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                                  EXHIBIT 10.3

              EMPLOYMENT AGREEMENT BETWEEN CSX AND MICHAEL C. HAGAN
                             DATED FEBRUARY 1, 1995


                              EMPLOYMENT AGREEMENT

     AGREEMENT by and between CSX CORPORATION, a Virginia corporation (the
"Company"), and Michael C. Hagan (the "Executive"), dated as of the first day of
February, 1995.

     The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.


     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1.   CERTAIN DEFINITIONS.

          a. The "Effective Date" shall mean the first date during the Term (as
     defined in Section 1(b)) on which a Change of Control (as defined in
     Section 2) occurs. Anything in this Agreement to the contrary
     notwithstanding, if the Executive's employment with the Company is
     terminated by the Company without Cause prior to the date on which the
     Change of Control occurs or the Executive ceases to be an officer of the
     Company, and if it is reasonably demonstrated by the Executive that such
     termination of employment or cessation of status as an officer (i) was at
     the request of a third party who has taken steps reasonably calculated to
     effect a Change of Control or (ii) otherwise arose in connection with or
     anticipation of a Change of Control, then, in each such case, for all
     purposes of this Agreement the "Effective Date" shall mean the date
     immediately prior to the date of such termination of employment or
     cessation of status as an officer.

          b. The "Term" shall mean the period commencing on the date hereof and
     ending on the earlier to occur of (i) the third anniversary of such date or
     (ii) the first day of the month next following the Employee's normal
     retirement date ("Normal Retirement Date") under the principal pension plan
     in which the Executive participates (the "Retirement Plan"); provided,
     however, that commencing on the date one year after the date hereof, and on
     each annual anniversary of such date (such date and each annual anniversary
     thereof shall be hereinafter referred to as the "Renewal Date"), unless
     previously terminated, the Term shall be automatically extended so as to
     terminate three years from such Renewal Date, unless at least 60 days prior
     to the Renewal Date the Company shall give notice to the Executive that the
     Term shall not be so extended.

     2.   CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
          Control" shall mean:

          a. STOCK ACQUISITION. The acquisition by any individual, entity or
     group (within the meaning of Section 13(d) (3) or 14(d) (2) of the
     Securities Exchange Act of 1934, as amended (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 either (i) the then
     outstanding shares of common stock of the Company (the "Outstanding Company
     Common Stock") or (ii) the combined voting power of the then outstanding


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     voting securities of the Company entitled to vote generally in the election
     of directors (the "Outstanding Company Voting Securities"); PROVIDED,
     HOWEVER, that for purposes of this subsection (a) the following
     acquisitions shall not constitute a Change of Control: (i) any acquisition
     directly from the Company, (ii) any acquisition by the Company, (iii) any
     acquisition by any employee benefit plan (or related trust) sponsored or
     maintained by the Company or any corporation controlled by the Company or
     (iv) any acquisition by any corporation pursuant to a transaction which
     complies with clauses (i) (ii) and (iii) of subsection (c) of this Section
     2; or

          b. BOARD COMPOSITION. 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 by a vote of at least a majority of the directors then comprising
     the Incumbent Board shall be considered as though such individual were a
     member of the Incumbent Board, but excluding, for this purpose, any such
     individual whose initial assumption of office occurs as a result of an
     actual or threatened election contest with respect to the election or
     removal of directors or other actual or threatened solicitation of proxies
     or consents by or on behalf of a Person other than the Board; or

          c. BUSINESS COMBINATION. Approval either (x) by the shareholders of
     the Company of a reorganization, merger or consolidation or sale or other
     disposition of all or substantially all of the assets of the Company or its
     principal subsidiary or (y) by the shareholders or the Board of the Company
     of a reorganization, merger or consolidation or sale or other disposition
     of all or substantially all of the assets of American Commercial Lines,
     Inc. ("ACL") (a "Business Combination") that is not subject, as a matter of
     law or contract, to approval by the Interstate Commerce Commission or any
     successor agency or regulatory body having jurisdiction over such
     transactions (the "Agency"), in each case, UNLESS, following such Business
     Combination:

               (i) all or substantially all of the individuals and entities who
          were the beneficial owners, respectively, of the Outstanding Company
          Common Stock and Outstanding Company Voting Securities immediately
          prior to such Business Combination beneficially own, directly or
          indirectly, more than 50% of, respectively, the then outstanding
          shares of common stock and the combined voting power of the then
          outstanding voting securities entitled to vote generally in the
          election of directors, as the case may be, of the corporation
          resulting from such Business Combination (including, without
          limitation, a corporation which as a result of such transaction owns
          the Company or its principal subsidiary or ACL or all or substantially
          all of the assets of the Company or its principal subsidiary or ACL
          either directly or through one or more subsidiaries) in substantially
          the same proportions as their ownership, immediately prior to such
          Business Combination of the Outstanding Company Common Stock and
          Outstanding Company Voting Securities, as the case may be;

               (ii) no Person (excluding any corporation resulting from such
          Business Combination or any employee benefit plan (or related trust)
          of the Company or such corporation resulting from such Business
          Combination) beneficially owns, directly or indirectly, 20% or more
          of, respectively, the then outstanding shares of common stock of the
          corporation resulting from such Business Combination or the combined
          voting power of the then outstanding voting securities of such
          corporation except to the extent that such ownership existed prior to
          the Business Combination; and

               (iii) at least a majority of the members of the board of
          directors of the corporation 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

          d. REGULATED BUSINESS COMBINATION. Approval by the shareholders or the
     Board, as the case may be, of the Company of a Business Combination that is
     subject, as a matter of law or contract, to 


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     approval by the Agency (a "Regulated Business Combination") UNLESS such
     Business Combination complies with clauses (i) (ii) and (iii) of
     subsection(c) of this Section 2; or

          e. LIQUIDATION OR DISSOLUTION. Approval by the shareholders of the
     Company of a complete liquidation or dissolution of the Company or its
     principal subsidiary.

If any Change of Control is a Regulated Business Combination, but its
implementation involves another "Change of Control" that is not a Regulated
Business Combination within the meaning of this Section 2, then for all purposes
of this Agreement, such Change of Control shall not be deemed to be a Regulated
Business Combination, the provisions governing a Regulated Business Combination
shall not apply, and the provisions governing such other Change in Control shall
apply.

     3.   EMPLOYMENT PERIOD.

          a. GENERALLY. Subject to Section 3(b), the Company hereby agrees to
     continue the Executive in its employ, and the Executive hereby agrees to
     remain in the employ of the Company subject to the terms and conditions of
     this Agreement, for the period commencing on the Effective Date and ending
     on the third anniversary of such date (the "Employment Period").

          b. REGULATED BUSINESS COMBINATION. Notwithstanding the foregoing, in
     the case of a Change of Control that is a Regulated Business Combination,
     then for all purposes of this Agreement, the "Employment Period" shall mean
     the longer of (i) the period commencing on the Effective Date and ending on
     the third anniversary of such date or (ii) the period commencing on the
     Effective Date and ending thirteen months from the effective date of a
     final decision by the Agency on the proposed Regulated Business Combination
     ("Final Regulatory Action"), PROVIDED, HOWEVER, that (x) if the Final
     Regulatory Action is a denial of the Regulated Business Combination then
     for all purposes of this Agreement the "Employment Period" shall end upon
     the sixtieth (60th) day following such Final Regulatory Action and (y) if
     the Final Regulatory Action is an approval of the Regulated Business
     Combination, but the Regulated Business Combination is not consummated by
     the first anniversary of the Final Regulatory Action, then for all purposes
     of this Agreement the "Employment Period" shall end upon such first
     anniversary of the Final Regulatory Action.

     4.   TERMS OF EMPLOYMENT.

          a.   POSITION AND DUTIES.

               (i) During the Employment Period: (A) the Executive's position
          (including status, offices, titles and reporting requirements)
          authority, duties and responsibilities shall be at least commensurate
          in all material respects with the most significant of those held,
          exercised and assigned at any time during the 120-day period
          immediately preceding the Effective Date, and (B) the Executive's
          services shall be performed at the location where the Executive was
          employed immediately preceding the Effective Date or any office or
          location less than 35 miles from such location.

               (ii) During the Employment Period, and excluding any periods of
          vacation and sick leave to which the Executive is entitled, the
          Executive agrees to devote reasonable attention and time during normal
          business hours to the business and affairs of the Company and, to the
          extent necessary to discharge the responsibilities assigned to the
          Executive hereunder, to use the Executive's reasonable best efforts to
          perform faithfully and efficiently such responsibilities. During the
          Employment Period it shall not be a violation of this Agreement for
          the Executive to (A) serve on corporate, civic or charitable boards or
          committees, (B) deliver lectures, fulfill speaking engagements or
          teach at educational institutions and (C) manage personal investments,
          so long as such activities do not significantly interfere with the
          performance of the Executive's responsibilities as an employee of the
          Company in accordance with this Agreement. It is expressly


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          understood and agreed that to the extent that any such activities have
          been conducted by the Executive prior to the Effective Date, the
          continued conduct of such activities (or the conduct of activities
          similar in nature and scope thereto) subsequent to the Effective Date
          shall not thereafter be deemed to interfere with the performance of
          the Executive's responsibilities to the Company.

          b.   COMPENSATION.

                    (i) BASE SALARY. During the Employment Period, the Executive
               shall receive an annual base salary ("Annual Base Salary"), which
               shall be paid at a monthly rate, at least equal to twelve times
               the highest monthly base salary paid or payable, including any
               base salary which has been earned but deferred, to the Executive
               by the Company and its affiliated companies in respect of the
               twelve-month period immediately preceding the month in which the
               Effective Date occurs. During the Employment Period, the Annual
               Base Salary shall be reviewed no more than 12 months after the
               last salary increase awarded to the Executive prior to the
               Effective Date and thereafter at least annually. Any increase in
               Annual Base Salary shall not serve to limit or reduce any other
               obligation to the Executive under this Agreement. Annual Base
               Salary shall not be reduced after any such increase, and the term
               Annual Base Salary as utilized in this Agreement shall refer to
               Annual Base Salary as so increased. As used in this Agreement,
               the term "affiliated companies" shall include any company
               controlled by, controlling or under common control with the
               Company.

                    (ii) ANNUAL BONUS. In addition to Annual Base Salary, the
               Executive shall be awarded, for each fiscal year ending during
               the Employment Period, an annual bonus (the "Annual Bonus") in
               cash at least equal to the Executive's highest cash bonus under
               the Company's annual incentive plans, or any comparable bonus
               under any predecessor or successor plan, for the last three full
               fiscal years prior to the Effective Date (annualized in the event
               that the Executive was not employed by the Company for the whole
               of such fiscal year) (the "Recent Annual Bonus"). Each such
               Annual Bonus shall be paid no later than the end of the third
               month of the fiscal year next following the fiscal year for which
               the Annual Bonus is awarded, unless the Executive shall elect to
               defer the receipt of such Annual Bonus.

                    (iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
               Employment Period, the Executive shall be entitled to participate
               in all incentive, savings and retirement plans, practices,
               policies and programs applicable generally to other peer
               executives of the Company and its affiliated companies, but in no
               event shall such plans, practices, policies and programs provide
               the Executive with incentive opportunities (measured with respect
               to both regular and special incentive opportunities, to the
               extent, if any, that such distinction is applicable), savings
               opportunities and retirement benefit opportunities, in each case,
               less favorable, in the aggregate, than the most favorable of
               those provided by the Company and its affiliated companies for
               the Executive under such plans, practices, policies and programs
               as in effect at any time during the 120-day period immediately
               preceding the Effective Date or if more favorable to the
               Executive, those provided generally at any time after the
               Effective Date to other peer executives of the Company and its
               affiliated companies.

                    (iv) WELFARE BENEFIT PLANS. During the Employment Period,
               the Executive and/or the Executive's family, as the case may be,
               shall be eligible for participation in and shall receive all
               benefits under welfare benefit plans, practices, policies and
               programs provided by the Company and its affiliated companies
               (including, without limitation, medical, prescription, dental,
               disability, employee life, group life, accidental death and
               travel accident insurance plans and programs) to the extent
               applicable generally to other peer executives of the Company and
               its affiliated companies, but in no event shall such plans,
               practices, policies and programs provide the Executive with
               benefits which are less favorable, in the aggregate, than the
               most favorable of such plans, practices, policies and programs in
               effect for the Executive at any time during the 120-day period
               immediately preceding the Effective Date or, if more favorable to
               the Executive, those provided generally at any time after the
               Effective Date to other peer executives of the Company and its
               affiliated companies.


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                    (v) EXPENSES. During the Employment Period, the Executive
               shall be entitled to receive prompt reimbursement for all
               reasonable expenses incurred by the Executive in accordance with
               the most favorable policies, practices and procedures of the
               Company and its affiliated companies in effect for the Executive
               at any time during the 120-day period immediately preceding the
               Effective Date or, if more favorable to the Executive, as in
               effect generally at any time thereafter with respect to other
               peer executives of the Company and its affiliated companies.

                    (vi) FRINGE BENEFITS. During the Employment Period, the
               Executive shall be entitled to fringe benefits, including,
               without limitation, tax and financial planning services, payment
               of club dues, and, if applicable, use of an automobile and
               payment of related expenses, in accordance with the most
               favorable plans, practices, programs and policies of the Company
               and its affiliated companies in effect for the Executive at any
               time during the 120-day period immediately preceding the
               Effective Date or, if more favorable to the Executive, as in
               effect generally at any time thereafter with respect to other
               peer executives of the Company and its affiliated companies.

                    (vii) OFFICE AND SUPPORT STAFF. During the Employment
               Period, the Executive shall be entitled to an office or offices
               of a size and with furnishings and other appointments, and to
               exclusive personal secretarial and other assistance, at least
               equal to the most favorable of the foregoing provided to the
               Executive by the Company and its affiliated companies at any time
               during the 120-day period immediately preceding the Effective
               Date or, if more favorable to the Executive, as provided
               generally at any time thereafter with respect to other peer
               executives of the Company and its affiliated companies.

                    (viii) VACATION. During the Employment Period, the Executive
               shall be entitled to paid vacation in accordance with the most
               favorable plans, policies, programs and practices of the Company
               and its affiliated companies as in effect for the Executive at
               any time during the 120-day period immediately preceding the
               Effective Date or, if more favorable to the Executive, as in
               effect generally at any time thereafter with respect to other
               peer executives of the Company and its affiliated companies.

     5.   TERMINATION OF EMPLOYMENT.

          a. DEATH OR DISABILITY. The Executive's employment shall terminate
     automatically upon the Executive's death during the Employment Period. If
     the Company determines in good faith that the Disability of the Executive
     has occurred during the Employment Period (pursuant to the definition of
     Disability set forth below), it may give to the Executive written notice in
     accordance with Section 12(b) of this Agreement of its intention to
     terminate the Executive's employment. In such event, the Executive's
     employment with the Company shall terminate effective on the 30th day after
     receipt of such notice by the Executive (the "Disability Effective Date"),
     provided that, within the 30 days after such receipt, the Executive shall
     not have returned to full-time performance of the Executive's duties. For
     purposes of this Agreement, "Disability" shall mean the absence of the
     Executive from the Executive's duties with the Company on a full-time basis
     for 180 consecutive business days as a result of incapacity due to mental
     or physical illness which is determined to be total and permanent by a
     physician selected by the Company or its insurers and acceptable to the
     Executive or the Executive's legal representative.

          b. CAUSE. The Company may terminate the Executive's employment during
     the Employment Period for Cause. For purposes of this Agreement, "Cause"
     shall mean:

               (i) the willful and continued failure of the Executive to perform
          substantially the Executive's duties with the Company or one of its
          affiliates (other than any such failure resulting from incapacity due
          to physical or mental illness), after a written demand for substantial
          performance is delivered to the Executive by the Board or the Chief
          Executive Officer 


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          of the Company which specifically identifies the manner in which the
          Board or Chief Executive Officer believes that the Executive has not
          substantially performed the Executive's duties, or

               (ii) the willful engaging by the Executive in illegal conduct or
          gross misconduct which is materially and demonstrably injurious to the
          Company.

     For purposes of this provision, no act or failure to act, on the part of
     the Executive, shall be considered "willful" unless it is done, or omitted
     to be done, by the Executive in bad faith or without reasonable belief that
     the Executive's action or omission was in the best interests of the
     Company. Any act, or failure to act, based upon authority given pursuant to
     a resolution duly adopted by the Board or upon the instructions of the
     Chief Executive Officer or a senior officer of the Company or based upon
     the advice of counsel for the Company shall be conclusively presumed to be
     done, or omitted to be done, by the Executive in good faith and in the best
     interests of the Company. The cessation of employment of the Executive
     shall not be deemed to be for Cause 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 entire membership
     of the Board at a meeting of the Board called and held for such purpose
     (after reasonable notice is provided to the Executive and the Executive is
     given an opportunity, together with counsel, to be heard before the Board),
     finding that, in the good faith opinion of the Board, the Executive is
     guilty of the conduct described in subparagraph (i) or (ii) above, and
     specifying the particulars thereof in detail.

          c. GOOD REASON. The Executive's employment may be terminated by the
     Executive during the Employment Period for Good Reason. For purposes of
     this Section 5(c), any good faith determination of "Good Reason" made by
     the Executive shall be conclusive. For purposes of this Agreement, "Good
     Reason" shall mean:

               (i) the assignment to the Executive of any duties inconsistent in
          any respect with the Executive's position (including status, offices,
          titles and reporting requirements), authority, duties or
          responsibilities as contemplated by Section 4(a) of this Agreement, or
          any other action by the Company which results in a diminution in such
          position, authority, duties or responsibilities1 excluding for this
          purpose an isolated, insubstantial and inadvertent action not taken in
          bad faith and which is remedied by the Company promptly after receipt
          of notice thereof given by the Executive;

               (ii) any failure by the Company to comply with any of the
          provisions of Section 4(b) of this Agreement, other than an isolated,
          insubstantial and inadvertent failure not occurring in bad faith and
          which is remedied by the Company promptly after receipt of notice
          thereof given by the Executive;

               (iii) the Company's requiring the Executive to be based at any
          office or location other than as provided in Section 4(a) (i) (B)
          hereof or the Company's requiring the Executive to travel on Company
          business to a substantially greater extent than required immediately
          prior to the Effective Date;

               (iv) any purported termination by the Company of the Executive's
          employment otherwise than as expressly permitted by this Agreement; or

               (vi) any failure by the Company to comply with and satisfy
          Section 11(c) of this Agreement.

     Anything in this Agreement to the contrary notwithstanding, a termination
     by the Executive for any reason shall be deemed to be a termination for
     Good Reason for all purposes of this Agreement if such termination occurs
     (i) in the case of a Change of Control that is not a Regulated Business
     Combination, during the 30-day period immediately following the first
     anniversary of the Effective Date, (ii) in the case of a Change of Control
     that is a Regulated Business Combination consummated pursuant to Final
     Regulatory Action, during the 30-day period immediately following the first
     anniversary of the Final Regulatory Action (it 


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     being understood that the Executive will have no rights under this
     paragraph in the case of a Change of Control that is a Regulated Business
     Combination (x) denied by the Agency or (y) for any other reason not
     consummated within one year of Final Regulatory Action).

          d. REGULATED BUSINESS COMBINATION. Notwithstanding the foregoing, in
     the case of a Change of Control that is a Regulated Business Combination,
     then for all purposes of this Agreement, during that portion of the
     Employment Period prior to Final Regulatory Action, the Executive may not
     exercise his rights to terminate his employment under this Agreement for
     "Good Reason." The Executive may only terminate his employment under this
     Agreement if he is "Constructively Terminated" by the Company. Moreover,
     except to the extent expressly set forth in the definition of "Constructive
     Termination," the Executive shall have no remedy for any breach by the
     Company of the provisions of Section 4; PROVIDED, HOWEVER, that any failure
     of the Company to comply in any material respect with the provisions of
     Section 4 shall create a rebuttable presumption that a Constructive
     Termination has occurred.

     For purposes of this Agreement, a "Constructive Termination" shall mean:

               (i) substantial diminution of the Executive's duties or
          responsibilities as contemplated by Section 4(a) of this Agreement,
          excluding for this purpose an isolated, insubstantial and inadvertent
          action not taken in bad faith and which is remedied by the Company
          promptly after receipt of notice thereof given by the Executive;

               (ii) either (x) a reduction in the Executive's cash compensation
          (which shall mean his Annual Base Salary or Annual Bonus) or (y) a
          discriminatory reduction in the Executive's other incentive
          opportunities, benefits or perquisites described in Section 4 (b)

               (iii) the Company's requiring the Executive to be based at any
          office or location other than as provided in Section 4(a) (i) (B)
          hereof; or

               (iv) any purported termination by the Company of the Executive's
          employment otherwise than for Cause.

     During that portion of the Employment Period after Final Regulatory Action,
     the Executive may terminate his Employment under this Agreement for "Good
     Reason".

          e. NOTICE OF TERMINATION. Any termination by the Company for Cause, or
     by the Executive for Good Reason or Constructive Termination, shall be
     communicated by Notice of Termination to the other party hereto given in
     accordance with Section 12(b) of this Agreement. For purposes of this
     Agreement, a "Notice of Termination" means a written notice which (i)
     indicates the specific termination provision in this Agreement relied upon,
     (ii) to the extent applicable, sets forth in reasonable detail the facts
     and circumstances claimed to provide a basis for termination of the
     Executive's employment under the provision so indicated, and (iii) if the
     Date of Termination (as defined below) is other than the date of receipt of
     such notice, specifies the termination date (which date shall be not more
     than thirty days after the giving of such notice). The failure by the
     Executive or the Company to set forth in the Notice of Termination any fact
     or circumstance which contributes to a showing of Good Reason, Cause or
     Constructive Termination shall not waive any right of the Executive or the
     Company, respectively, hereunder or preclude the Executive or the Company,
     respectively, from asserting such fact or circumstance in enforcing the
     Executive's or the Company's rights hereunder.

          f. DATE OF TERMINATION. "Date of Termination" means (i) if the
     Executive's employment is terminated by the Company for Cause, or by the
     Executive for Good Reason or Constructive Termination, the date of receipt
     of the Notice of Termination or any later date specified therein, as the
     case may be, (ii) if the Executive's employment is terminated by the
     Company other than for Cause or Disability, the Date of Termination shall
     be the date on which the Company notifies the Executive of such termination
     and (iii) if the Executive's employment is terminated by reason of death or
     Disability, the Date of Termination shall 


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     be the date of death of the Executive or the Disability Effective Date, as
     the case may be.

     6.   OBLIGATIONS OF THE COMPANY UPON TERMINATION.

          a. GOOD REASON OR CONSTRUCTIVE TERMINATION; OTHER THAN FOR CAUSE,
     DEATH OR DISABILITY. If, during the Employment Period, the Company shall
     terminate the Executive's employment other than for Cause or Disability or
     the Executive shall terminate employment for Good Reason or Constructive
     Termination:

               (i) the Company shall pay to the Executive in a lump sum in cash
          within 30 days after the Date of Termination the aggregate of the
          following amounts:

                    A. the sum of (1) the Executive's Annual Base Salary through
               the Date of Termination to the extent not theretofore paid, (2)
               the product of (x) the higher of (I) the Recent Annual Bonus and
               (II) the Annual Bonus paid or payable, including any bonus or
               portion thereof which has been earned but deferred (and
               annualized for any fiscal year consisting of less than twelve
               full months or during which the Executive was employed for less
               than twelve full months), for the most recently completed fiscal
               year during the Employment Period, if any (such higher amount
               being referred to as the "Highest Annual Bonus") and (y) a
               fraction, the numerator of which is the number of days in the
               current fiscal year through the Date of Termination, and the
               denominator of which is 365 and (3) any compensation previously
               deferred by the Executive (together with any accrued interest or
               earnings thereon) and any accrued vacation pay, in each case to
               the extent not theretofore paid (the sum of the amounts described
               in clauses (1), (2), and (3) shall be hereinafter referred to as
               the "Accrued Obligations") ; and

                    B. the amount equal to the product of (1) three and (2) the
               sum of (x) the Executive's Annual Base Salary and (y) the Highest
               Annual Bonus; and

                    C. an amount equal to the excess of (a) the actuarial
               equivalent of the benefit under the Company's qualified defined
               benefit retirement plan (the "Retirement Plan") (utilizing
               actuarial assumptions no less favorable to the Executive than
               those in effect under the Company s Retirement Plan immediately
               prior to the Effective Date), and any excess or supplemental
               retirement plan in which the Executive participates (together,
               the "SERP") which the Executive would receive if the Executive's
               employment continued for three years after the Date of
               Termination assuming for this purpose that all accrued benefits
               are fully vested, and, assuming that the Executive's compensation
               in each of the three years is that required by Section 4(b) (i)
               and Section 4 (b) (ii), over (b) the actuarial equivalent of the
               Executive's actual benefit (paid or payable), if any, under the
               Retirement Plan and the SERP as of the Date of Termination;

               (ii) for three years after the Executive's Date of Termination,
          or such longer period as may be provided by the terms of the
          appropriate plan, program, practice or policy, the Company shall
          continue benefits to the Executive and/or the Executive's family at
          least equal to those which would have been provided to them in
          accordance with the plans, programs, practices and policies described
          in Section 4(b)(iv) of this Agreement if the Executive's employment
          had not been terminated or, if more favorable to the Executive, as in
          effect generally at any time thereafter with respect to other peer
          executives of the Company and its affiliated companies and their
          families, PROVIDED, HOWEVER, that if the Executive becomes reemployed
          with another employer and is eligible to receive medical or other
          welfare benefits under another employer provided plan, the medical and
          other welfare benefits described herein shall be secondary to those
          provided under such other plan during such applicable period of
          eligibility. For purposes of determining eligibility (but not the time
          of commencement of benefits) of the Executive for retiree benefits
          pursuant to such plans, practices, programs and policies, the
          Executive shall be considered to have remained 


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          employed until three years after the Date of Termination and to have
          retired on the last day of such period;

               (iii) the Company shall, at its sole expense as incurred, provide
          the Executive with outplacement services the scope and provider of
          which shall be selected by the Executive in his sole discretion; and

               (iv) to the extent not theretofore paid or provided, the Company
          shall timely pay or provide to the Executive any other amounts or
          benefits required to be paid or provided or which the Executive is
          eligible to receive under any plan, program, policy or practice or
          contract or agreement of the Company and its affiliated companies,
          including earned but unpaid stock and similar compensation (such other
          amounts and benefits shall be hereinafter referred to as the "Other
          Benefits").

          b. DEATH. If the Executive's employment is terminated by reason of the
     Executive's death during the Employment Period, this Agreement shall
     terminate without further obligations to the Executive's legal
     representatives under this Agreement, other than for payment of Accrued
     Obligations and the timely payment or provision of Other Benefits. Accrued
     Obligations shall be paid to the Executive's estate or beneficiary, as
     applicable, in a lump sum in cash within 30 days of the Date of
     Termination. With respect to the provision of Other Benefits, the term
     Other Benefits as utilized in this Section 6(b) shall include, without
     limitation, and the Executive's estate and/or beneficiaries shall be
     entitled to receive, benefits at least equal to the most favorable benefits
     provided by the Company and affiliated companies to the estates and
     beneficiaries of peer executives of the Company and such affiliated
     companies under such plans, programs, practices and policies relating to
     death benefits, if any, as in effect with respect to other peer executives
     and their beneficiaries at any time during the 120-day period immediately
     preceding the Effective Date or, if more favorable to the Executive's
     estate and/or the Executive's beneficiaries, as in effect on the date of
     the Executive's death with respect to other peer executives of the Company
     and its affiliated companies and their beneficiaries.

          c. DISABILITY. If the Executive's employment is terminated by reason
     of the Executive's Disability during the Employment Period, this Agreement
     shall terminate without further obligations to the Executive, other than
     for payment of Accrued Obligations and the timely payment or provision of
     Other Benefits. Accrued Obligations shall be paid to the Executive in a
     lump sum in cash within 30 days of the Date of Termination. With respect to
     the provision of Other Benefits, the term Other Benefits as utilized in
     this Section 6(c) shall include, and the Executive shall be entitled after
     the Disability Effective Date to receive, disability and other benefits at
     least equal to the most favorable of those generally provided by the
     Company and its affiliated companies to disabled executives and/or their
     families in accordance with such plans, programs, practices and policies
     relating to disability, if any, as in effect generally with respect to
     other peer executives and their families at any time during the 120-day
     period immediately preceding the Effective Date or, if more favorable to
     the Executive and/or the Executive's family, as in effect at any time
     thereafter generally with respect to other peer executives of the Company
     and its affiliated companies and their families.

          d. CAUSE; OTHER THAN FOR GOOD REASON OR CONSTRUCTIVE TERMINATION. If
     the Executive's employment shall be terminated for Cause during the
     Employment Period, this Agreement shall terminate without further
     obligations to the Executive other than the obligation to pay to the
     Executive (x) his Annual Base Salary through the Date of Termination, (y)
     the amount of any compensation previously deferred by the Executive, and
     (z) Other Benefits, in each case to the extent theretofore unpaid. If the
     Executive voluntarily terminates employment during the Employment Period,
     excluding a termination for Good Reason or Constructive Termination, this
     Agreement shall terminate without further obligations to the Executive,
     other than for Accrued Obligations and the timely payment or provision of
     Other Benefits. In such case, all Accrued Obligations shall be paid to the
     Executive in a lump sum in cash within 30 days of the Date of Termination.


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     7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.

     8. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f) (2) (A) of the Internal Revenue
Code of 1986, as amended (the "Code").

     9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

          a. Anything in this Agreement to the contrary notwithstanding and
     except as set forth below, in the event it shall be determined that any
     payment or distribution by the Company 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, but determined without regard
     to any additional payments required under this Section 9) (a "Payment")
     would be subject to the excise tax imposed by Section 4999 of the Code or
     any interest or penalties are incurred by the Executive with respect to
     such excise tax (such excise tax, together with any such interest and
     penalties, are hereinafter collectively referred to as the "Excise Tax"),
     then the Executive shall be entitled to receive an additional payment (a
     "Gross-Up Payment") 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, without limitation, any income taxes (and any
     interest and penalties imposed with respect thereto) and 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 Payments. Notwithstanding
     the foregoing provisions of this Section 9 (a), if it shall be determined
     that the Executive is entitled to a Gross-Up Payment, but that the
     Executive, after taking into account the Payments and the Gross-Up Payment,
     would not receive a net after-tax benefit of at least $50,000 (taking into
     account both income taxes and any Excise Tax) as compared to the net
     after-tax proceeds to the Executive resulting from an elimination of the
     Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
     amount (the "Reduced Amount") such that the receipt of Payments would not
     give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
     Executive and the Payments, in the aggregate, shall be reduced to the
     Reduced Amount.

          b. Subject to the provisions of Section 9(c), all determinations
     required to be made under this Section 9, including whether and when a
     Gross-Up Payment is required and the amount of such Gross-Up Payment and
     the assumptions to be utilized in arriving at such determination, shall be
     made by Ernst & Young or such other certified public accounting firm as may
     be designated by the Executive (the "Accounting Firm") which shall provide
     detailed supporting calculations both to the Company and the Executive
     within 15 business days of the receipt of notice from the Executive that
     there has been a Payment, or such earlier time as is requested by the
     Company. In the event that the Accounting Firm is serving as accountant or
     auditor for the individual, entity or group effecting the Change of
     Control, the Executive shall appoint another nationally recognized
     accounting firm to make the determinations required hereunder (which
     accounting firm shall then be referred to as the Accounting Firm
     hereunder). All fees and expenses of the Accounting Firm shall be borne
     solely by the Company. Any Gross-Up Payment, as 


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     determined pursuant to this Section 9, shall be paid by the Company to the
     Executive within five days of the receipt of the Accounting Firm's
     determination. Any determination by the Accounting Firm shall be binding
     upon the Company and the Executive. As a result of the uncertainty in the
     application of Section 4999 of the Code at the time of the initial
     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 ("Underpayment"), consistent with the calculations required to be
     made hereunder. In the event that the Company exhausts its remedies
     pursuant to Section 9(c) and the Executive thereafter is required to make a
     payment of any Excise Tax, the Accounting Firm shall determine the amount
     of the Underpayment that has occurred and any such Underpayment shall be
     promptly paid by the Company to or for the benefit of the Executive.

          c. The Executive shall notify the Company in writing of any claim by
     the Internal Revenue Service that, if successful, would require the payment
     by the Company of the Gross-Up Payment. Such notification shall be given as
     soon as practicable but no later than ten business days after the Executive
     is informed in writing of such claim and shall apprise the Company of the
     nature of such claim and the date on which such claim is requested to be
     paid. The Executive shall not pay such claim prior to the expiration of the
     30-day period following the date on which it gives such notice to the
     Company (or such shorter period ending on the date that any payment of
     taxes 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) give the Company any information reasonably requested by the
          Company relating to such claim,

               (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 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 additional interest and penalties) incurred in
     connection with such contest and shall indemnify and hold the Executive
     harmless, on an after-tax basis, for 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
     limitation on the foregoing provisions of this Section 9(c), the Company
     shall control all proceedings taken in connection with such contest and, at
     its sole option, may pursue or forgo any and all administrative appeals,
     proceedings, hearings and conferences with the taxing authority in respect
     of such claim and may, at its sole 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 such claim 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 tax (including interest or penalties with respect
     thereto) imposed with respect to such advance or with respect to any
     imputed income with respect to such advance; and further provided that any
     extension of the statute of limitations relating to payment of taxes for
     the taxable year of the Executive with respect to which such contested
     amount is claimed to be due is limited solely to such contested amount.
     Furthermore, the Company's control of the contest 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.


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<PAGE>

          d. If, after the receipt by the Executive of an amount advanced by the
     Company pursuant to Section 9(c), the Executive becomes entitled to receive
     any refund with respect to such claim, the Executive shall (subject to the
     Company's complying with the requirements of Section 9(c)) promptly pay to
     the Company the amount of such refund (together with any interest paid or
     credited thereon after taxes applicable thereto). If, after the receipt by
     the Executive of an amount advanced by the Company pursuant to Section
     9(c), 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 of refund prior
     to the expiration of 30 days after such determination, then such advance
     shall be forgiven and shall not be required to be repaid and the amount of
     such advance shall offset, to the extent thereof, the amount of Gross-Up
     Payment required to be paid.

     10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.

     11.  SUCCESSORS.

          a. This Agreement is personal to the Executive and without the prior
     written consent of the Company shall not be assignable by the Executive
     otherwise than by will or the laws of descent and distribution. This
     Agreement shall inure to the benefit of and be enforceable by the
     Executive's legal representatives.

          b. This Agreement shall inure to the benefit of and be binding upon
     the Company and its successors and assigns.

          c. The Company will require any successor (whether direct or indirect,
     by purchase, merger, consolidation or otherwise) to all or substantially
     all of the business and/or assets of the Company to assume expressly and
     agree to perform this Agreement in the same manner and to the same extent
     that the Company would be required to perform it if no such succession had
     taken place. As used in this Agreement, "Company" shall mean the Company as
     hereinbefore defined and any successor to its business and/or assets as
     aforesaid which assumes and agrees to perform this Agreement by operation
     of law, or otherwise.

     12.  MISCELLANEOUS.

          a. This Agreement shall be governed by and construed in accordance
     with the laws of the Commonwealth of Virginia, without reference to
     principles of conflict of laws. The captions of this Agreement are not part
     of the provisions hereof and shall have no force or effect. This Agreement
     may not be amended or modified otherwise than by a written agreement
     executed by the parties hereto or their respective successors and legal
     representatives.

          b. All notices and other communications hereunder shall be in writing
     and shall be given by hand delivery to the other party or by registered or
     certified mail, return receipt requested, postage prepaid, addressed as
     follows:


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                       IF TO THE EXECUTIVE:

                           Michael C. Hagan
                           8503 Westover Drive
                           Prospect, Kentucky 40059

                        IF TO THE COMPANY:

                           CSX Corporation
                           One James Center
                           Richmond, Virginia 23219
                           Attention:     General Counsel

     or to such other address as either party shall have furnished to the other
     in writing in accordance herewith. Notice and communications shall be
     effective when actually received by the addressee.

          c. The invalidity or unenforceability of any provision of this
     Agreement shall not affect the validity or enforceability of any other
     provision of this Agreement.

          d. The Company may withhold from any amounts payable under this
     Agreement such Federal, state, local or foreign taxes as shall be required
     to be withheld pursuant to any applicable law or regulation.

          e. The Executive's or the Company's failure to insist upon strict
     compliance with any provision of this Agreement or the failure to assert
     any right the Executive or the Company may have hereunder, including,
     without limitation, the right of the Executive to terminate employment for
     Good Reason or Constructive Termination pursuant to Section 5 of this
     Agreement, shall not be deemed to be a waiver of such provision or right or
     any other provision or right of this Agreement.

          f. The Executive and the Company acknowledge that, except as may
     otherwise be provided under any other written agreement between the
     Executive and the Company, the employment of the Executive by the Company
     is "at will" and, subject to Section 1(a) hereof, prior to the Effective
     Date, the Executive's employment and/or this Agreement may be terminated by
     either the Executive or the Company at any time prior to the Effective
     Date, in which case the Executive shall have no further rights under this
     Agreement. From and after the Effective Date this Agreement shall supersede
     any other agreement between the parties with respect to the subject matter
     hereof.

     13. OTHER AGREEMENTS UNAFFECTED. Except as otherwise expressly provided
herein, this Agreement shall have no affect on any other agreement between the
Executive and the Company or any of its affiliates, and any such agreement is
ratified and confirmed in all respects and shall remain in full force and effect
in accordance with its terms.


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     IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.


                                   /s/ Michael C. Hagan
                                   --------------------------------------------
                                   Michael C. Hagan


                                   CSX CORPORATION

                                   By: /s/ John W. Snow
                                   --------------------------------------------
                                   John W. Snow, Chairman
                                   President and Chief
                                   Executive Officer




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