<PAGE>
 
                                                                    Exhibit 10.3

                   AMENDED AND RESTATED EMPLOYMENT AGREEMENT



THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of March 18, 1999,
amends and restates the Employment Agreement entered into on the 6th day of
June, 1996, between The GSI Group, Inc., a Delaware corporation with its
principal place of business in Assumption, Illinois (the "Company"), and Howard
G. Buffett (the "Employee").


WHEREAS, the parties hereto desire to enter into this Agreement to define and
set forth the terms and conditions of the employment of the Employee by the
Company;


NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Company and the Employee
as follows:



1.  Position, Employment Period.  The Company hereby employs the Employee as its
Chairman of the Board and Employee agrees to serve in such capacity, for the
period beginning the date hereof and ending on the date on which the Employee's
employment with the Company is terminated in accordance with paragraph 9 below
(the "Employment Period").

2.  Performance of Duties.  The Employee agrees that during the Employment
Period he shall devote his full business time to the business affairs of the
Company and shall perform his duties faithfully, efficiently and to the best of
his ability subject to the direction of the Board of Directors of the Company
and as set forth in the By Laws of the Company; provided that the foregoing
shall not limit or prevent the Employee from serving on the board of directors
of charitable organizations or other business corporations not in competition
with the Company, or on the board of directors of any corporation on which the
Employee is serving as of the date of this Agreement.  The Employee shall not be
assigned duties and responsibilities that are not generally within the scope and
character associated with or required of other executives of similar rank and
position in similarly situated companies.  The Employee shall be indemnified by
the Company to the fullest extent permitted under applicable law.

3.  Compensation and Benefits.  Subject to the following provisions of this
Agreement, during the Employment Period the Employee shall receive an annual
salary, payable in monthly or more frequent installments, in an amount not less
than $300,000 per annum, subject to such increases as may from time to time be
determined by the Board of Directors of the Company.  He shall be entitled to
such vacations as he, in his reasonable judgement, requires without unduly
interfering with his duties and responsibilities at the Company.  He shall be
entitled to such other perquisites as may be customarily granted by the Company
to executives of similar rank and position including, but not limited to, a
secretary and a cellular phone and all expenses associated therewith, each to be
used for Company business and other matters, both related and unrelated to the
Company.  The Employee shall have the option of traveling first class in all
Company-related travel, with the exception of travel within the continental
United States with other non-senior management of the Company.  The Company
shall reimburse the Employee for his business expenses in accordance with its
then prevailing policy.  The 

                                       1
<PAGE>
 
Employee shall be entitled to participate, to the extent he is eligible, in any
profit sharing, retirement, insurance or other benefit plan maintained by the
Company. If, after December 6, 1999, the Employee is terminated by the Company
and such termination is not for Cause, the Employee shall be entitled to
receive, immediately upon such termination, a minimum of eighteen months salary
at the Employee's then current rate payable in equal monthly installments. If
this agreement terminates on June 6, 2001 and Employee is still employed by the
Company, Employee will be entitled to receive two years salary payable in equal
monthly installments as severance payment if the Employee is terminated any time
after such date by the Company and such termination is not for Cause.


4.  Competing Businesses.  During the period of his employment under this
Agreement and for a period of two years thereafter, the Employee shall not be
employed by or otherwise engage in or be interested in any business in
competition with the Company, except that the Employee's investment in any such
business shall not be considered a violation of this paragraph if the stock of
such business is traded on a national securities exchange and the Employee owns
less than 1% of the equity thereof; provided that the foregoing (a) shall not
limit or prevent the Employee from (i) serving on the board of directors of any
corporation on which the Employee is serving, or (ii) investing in any business
in which the Employee has an investment, each as of the date of termination of
his employment, and (b) shall be null and void if the Employee is terminated by
the Company without Cause.

5.  Confidentiality.  During and after the Employment Period, the Employee will
not divulge or appropriate to his own use or to the use of a business in
competition with the Company, any secret or confidential information or
knowledge pertaining to the business of the Company, or of any of its
subsidiaries, obtained by him in any way while he was employed by the Company.

6.  Remedies.  If at any time the Employee violates to a material extent any of
the covenants or agreements set forth in paragraphs 4 and 5, the Company shall
have the right to terminate all of its obligations to make further payment under
this Agreement.  The Employee acknowledges that the Company would be irreparably
injured by a violation of paragraph 4 or 5 and agrees that the Company shall be
entitled to an injunction restraining the Employee from any actual or threatened
breach of paragraph 4 or 5 and to any other appropriate equitable remedy without
any bond or other security being required.

7.  Attorneys' Fees and Costs.  In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment.

8.  Amendment and Termination.  This Agreement may be amended or canceled by
mutual agreement of the parties without the consent of any other person and, so
long as the Employee lives, no person, other than the parties hereto and any
legal representative of the Employee if he is Permanently Disabled, shall have
any rights under or interest in this Agreement or the subject matter hereof.

The Employment Period shall terminate as of the earliest of:

          (a)  June 6, 2001;
          (b)  the last day of the month in which the date of the Employee's
death occurs;
          (c)  90 days after the date on which the Company gives notice to the
Employee if such termination is for Cause or due to Employee being Permanently
Disabled; or

                                       2
<PAGE>
 
          (d)  the day on which Employee gives notice of his resignation from
the Company.

For purposes of this Agreement, "Cause" means termination upon (a) willful and
substantial failure by the Employee to perform his duties with the Company
(other than due to disability); (b) willful engaging by the Employee in conduct
which is demonstrably and materially injurious to the Company or that
demonstrates gross unfitness for service; (c) the Employee's conviction of a
felony which impairs his ability substantially to perform his duties with the
Company or other felony involving dishonesty or breach of trust; or (d) any
material breach by the Employee of the terms of this Agreement.  The Employee
will not be subject to termination for "Cause" unless (i) the Company has
followed the procedures set forth below and (ii) the Employee is given an
opportunity to cure, if possible, any of the actions or omissions forming the
basis for such termination, within thirty (30) days of the adoption of the
resolution set forth below.  In the event that the Company fails to comply with
either of these conditions, any termination of the Employment Period shall be
deemed to be without Cause.

Notwithstanding anything else in this Agreement, the Company shall not terminate
the Employment Period (whether with or without Cause) unless such termination is
authorized by a resolution adopted by the Company's board of directors at a
meeting duly called and held following due notice that termination of the
Employment Period of the Employee shall be considered at such meeting.  The
Company shall (a) give the Employee at least five (5) days prior written notice
of any such meeting and the purpose thereof, which notice shall, in the case of
any anticipated termination for Cause, specify the actions or omissions
anticipated to form the basis for such termination, and (b) afford the Employee
and his counsel an opportunity to be heard before the board of directors at such
meeting.

A business that is "in competition" with the Company for purposes of this
Agreement shall mean an entity that is engaged in the same or similar business
as the Company and derives at least fifty percent (50%) of its revenue from the
manufacture of grain storage systems, poultry feeding equipment and/or swine
producing equipment.

9.  Notices.  Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered mail to the Company
at its principal executive offices or to the Employee at the last address filed
by him in writing with the Company, as the case may be.

10.  Non-Assignment.  The interests of the Employee under this Agreement are not
subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered.

11.  Successors.  This Agreement shall be binding upon, and inure to the benefit
of, the Company and its successors and assigns and upon any person acquiring,
whether by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the Company's assets and business.

12.  Applicable Law.  The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.

                                       3
<PAGE>
 
     IN WITNESS WHEREOF, the Employee has hereunto set his hand, and the Company
has caused these presents to be executed in its name and on its behalf, all as
of the day and year first above written.


                                      THE GSI GROUP, INC.
                  
                  
                                      BY /s/ Craig Sloan
                                         -------------------------
                                      ITS CHIEF EXECUTIVE OFFICER
                  
                  
                                      /s/ Howard G. Buffett
                                      ----------------------------
                                      HOWARD G. BUFFETT

                                       4