidiary
      during the Severance Period with the right to severance compensation as
      provided in Section 4 upon the occurrence of one or more of the following
      events (regardless of whether any other reason, other than Cause as
      hereinabove provided, for such termination exists or has occurred,
      including without limitation other employment):

              (ii) Failure to elect or reelect or otherwise to maintain the
      Executive in the office or the position, or a substantially equivalent
      office or position, of or with the Company and/or RailTex Service Co.,
      Inc. (or any successor entity by operation of law or otherwise), as the
      case may be, which the Executive held immediately prior to a Change in
      Control, or the removal of the Executive as a Director of the Company (or
      any successor thereto) if the Executive shall have been a Director of the
      Company immediately prior to the Change in Control;

             (iii) (A) A significant adverse change in the nature or scope of
      the authorities, powers, functions, responsibilities or duties attached to
      the position with the Company and any Subsidiary which the Executive held
      immediately prior to the Change in Control, (B) a reduction in the
      aggregate of the Executive's Base Pay and Incentive Pay received from the
      Company and any Subsidiary, or (C) the termination or denial of the
      Executive's rights to Employee Benefits or a reduction in the scope or
      value thereof, any

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      of which is not remedied by the Company within 10 calendar days after
      receipt by the Company of written notice from the Executive of such
      change, reduction or termination, as the case may be;

              (iv) A determination by the Executive (which determination will be
      conclusive and binding upon the parties hereto provided it has been made
      in good faith and in all events will be presumed to have been made in good
      faith unless otherwise shown by the Company by clear and convincing
      evidence) that a change in circumstances has occurred following a Change
      in Control, including, without limitation, a change in the scope of the
      business or other activities for which the Executive was responsible
      immediately prior to the Change in Control, which has rendered the
      Executive substantially unable to carry out, has substantially hindered
      Executive's performance of, or has caused Executive to suffer a
      substantial reduction in, any of the authorities, powers, functions,
      responsibilities or duties attached to the position held by the Executive
      immediately prior to the Change in Control, which situation is not
      remedied within 10 calendar days after written notice to the Company from
      the Executive of such determination;

               (v) The liquidation, dissolution, merger, consolidation or
      reorganization of the Company or transfer of all or substantially all of
      its business and/or assets, unless the successor or successors (by
      liquidation, merger, consolidation, reorganization, transfer or otherwise)
      to which all or substantially all of its business and/or assets have been
      transferred (by operation of law or otherwise) assumed all duties and
      obligations of the Company under this Agreement pursuant to Section 11(a);

              (vi) The Company (A) relocates its principal executive offices (if
      such offices are the principal location of Executive's work), or (B)
      requires the Executive to have his principal location of work changed, to
      any location that, in either case, is in excess of 50 miles from the
      location thereof immediately prior to the Change in Control, or (C)
      requires the Executive to travel away from his office in the course of
      discharging his responsibilities or duties hereunder at least 20% more (in
      terms of aggregate days in any calendar year or in any calendar quarter
      when annualized for purposes of comparison to any prior year) than was
      required of Executive in any of the three full years immediately prior to
      the Change in Control without, in either case, his prior written consent,
      and, in the case of clause (C), which is not remedied by the Company
      within 10 calendar days after receipt by the Company of written notice of
      such increase; or

             (vii) Without limiting the generality or effect of the foregoing,
      any material breach of this Agreement by the Company or any successor
      thereto which is not remedied by the Company within 10 calendar days after
      receipt by the Company of written notice from the Executive of such
      breach.

            (c) Notwithstanding anything contained in this Agreement to the
      contrary, in the event of a Change in Control, the Executive may terminate
      employment with the Company and any Subsidiary for any reason, or without
      reason, during the 30-day 

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      period immediately following the six month anniversary of the first
      occurrence of a Change in Control with the right to severance compensation
      as provided in Section 4.

            (d) A termination by the Company pursuant to Section 3(a) or by the
      Executive pursuant to Section 3(b) or Section 3(c) will not affect any
      rights that the Executive may have pursuant to any agreement, policy,
      plan, program or arrangement of the Company or Subsidiary providing
      Employee Benefits, which rights shall be governed by the terms thereof.

      4.    SEVERANCE COMPENSATION.

            (a) If, following the occurrence of a Change in Control, the Company
      or Subsidiary terminates the Executive's employment during the Severance
      Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or
      if the Executive terminates his employment pursuant to Section 3(b) or
      Section 3(c), the Company will pay to the Executive the amounts described
      in Annex A within five business days after the Termination Date and will
      continue to provide to the Executive the benefits described on Annex A for
      the periods described therein.

            (b) Without limiting the rights of the Executive at law or in
      equity, if the Company fails to make any payment or provide any benefit
      required to be made or provided hereunder on a timely basis, the Company
      will pay interest on the amount or value thereof at an annualized rate of
      interest equal to the so-called composite "prime rate" as quoted from time
      to time during the relevant period in the Southwest Edition of THE WALL
      STREET JOURNAL, plus 2%. Such interest will be payable as it accrues on
      demand. Any change in such prime rate will be effective on and as of the
      date of such change.

            (c) Notwithstanding any provision of this Agreement to the contrary,
      the parties' respective rights and obligations under this Section 4 and
      under Sections 5, 7, 8 and the last sentence of Section 9 will survive any
      termination or expiration of this Agreement or the termination of the
      Executive's employment following a Change in Control for any reason
      whatsoever.

            (d) Unless otherwise expressly provided by the applicable annual
      bonus plan, after the occurrence of a Change in Control, the Company shall
      pay in cash to the Executive a lump-sum amount equal to the value of the
      Executive's annual bonus earned or accrued with respect to the Executive's
      service during the annual performance period that includes the date on
      which the Change in Control occurred, disregarding any applicable vesting
      requirements; provided that such amount shall be calculated at the plan
      target rate, but prorated to base payment only on the portion of the
      Executive's service that had elapsed during the applicable performance
      period. Such payment shall take into account service rendered through the
      payment date and shall be made at the earlier of (i) the date prescribed
      for payment pursuant to the applicable plan, program or agreement, and
      (ii) within five business days after the Termination Date.

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      5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

            (a) Anything in this Agreement to the contrary notwithstanding, but
      subject to Section 5(h), in the event that this Agreement shall become
      operative and it shall be determined (as hereafter provided) that any
      payment (other than the Gross-Up payments provided for in this Section 5)
      or distribution by the Company or any of its affiliates to or for the
      benefit of the Executive, whether paid or payable or distributed or
      distributable pursuant to the terms of this Agreement or otherwise
      pursuant to or by reason of any other agreement, policy, plan, program or
      arrangement, including without limitation any stock option, performance
      share, performance unit, stock appreciation right or similar right, or the
      lapse or termination of any restriction on or the vesting or
      exercisability of any of the foregoing (a "Payment"), would be subject to
      the excise tax imposed by Section 4999 of the Internal Revenue Code of
      1986, as amended (the "Code") (or any successor provision thereto) by
      reason of being considered "contingent on a change in ownership or
      control" of the Company, within the meaning of Section 280G of the Code
      (or any successor provision thereto) or to any similar tax imposed by
      state or local law, or any interest or penalties with respect to such tax
      (such tax or taxes, together with any such interest and penalties, being
      hereafter collectively referred to as the "Excise Tax"), then the
      Executive shall be entitled to receive an additional payment or payments
      (collectively, a "Gross-Up Payment"); provided, however, that no Gross-up
      Payment shall be made with respect to the Excise Tax, if any, attributable
      to (i) any incentive stock option, as defined by Section 422 of the Code
      ("ISO") granted prior to the execution of this Agreement, or (ii) any
      stock appreciation or similar right, whether or not limited, granted in
      tandem with any ISO described in clause (i). The Gross-Up Payment shall be
      in an amount such that, after payment by the Executive of all taxes
      (including any interest or penalties imposed with respect to such taxes),
      including any Excise Tax imposed upon the Gross-Up Payment, the Executive
      retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
      upon the Payment.

            (b) Subject to the provisions of Section 5(f), all determinations
      required to be made under this Section 5, including whether an Excise Tax
      is payable by the Executive and the amount of such Excise Tax and whether
      a Gross-Up Payment is required to be paid by the Company to the Executive
      and the amount of such Gross-Up Payment, if any, shall be made by a
      nationally recognized accounting firm (the "Accounting Firm") selected by
      the Executive in his sole discretion. The Executive shall direct the
      Accounting Firm to submit its determination and detailed supporting
      calculations to both the Company and the Executive within 30 calendar days
      after the Termination Date, if applicable, and any such other time or
      times as may be requested by the Company or the Executive. If the
      Accounting Firm determines that any Excise Tax is payable by the
      Executive, the Company shall pay the required Gross-Up Payment to the
      Executive within five business days after receipt of such determination
      and calculations with respect to any Payment to the Executive. If the
      Accounting Firm determines that no Excise Tax is payable by the Executive,
      it shall, at the same time as it makes such determination, furnish the
      Company and the Executive an opinion that the Executive has substantial
      authority not to report any Excise Tax on his federal, state or local
      income or other tax

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      return. As a result of the uncertainty in the application of Section 4999
      of the Code (or any successor provision thereto) and the possibility of
      similar uncertainty regarding applicable state or local tax law at the
      time of any determination by the Accounting Firm hereunder, it is possible
      that Gross-Up Payments which will not have been made by the Company should
      have been made (an "Underpayment"), consistent with the calculations
      required to be made hereunder. In the event that the Company exhausts or
      fails to pursue its remedies pursuant to Section 5(f) and the Executive
      thereafter is required to make a payment of any Excise Tax, the Executive
      shall direct the Accounting Firm to determine the amount of the
      Underpayment that has occurred and to submit its determination and
      detailed supporting calculations to both the Company and the Executive as
      promptly as possible. Any such Underpayment shall be promptly paid by the
      Company to, or for the benefit of, the Executive within five business days
      after receipt of such determination and calculations.

            (c) The Company and the Executive shall each provide the Accounting
      Firm access to and copies of any books, records and documents in the
      possession of the Company or the Executive, as the case may be, reasonably
      requested by the Accounting Firm, and otherwise cooperate with the
      Accounting Firm in connection with the preparation and issuance of the
      determinations and calculations contemplated by Section 5(b). Any
      determination by the Accounting Firm as to the amount of the Gross-Up
      Payment shall be binding upon the Company and the Executive.

            (d) The federal, state and local income or other tax returns filed
      by the Executive shall be prepared and filed on a consistent basis with
      the determination of the Accounting Firm with respect to the Excise Tax
      payable by the Executive. The Executive shall make proper payment of the
      amount of any Excise Payment, and at the request of the Company, provide
      to the Company true and correct copies (with any amendments) of his
      federal income tax return as filed with the Internal Revenue Service and
      corresponding state and local tax returns, if relevant, as filed with the
      applicable taxing authority, and such other documents reasonably requested
      by the Company, evidencing such payment. If prior to the filing of the
      Executive's federal income tax return, or corresponding state or local tax
      return, if relevant, the Accounting Firm determines that the amount of the
      Gross-Up Payment should be reduced, the Executive shall within five
      business days pay to the Company the amount of such reduction.

            (e) The fees and expenses of the Accounting Firm for its services in
      connection with the determinations and calculations contemplated by
      Section 5(b) shall be borne by the Company. If such fees and expenses are
      initially paid by the Executive, the Company shall reimburse the Executive
      the full amount of such fees and expenses within five business days after
      receipt from the Executive of a statement therefor and reasonable evidence
      of his payment thereof.

            (f) The Executive shall notify the Company in writing of any claim
      by the Internal Revenue Service or any other taxing authority that, if
      successful, would require the payment by the Company of a Gross-Up
      Payment. Such notification shall be given as 

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      promptly as practicable but no later than 10 business days after the
      Executive actually receives notice of such claim and the Executive shall
      further apprise the Company of the nature of such claim and the date on
      which such claim is requested to be paid (in each case, to the extent
      known by the Executive). The Executive shall not pay such claim prior to
      the earlier of (i) the expiration of the 30-calendar-day period following
      the date on which he gives such notice to the Company and (ii) the date
      that any payment of amount with respect to such claim is due. If the
      Company notifies the Executive in writing prior to the expiration of such
      period that it desires to contest such claim, the Executive shall:

               (i) provide the Company with any written records or documents in
      his possession relating to such claim reasonably requested by the Company;

              (ii) take such action in connection with contesting such claim as
      the Company shall reasonably request in writing from time to time,
      including without limitation accepting legal representation with respect
      to such claim by an attorney competent in respect of the subject matter
      and reasonably selected by the Company;

             (iii) cooperate with the Company in good faith in order effectively
      to contest such claim; and

              (iv) permit the Company to participate in any proceedings relating
      to such claim;

      PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs
      and expenses (including interest and penalties) incurred in connection
      with such contest and shall indemnify and hold harmless the Executive, on
      an after-tax basis, for and against any Excise Tax or income tax,
      including interest and penalties with respect thereto, imposed as a result
      of such representation and payment of costs and expenses. Without limiting
      the foregoing provisions of this Section 5(f), the Company shall control
      all proceedings taken in connection with the contest of any claim
      contemplated by this Section 5(f) and, at its sole option, may pursue or
      forego any and all administrative appeals, proceedings, hearings and
      conferences with the taxing authority in respect of such claim (provided,
      however, that the Executive may participate therein at his own cost and
      expense) and may, at its option, either direct the Executive to pay the
      tax claimed and sue for a refund or contest the claim in any permissible
      manner, and the Executive agrees to prosecute such contest to a
      determination before any administrative tribunal, in a court of initial
      jurisdiction and in one or more appellate courts, as the Company shall
      determine; PROVIDED, HOWEVER, that if the Company directs the Executive to
      pay the tax claimed and sue for a refund, the Company shall advance the
      amount of such payment to the Executive on an interest-free basis and
      shall indemnify and hold the Executive harmless, on an after-tax basis,
      from any Excise Tax or income or other tax, including interest or
      penalties with respect thereto, imposed with respect to such advance; and
      provided FURTHER, HOWEVER, that any extension of the statute of
      limitations relating to payment of taxes for the taxable year of the
      Executive with respect to which the contested amount is 

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      claimed to be due is limited solely to such contested amount. Furthermore,
      the Company's control of any such contested claim shall be limited to
      issues with respect to which a Gross-Up Payment would be payable hereunder
      and the Executive shall be entitled to settle or contest, as the case may
      be, any other issue raised by the Internal Revenue Service or any other
      taxing authority.

            (g) If, after the receipt by the Executive of an amount advanced by
      the Company pursuant to Section 5(f), the Executive receives any refund
      with respect to such claim, the Executive shall (subject to the Company's
      complying with the requirements of Section 5(f)) promptly pay to the
      Company the amount of such refund (together with any interest paid or
      credited thereon after any taxes applicable thereto). If, after the
      receipt by the Executive of an amount advanced by the Company pursuant to
      Section 5(f), a determination is made that the Executive shall not be
      entitled to any refund with respect to such claim and the Company does not
      notify the Executive in writing of its intent to contest such denial or
      refund prior to the expiration of 30 calendar days after such
      determination, then such advance shall be forgiven and shall not be
      required to be repaid and the amount of any such advance shall offset, to
      the extent thereof, the amount of Gross-Up Payment required to be paid by
      the Company to the Executive pursuant to this Section 5.

            (h) Notwithstanding any provision of this Agreement to the contrary,
      if (i) but for this sentence, the Company would be obligated to make a
      Gross-Up Payment to the Executive and (ii) the aggregate "present value"
      of the "parachute payments" to be paid or provided to the Executive under
      this Agreement or otherwise does not exceed 1.15 multiplied by three times
      the Executive's "base amount," then the payments and benefits to be paid
      or provided under this Agreement will be reduced to the minimum extent
      necessary (but in no event to less than zero) so that no portion of any
      payment or benefit to the Executive, as so reduced, constitutes an "excess
      parachute payment." For purposes of this Section 5(h), the terms "excess
      parachute payment," "present value," "parachute payment," and "base
      amount" will have the meanings assigned to them by Section 280G of the
      Code. The determination of whether any reduction in such payments or
      benefits to be provided under this Agreement is required pursuant to the
      preceding sentence will be made at the expense of the Company, if
      requested by the Executive or the Company, by the Accounting Firm. The
      fact that the Executive's right to payments or benefits may be reduced by
      reason of the limitations contained in this Section 5(h) will not of
      itself limit or otherwise affect any other rights of the Executive other
      than pursuant to this Agreement. In the event that any payment or benefit
      intended to be provided under this Agreement or otherwise is required to
      be reduced pursuant to this Section 5(h), the Executive will be entitled
      to designate the payments and/or benefits to be so reduced in order to
      give effect to this Section 5(h). The Company will provide the Executive
      with all information reasonably requested by the Executive to permit the
      Executive to make such designation. In the event that the Executive fails
      to make such designation within 10 business days of the Termination Date,
      the Company may effect such reduction in any manner it deems appropriate.

                                      -11-
<PAGE>
      6. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will
be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. Accordingly, the payment
of the severance compensation by the Company to the Executive in accordance with
the terms of this Agreement is hereby acknowledged by the Company to be
reasonable, and the Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation on
the part of the Executive hereunder or otherwise, except as expressly provided
in the last sentence of Paragraph 2 set forth on Annex A.

      7. LEGAL FEES AND EXPENSES. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing; provided that, in regard to such matters,
the Executive has not acted in bad faith or with no colorable claim of success.

      8.    CONFIDENTIALITY; NONSOLICITATION.

            (a) During the Term, the Company agrees that it will disclose to
      Executive its confidential or proprietary information (as defined in this
      Section 8(a)) to the extent necessary for Executive to carry out his
      obligations to the Company. The Executive hereby covenants and agrees that
      the Executive will not, without the prior written consent of the Company,
      during the Term or thereafter disclose to any person not employed by the
      Company, or use in connection with engaging in competition with the
      Company, any confidential or proprietary information of the Company. For
      purposes of this Agreement, 

                                      -12-
<PAGE>
      the term "confidential or proprietary information" will include all
      information of any nature and in any form that is owned by the Company and
      that is not publicly available (other than by Executive's breach of this
      Section 8(a)) or generally known to persons engaged in businesses similar
      or related to those of the Company. Confidential or proprietary
      information will include, information concerning the Company's business,
      affairs, customers, clients, sources of supply and customer lists. For
      purposes of the preceding two sentences, the term "Company" will also
      include any Subsidiary (collectively, the "Restricted Group"). The
      foregoing obligations imposed by this Section 8(a) will not apply (i)
      during the Term, in the course of the business of and for the benefit of
      the Company, (ii) if such confidential or proprietary information will
      have become, through no fault of the Executive, generally known to the
      public or (iii) if the Executive is required by law to make disclosure
      (after giving the Company notice and an opportunity to contest such
      requirement).

            (b) The Executive hereby covenants and agrees that during the Term
      and for one year thereafter Executive will not, without the prior written
      consent of the Company, which consent will not unreasonably be withheld,
      knowingly solicit any employee of the Restricted Group to leave the
      employment of the Restricted Group.

      9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of employment of the Executive
or the removal of the Executive from the office or position in the Company or
any Subsidiary that occurs (i) (A) not more than one year prior to the date on
which a Change in Control, as defined in Section 1(d)(ii), 1(d)(iii) or
1(d)(iv), occurs, or (B) not more than 90 days prior to the date on which a
Change in Control, as defined in Section 1(d)(i), but not otherwise in Section
1(d), occurs, and (ii) following the commencement of any discussion with a third
person that ultimately results in a Change in Control, shall be deemed to be a
termination or removal of the Executive after a Change in Control for purposes
of this Agreement.

      10. WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any applicable law, regulation or
ruling.

      11.   SUCCESSORS AND BINDING AGREEMENT.

            (a) The Company will require any successor (whether direct or
      indirect, by purchase, merger, consolidation, reorganization or otherwise)
      to all or substantially all of the business or assets of the Company, by
      agreement in form and substance reasonably satisfactory to the Executive,
      expressly to assume and agree to perform this Agreement in the same manner
      and to the same extent the Company would be required to perform if no such
      succession had taken place. This Agreement will be binding upon and inure
      to the benefit of the Company and any successor to the Company, including
      without limitation any persons acquiring directly or indirectly all or
      substantially all of the business or assets 

                                      -13-
<PAGE>
      of the Company whether by purchase, merger, consolidation, reorganization
      or otherwise (and such successor shall thereafter be deemed the "Company"
      for the purposes of this Agreement), but will not otherwise be assignable,
      transferable or delegable by the Company.

            (b) This Agreement will inure to the benefit of and be enforceable
      by the Executive's personal or legal representatives, executors,
      administrators, successors, heirs, distributees and legatees.

            (c) This Agreement is personal in nature and neither of the parties
      hereto shall, without the consent of the other, assign, transfer or
      delegate this Agreement or any rights or obligations hereunder except as
      expressly provided in Sections 11(a) and 11(b). Without limiting the
      generality or effect of the foregoing, the Executive's right to receive
      payments hereunder will not be assignable, transferable or delegable,
      whether by pledge, creation of a security interest, or otherwise, other
      than by a transfer by Executive's will or by the laws of descent and
      distribution and, in the event of any attempted assignment or transfer
      contrary to this Section 11(c), the Company shall have no liability to pay
      any amount so attempted to be assigned, transferred or delegated.

      12. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as FedEx, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive office and to the Executive at his principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.

      13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Texas, without giving effect to the
principles of conflict of laws of such State.

      14. VALIDITY. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.

      15. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the 

                                      -14-
<PAGE>
other party hereto or compliance with any condition or provision of this
Agreement to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, expressed or implied
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. References to Sections are to
references to Sections of this Agreement.

      16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.

            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.

                                    RAILTEX, INC.


                                    By:/s/ BRUCE M. FLOHR
                                        Bruce M. Flohr, Chairman of the Board



                                 /s/RONALD A. RITTENMEYER
                                    RONALD A. RITTENMEYER

                                      -15-
<PAGE>
                                                                         ANNEX A

                             SEVERANCE COMPENSATION

      (1) A lump-sum payment in an amount equal to three times the sum of (A)
Base Pay (at the highest rate in effect for any period prior to the Termination
Date), plus (B) Incentive Pay (in an amount equal to the target bonus applicable
immediately prior to the Change in Control or, if greater, the target bonus in
effect prior to the Termination Date).

      (2) For a period of 36 months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the Executive with
Employee Benefits that are welfare benefits (but not stock option, performance
share, performance unit, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the Termination Date (or,
if greater, immediately prior to the reduction, termination, or denial described
in Section 3(b)(ii)), including, but not limited to, health care, dental, group
life, and group long-term disability benefits, and the term life equivalent
benefit for any split-dollar insurance program. If and to the extent that any
benefit described in this Paragraph 2 is not or cannot be paid or provided under
any policy, plan, program or arrangement of the Company or any Subsidiary, as
the case may be, then the Company will itself pay or provide for the payment to
the Executive, his dependents and beneficiaries, of such Employee Benefits.
Notwithstanding the foregoing, or any other provision of the Agreement, for
purposes of determining the period of continuation coverage to which the
Executive or any of his dependents is entitled pursuant to Section 4980B of the
Code (or any successor provision thereto) under the Company's medical, dental
and other group health plans, or successor plans, the Executive's "qualifying
event" shall be the termination of the Continuation Period and the Executive
shall be considered to have remained actively employed on a full-time basis
through that date. Employee Benefits otherwise receivable by the Executive
pursuant to this Paragraph 2 will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer during the
Continuation Period following the Executive's Termination Date, and any such
benefits actually received by the Executive shall be reported by the Executive
to the Company.

      (3) If, prior to the Change in Control, Executive has been provided the
use of a Company car, then within five business days after the Termination Date,
the Company will convey title to such car to Executive without additional
consideration therefor.

                                      A-1