Document:

EMPLOYMENT AGREEMENT
                      (Amended and Restated January 1, 1999)

         THIS  AGREEMENT,  made and entered  into as of this 1st day of January,
1999,  by and between  The Kansas  City  Southern  Railway  Company,  a Missouri
corporation  ("Railway"),  Kansas City  Southern  Industries,  Inc.,  a Delaware
corporation  ("KCSI") and Michael  R.  Haverty,  an  individual ("Executive").

         WHEREAS,  Executive is now employed by Railway,  and Railway,  KCSI and
Executive  desire for Railway to continue to employ  Executive  on the terms and
conditions  set forth in this Agreement and to provide an incentive to Executive
to remain in the employ of Railway  hereafter,  particularly in the event of any
change in control (as herein  defined) of KCSI,  Railway or Kansas City Southern
Lines,  Inc.,  thereby  establishing and preserving  continuity of management of
Railway.
         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein  contained,  it is agreed by and between  Railway,  KCSI and Executive as
follows:
         1. Employment.  Railway hereby continues the employment of Executive as
its  President and Chief  Executive  Officer to have general  supervision  over,
responsibility  for and  control  of the  day-to-day  business  and  affairs  of
Railway,  subject  to  the  powers  vested  in  the  Railway  Board  and  in the
stockholder  of  Railway.  Executive  shall have such other  powers,  duties and
responsibilities  consistent  with his position as President and Chief Executive
Officer  of Railway as may be  prescribed  from time to time by the Board.  KCSI
shall cause  Executive  to continue to be elected and  retained as an  Executive
Vice  President  of KCSI and as a  Director  of  Railway  and shall use its best
efforts to cause  Executive  to  continue  to be elected as a Director  of KCSI.
Executive shall  faithfully  perform his duties under this Agreement to the best
of his  ability  and shall  devote  substantially  all of his  working  time and
efforts to the  business  and affairs of Railway and its  affiliates;  provided,
however,  that to an  extent  consistent  with  the  needs  of  Railway  and its
affiliates, Executive shall be entitled to expend a reasonable amount of time on
civic and  philanthropic  activities  and the  management of personal and family
investments.

         2.       Compensation.

                  (a)  Base   Compensation.   Railway  shall  pay  Executive  as
compensation  for his  services  hereunder  an  annual  base  salary at the rate
approved by the KCSI  Compensation  Committee on November  17,  1998.  Such rate
shall not be increased  prior to January 1, 2000 and shall not be reduced except
as agreed by the parties or except as part of a general salary reduction program
imposed by Railway for  non-union  employees  and  applicable to all officers of
Railway.
               (b) Incentive  Compensation.  For the year 1999, Executive shall
  not be entitled to participate in the Railway Incentive Compensation Plan.

               (c) Stock  Options.  Executive  acknowledges  that he has been
  granted KCSI stock options as follows:

          (i)  Options for 100,000  shares of KCSI  common  stock  pursuant to a
     stock  option  agreement  dated May 15, 1995,  representing  options at the
     option  price  of  $38.3125  awarded  at the  time of  Executive's  initial
     employment by Railway in accordance with the Employment  Agreement  between
     Executive,  Railway,  and KCSI  dated May 15,  1995 (the  "1995  Employment
     Agreement").

          (ii) Options for the purchase of 150,000  shares of KCSI common stock,
     pursuant to a stock option  agreement dated November 6, 1995,  representing
     options  at the  option  price of  Forty-Six  Dollars  ($46.00)  granted to
     Executive in lieu of  Performance  Shares which  Executive  was to have the
     right to earn under the 1995 Employment Agreement.

          (iii) Options to purchase 45,000 shares of KCSI common,  pursuant to a
     stock option agreement dated January 25, 1996,  representing  stock options
     at the option  price of  $43.1875  awarded to  Executive  in lieu of a cash
     bonus  for  the  period  of May  15,  1995  through  December  31,  1995 as
     previously provided in the 1995 Employment Agreement.

         Executive  acknowledges  and  agrees  that he has  received  the  stock
options  specified in subparagraphs  (ii) and (iii) above in lieu of performance
shares and a cash bonus as previously provided in the 1995 Employment  Agreement
and that Executive has no right or claim under the 1995 Employment  Agreement or
otherwise for said performance shares or said cash bonus.

         3.  Benefits.  During the period of his employment  hereunder,  Railway
shall provide  Executive  with coverage under such benefit plans and programs as
are made  generally  available  to  similarly  situated  employees  of  Railway,
provided  (a)  Railway  shall  have no  obligation  with  respect to any plan or
program if Executive is not eligible for coverage thereunder,  and (b) Executive
acknowledges that stock options and other stock and equity  participation awards
are  granted  in the  discretion  of the Board of  Directors  of KCSI (the "KCSI
Board") or the  Compensation  Committee of the KCSI Board and that Executive has
no right to receive  stock options or other equity  participation  awards or any
particular  number or level of stock  options or other  awards.  In  determining
contributions,  coverage and benefits under any disability  insurance policy and
under any cash  compensation-based  plan  provided to Executive  by Railway,  it
shall be assumed that the value of Executive's annual compensation, pursuant
to this  Agreement,  is 167.67% of  Executive's  annual base  salary.  Executive
acknowledges that all rights and benefits under benefit plans and programs shall
be governed by the official  text of each plan or program and not by any summary
or description  thereof or any provision of this Agreement (except to the extent
that this Agreement  expressly modifies such benefit plans or programs) and that
none of KCSI,  KCSL nor Railway is under any obligation to continue in effect or
to fund any such plan or program, except as provided in Paragraph 7 hereof.

         4.       Termination.

                  (a)  Termination  by Executive.  Executive may terminate  this
Agreement  and his  employment  hereunder  by at least  thirty (30) days advance
written  notice to Railway,  except that in the event of any material  breach of
this  Agreement by Railway,  Executive  may  terminate  this  Agreement  and his
employment hereunder immediately upon notice to Railway.

                  (b) Death or Disability.  This  Agreement and  Executive's
employment hereunder shall terminate automatically on the death or disability of
Executive,  except to the extent  employment  is continued  under  Railway's
disability plan. For purposes of this Agreement, Executive shall be deemed to be
disabled if he qualifies for disability benefits under  Railway's  long-term
disability plan.

                  (c)  Termination  by Railway For Cause.  Railway may terminate
this Agreement and Executive's employment "for cause" immediately upon notice to
Executive.  For purposes of this Agreement (except for Paragraph 7), termination
"for cause" shall mean termination based upon any one or more of the following:

          (i) Any material breach of this Agreement by Executive;

          (ii)  Executive's  dishonesty  involving  Railway,  KCSI,  KCSL or any
          subsidiary of Railway, KCSI or KCSL;

          (iii) Gross  negligence or willful  misconduct in the  performance  of
          Executive's duties as determined in good faith by the Railway Board;

          (iv) Willful failure by Executive to follow reasonable instructions of
          the President or other officer to whom Executive reports;

          (v) Executive's fraud or criminal activity; or

          (vi) Embezzlement or misappropriation by Executive.

                  (d)      Termination by Railway Other Than For Cause.

                           (i)  Railway  may   terminate   this   Agreement  and
         Executive's  employment other than for cause immediately upon notice to
         Executive,  and in such event, Railway shall provide severance benefits
         to Executive in accordance with Paragraph 4(d)(ii) below.

                           (ii)  Unless the  provisions  of  Paragraph 7 of this
         Agreement are applicable, if Executive's employment is terminated under
         Paragraph 4(d)(i), Railway shall continue, for a period of one (1) year
         following such termination,  (a) to pay to Executive as severance pay a
         monthly amount equal to one-twelfth  (1/12th) of the annual base salary
         referenced in Paragraph 2(a) above,  at the rate in effect  immediately
         prior to  termination,  and,  (b) to reimburse  Executive  for the cost
         (including  state and federal income taxes payable with respect to this
         reimbursement)  of continuing the health  insurance  coverage  provided
         pursuant to this  Agreement  or  obtaining  health  insurance  coverage
         comparable to the health insurance provided pursuant to this Agreement,
         and  obtaining  coverage  comparable  to the  life  insurance  provided
         pursuant to this  Agreement,  unless  Executive is provided  comparable
         health or life insurance  coverage in connection with other employment.
         The foregoing  obligations  of Railway shall  continue until the end of
         such one (1) year period  notwithstanding  the death or  disability  of
         Executive  during  said  period  (except,  in the event of  death,  the
         obligation to reimburse  Executive for the cost of life insurance shall
         not continue).  In the year in which termination of employment  occurs,
         Executive  shall be  eligible  to receive  benefits  under the  Railway
         Incentive  Compensation  Plan and any Executive Plan in which Executive
         participates  (the  "Executive  Plan")  (if  such  Plans  then  are  in
         existence and Executive was entitled to participate  immediately  prior
         to  termination)  in accordance  with the provisions of such plans then
         applicable, and severance pay received in such year shall be taken into
         account  for the purpose of  determining  benefits,  if any,  under the
         Railway  Incentive  Compensation Plan but not under the Executive Plan.
         After  the year in which  termination  occurs,  Executive  shall not be
         entitled  to accrue or receive  benefits  under the  Railway  Incentive
         Compensation  Plan or the Executive  Plan with respect to the severance
         pay provided herein, notwithstanding that benefits under such plan then
         are still generally available to executive employees of Railway.  After
         termination of employment, Executive shall not be entitled to accrue or
         receive  benefits  under any other  employee  benefit  plan or program,
         except that  Executive  shall be entitled  to  participate  in the KCSI
         Profit  Sharing Plan,  the KCSI Employee  Stock  Ownership Plan and the
         KCSI Section 401(k) Plan (if Railway  employees then still  participate
         in  such  plans)  in the  year of  termination  of  employment  only if
         Executive  meets all  requirements of such plans for  participation  in
         such year.

         5. Non-Disclosure.  During the term of this Agreement and at all times
after any termination of this  Agreement,  Executive shall not, either
directly or  indirectly,  use or disclose  any Railway  trade  secret,
except to the extent necessary for Executive to perform his duties for
Railway while an employee.  For purposes of this  Agreement,  the term
"Railway  trade  secret"  shall  mean any  information  regarding  the
business or  activities  of Railway or any  subsidiary  or  affiliate,
including any formula, pattern, compilation,  program, device, method,
technique,  process,  customer  list,  technical  information or other
confidential or proprietary information,  that (a) derives independent
economic  value,  actual or potential,  from not being generally known
to, and not being  readily  ascertainable  by proper  means by,  other
persons who can obtain  economic value from its disclosure or use, and
(b) is the  subject  of  efforts  of  Railway  or  its  subsidiary  or
affiliate that are reasonable  under the  circumstance to maintain its
secrecy.  In the event of any breach of this Paragraph 5 by Executive,
Railway shall be entitled to terminate any and all remaining severance
benefits under Paragraph 4(d)(ii) and shall be entitled to pursue such
other legal and equitable remedies as may be available.

         6.       Duties Upon Termination; Survival.

                  (a) Duties.  Upon  termination of this Agreement by Railway or
Executive  for any reason,  Executive  shall  immediately  return to Railway all
Railway  trade  secrets which exist in tangible form and shall sign such written
resignations  from all  positions  as an  officer,  director  or  member  of any
committee  or board of  Railway  and all direct and  indirect  subsidiaries  and
affiliates  of Railway as may be  requested by Railway and shall sign such other
documents and papers  relating to Executive's  employment,  benefits and benefit
plans as Railway may reasonably request.

                  (b)  Survival.  The  provisions of Paragraphs 5, 6(a) and 7 of
this  Agreement  shall survive any  termination  of this Agreement by Railway or
Executive,   and  the  provisions  of  Paragraph   4(d)(ii)  shall  survive  any
termination of this Agreement by Railway under Paragraph 4(d)(i).

         7.       Continuation of Employment Upon Change in Control

                  (a)  Continuation  of  Employment.  Subject  to the  terms and
conditions of this  Paragraph 7, in the event of a Change in Control (as defined
in  Paragraph  7(d)) at any time  during the term of this  Agreement,  Executive
agrees to  remain in the  employ of  Railway  for a period of three  years  (the
"Three-Year  Period")  from the date of such  Change in  Control  (the  "Control
Change Date"). Railway agrees to continue to employ Executive for the Three-Year
Period.  During the Three-Year Period, (i) the Executive's  position  (including
offices,  titles,  reporting requirements and  responsibilities),  authority and
duties shall be at least  commensurate  in all material  respects  with the most
significant  of those  held,  exercised  and  assigned at any time during the 12
month period immediately before the Control Change Date and (ii) the Executive's
services  shall be  performed  at the  location  where  Executive  was  employed
immediately before the Control Change Date or at any other location less than 40
miles from such former  location.  During the Three-Year  Period,  Railway shall
continue to pay to  Executive an annual base salary on the same basis and at the
same  intervals as in effect prior to the Control Change Date at a rate not less
than 12 times the highest  monthly base salary paid or payable to the  Executive
by Railway in respect of the  12-month  period  immediately  before the  Control
Change Date.
                  (b) Benefits. During the Three-Year Period, Executive shall be
entitled to participate,  on the basis of his executive position, in each of the
following KCSI, KCSL or Railway plans  (together,  the "Specified  Benefits") in
existence, and in accordance with the terms thereof, at the Control Change Date:

                           (i) any  benefit  plan,  and  trust  fund  associated
         therewith, related to (A) life, health, dental, disability,  accidental
         death and dismemberment  insurance or accrued but unpaid vacation time,
         (B) profit  sharing,  thrift or deferred  savings  (including  deferred
         compensation,  such as under Sec.  401(k)  plans),  (C)  retirement  or
         pension  benefits,  (D) ERISA excess benefits and similar plans and (E)
         tax favored  employee stock ownership (such as under ESOP, and Employee
         Stock Purchase programs); and

                           (ii) any other benefit plans hereafter made generally
         available to  executives  of  Executive's  level or to the employees of
         Railway generally.  In addition,  Railway and KCSI shall use their best
         efforts to cause all outstanding options held by

Executive  under  any  stock  option  plan of KCSI or its  affiliates  to become
immediately  exercisable  on the Control Change Date and to the extent that such
options  are not vested and are  subsequently  forfeited,  the  Executive  shall
receive a lump-sum  cash payment  within 5 days after the options are  forfeited
equal to the  difference  between the fair  market  value of the shares of stock
subject to the  non-vested,  forfeited  options  determined  as of the date such
options  are  forfeited  and the  exercise  price for such  options.  During the
Three-Year  Period  Executive shall be entitled to participate,  on the basis of
his executive  position,  in any incentive  compensation  plan of KCSI,  KCSL or
Railway  in  accordance  with the terms  thereof  at the  Control  Change  Date;
provided  that if  under  KCSI,  KCSL or  Railway  programs  or  Executive's
Employment Agreement in existence  immediately prior to the Control Change Date,
there are written  limitations on participation  for a designated time period in
any incentive  compensation  plan,  such  limitations  shall  continue after the
Control  Change Date to the extent so provided  for prior to the Control  Change
Date.

         If  the  amount  of  contributions  or  benefits  with  respect  to the
Specified   Benefits  or  any   incentive   compensation   is  determined  on  a
discretionary  basis under the terms of the Specified  Benefits or any incentive
compensation  plan  immediately  prior to the Control Change Date, the amount of
such  contributions  or benefits  during the  Three-Year  Period for each of the
Specified  Benefits shall not be less than the average annual  contributions  or
benefits for each Specified Benefit for the three plan years ending prior to the
Control  Change Date and, in the case of any incentive  compensation  plan,  the
amount of the incentive  compensation  during the Three-Year Period shall not be
less than 75% of the maximum  that could have been paid to the  Executive  under
the terms of the incentive compensation plan.

                  (c) Payment. With respect to any plan or agreement under which
Executive  would be  entitled at the  Control  Change Date to receive  Specified
Benefits or incentive  compensation as a general obligation of Railway which has
not been separately  funded (including  specifically,  but not limited to, those
referred to under Paragraph  7(b)(i)(d)  above),  Executive shall receive within
five (5) days  after  such date full  payment  in cash  (discounted  to the then
present  value on the basis of a rate of seven  percent  (7%) per  annum) of all
amounts to which he is then entitled thereunder.

                  (d) Change in Control. Except as provided in the last sentence
of this Paragraph  7(d), for purposes of this  Agreement,  a "Change in Control"
shall be deemed to have occurred if:

                           (i) for any reason at any time less than seventy-five
         percent (75%) of the members of the KCSI Board shall be individuals who
         fall into any of the following  categories:  (A)  individuals  who were
         members  of the  KCSI  Board  on the  date  of  the  Agreement;  or (B)
         individuals  whose  election,  or nomination for election by KCSI's
         stockholders,  was approved by a vote of at least seventy-five  percent
         (75%) of the  members  of the KCSI  Board then still in office who were
         members  of the  KCSI  Board  on the  date  of  the  Agreement;  or (C)
         individuals whose election,  or nomination for election,  by KCSI's
         stockholders,  was approved by a vote of at least seventy-five  percent
         (75%) of the  members  of the KCSI  Board then still in office who were
         elected in the manner described in (A) or (B) above, or

                           (ii) any  "person"  (as such term is used in Sections
         13(d)  and  14(d)(2)  of  the  Securities  Exchange  Act of  1934  (the
         "Exchange  Act")) other than KCSI shall have become after September 18,
         1997,  according to a public  announcement  or filing,  the "beneficial
         owner" (as defined in Rule 13d-3 under the Exchange  Act),  directly or
         indirectly,  of securities of KCSL, Railway or KCSI representing thirty
         percent (30%) (or, with respect to Paragraph 7(c) hereof,  40%) or more
         (calculated in accordance with Rule 13d-3) of the combined voting power
         of KCSL's,  Railway's  or KCSI's  then  outstanding  voting
         securities; or

                           (iii) the stockholders of KCSL, Railway or KCSI shall
         have approved a merger,  consolidation or dissolution of KCSL,  Railway
         or  KCSI  or  a  sale,  lease,   exchange  or  disposition  of  all  or
         substantially  all of KCSL's,  Railway's or KCSI's  assets,  if
         persons who were the beneficial  owners of the combined voting power of
         KCSL's,  Railway's or KCSI's voting securities  immediately
         before  any  such  merger,  consolidation,  dissolution,  sale,  lease,
         exchange or disposition  do not  immediately  thereafter,  beneficially
         own,  directly or indirectly,  in substantially  the same  proportions,
         more than 60% of the combined  voting power of any corporation or other
         entity resulting from any such transaction.

Notwithstanding the foregoing provisions of this Paragraph 7(d) to the contrary,
the sale of shares of stock of KCSL  pursuant to an initial  public  offering of
shares of stock of KCSL shall not constitute a Change in Control.

                  (e) Termination After Control Change Date. Notwithstanding any
other  provision of this Paragraph 7, at any time after the Control Change Date,
Railway may  terminate  the  employment of Executive  (the  "Termination"),  but
unless  such  Termination  is for Cause as  defined in  subparagraph  (g) or for
disability,  within  five  (5)  days of the  Termination  Railway  shall  pay to
Executive  his full base  salary  through  the  Termination,  to the  extent not
theretofore paid, plus a lump sum amount (the "Special Severance Payment") equal
to the product  (discounted  to the then present value on the basis of a rate of
seven percent (7%) per annum) of (i) 167.67% of his annual base salary specified
in Paragraph 7(a) multiplied by (ii) Three;  and Specified  Benefits  (excluding
any incentive compensation) to which Executive was entitled immediately prior to
Termination  shall  continue  until  the  end of the  3-year  period  ("Benefits
Period")  beginning on the date of  Termination.  If any plan  pursuant to which
Specified  Benefits  are provided  immediately  prior to  Termination  would not
permit  continued  participation  by Executive after  Termination,  then Railway
shall pay to Executive within five (5) days after Termination a lump sum payment
equal to the amount of Specified  Benefits  Executive  would have received under
such plan if Executive had been fully vested in the average annual contributions
or  benefits  in effect  for the three plan years  ending  prior to the  Control
Change Date (regardless of any limitations  based on the earnings or performance
of KCSI,  KCSL or Railway) and a continuing  participant in such plan to the end
of the Benefits Period.  Following the end of the Benefits Period, Railway shall
continue to provide to the  Executive and the  Executive's  family the following
benefits  ("Post-Period  Benefits"):  (1) prior to the Executive's attainment of
age sixty (60),  health,  prescription  and dental benefits  equivalent to those
then applicable to active peer executives of Railway) and their families, as the
same may be  modified  from  time to time,  and (2)  following  the  Executive's
attainment of age sixty (60) (and without  regard to the  Executive's  period of
service with Railway) health and prescription  benefits equivalent to those then
applicable to retired peer executives of Railway and their families, as the same
may be modified from time to time. The cost to the Executive of such Post-Period
Benefits  shall not exceed the cost of such  benefits  to active or retired  (as
applicable)  peer  executives,  as the same may be  modified  from time to time.
Notwithstanding  the  preceding  two  sentences of this  Paragraph  7(e), if the
Executive is covered under any health, prescription or dental plan provided by a
subsequent employer, then the corresponding type of plan coverage (i.e., health,
prescription or dental),  required to be provided as Post-Period  Benefits under
this Paragraph  7(e) shall cease.  The  Executive's  rights under this Paragraph
7(e)  shall  be in  addition  to,  and  not in  lieu  of,  any  post-termination
continuation  coverage or  conversion  rights the Executive may have pursuant to
applicable law, including without limitation  continuation  coverage required by
Section  4980 of the Code.  Nothing  in this  Paragraph  7(e) shall be deemed to
limit in any manner the  reserved  right of  Railway,  in its sole and  absolute
discretion,  to at any time amend,  modify or terminate health,  prescription or
dental benefits for active or retired employees generally.

                  (f)  Resignation  After Control Change Date. In the event of a
Change in Control as defined in Paragraph 7(d), thereafter, upon good reason (as
defined  below),  Executive may, at any time during the 3-year period  following
the Change in  Control,  in his sole  discretion,  on not less than  thirty (30)
days'  written  notice (the  "Notice of  Resignation")  to the  Secretary of
Railway and effective at the end of such notice  period,  resign his  employment
with Railway (the  "Resignation").  Within five (5) days of such a  Resignation,
Railway shall pay to Executive his full base salary  through the effective  date
of such Resignation,  to the extent not theretofore paid, plus a lump sum amount
equal to the  Special  Severance  Payment  (computed  as  provided  in the first
sentence of Paragraph  7(e),  except that for purposes of such  computation  all
references to "Termination"  shall be deemed to be references to "Resignation").
Upon  Resignation  of  Executive,  Specified  Benefits  to which  Executive  was
entitled  immediately  prior to Resignation shall continue on the same terms and
conditions as provided in Paragraph 7(e) in the case of  Termination  (including
equivalent  payments  provided for therein),  and Post-Period  Benefits shall be
provided on the same terms and  conditions as provided in Paragraph  7(e) in the
case of Termination.  For purposes of this Agreement, "good reason" means any of
the following:

                           (i) the  assignment  to the  Executive  of any duties
         inconsistent  in any respect with the Executive's  position  (including
         offices, titles, reporting requirements or responsibilities), authority
         or duties as  contemplated by Section  7(a)(i),  or any other action by
         Railway which results in a diminution or other material  adverse change
         in such position, authority or duties;

                           (ii) any failure by Railway to comply with any of the
         provisions of Paragraph 7; (iii) Railway's  requiring
         the Executive to be based at any office or location
         other than the location described in Section 7(a)(ii);

                           (iv)     any other  material  adverse  change to the
         terms  and  conditions  of the Executive's employment; or

                           (v)  any  purported  termination  by  Railway  of the
         Executive's  employment  other  than  as  expressly  permitted  by this
         Agreement  (any such purported  termination  shall not be effective for
         any other purpose under this Agreement).

A passage of time prior to delivery of the Notice of Resignation or a failure by
the Executive to include in the Notice of Resignation  any fact or  circumstance
which  contributes  to a showing of Good Reason shall not waive any right of the
Executive  under this  Agreement or preclude the Executive  from  asserting such
fact or circumstance in enforcing rights under this Agreement.

                  (g)   Termination   for  Cause  After  Control   Change  Date.
Notwithstanding  any other  provision of this Paragraph 7, at any time after the
Control  Change Date,  Executive may be terminated by Railway "for cause." Cause
means commission by the Executive of any felony or willful breach of duty by the
Executive in the course of the Executive's  employment;  except that Cause shall
not mean:

                           (i)      bad judgment or negligence;

                           (ii) any act or omission believed by the Executive in
         good faith to have been in or not  opposed to the  interest  of Railway
         (without  intent of the Executive to gain,  directly or  indirectly,  a
         profit to which the Executive was not legally entitled);

                           (iii) any act or  omission  with  respect  to which a
         determination  could  properly have been made by the Railway Board that
         the   Executive   met  the   applicable   standard   of   conduct   for
         indemnification  or  reimbursement  under  Railway's  by-laws,  any
         applicable  indemnification  agreement, or applicable law, in each case
         in effect at the time of such act or omission; or

                           (iv) any act or omission with respect to which Notice
         of  Termination of the Executive is given more than 12 months after the
         earliest date on which any member of the Railway Board,  not a party to
         the act or omission, knew or should have known of such act or omission.
Any  Termination  of the  Executive's  employment  by Railway for Cause shall be
communicated to the Executive by Notice of Termination.

                  (h) Gross-up for Certain  Taxes.  If it is determined  (by the
reasonable  computation of Railway's independent auditors,  which determinations
shall be  certified to by such  auditors and set forth in a written  certificate
("Certificate")  delivered to the Executive) that any benefit received or deemed
received by the Executive from Railway,  KCSL or KCSI pursuant to this Agreement
or otherwise  (collectively,  the  "Payments")  is or will become subject to any
excise tax under  Section 4999 of the Code or any similar tax payable  under any
United States federal,  state,  local or other law (such excise tax and all such
similar taxes  collectively,  "Excise Taxes"),  then Railway shall,  immediately
after such  determination,  pay the Executive an amount (the "Gross-up Payment")
equal to the product of:

                           (i)  the amount of such Excise Taxes; multiplied by

                           (ii) the Gross-up Multiple (as defined in Paragraph
                                7(k)).

                           The Gross-up  Payment is intended to  compensate the
         Executive for the Excise Taxes and any federal,  state, local or other
         income or excise taxes or other taxes payable by the Executive with
         respect to the Gross-up Payment.  Railway shall cause the  preparation
         and delivery to the Executive of a Certificate upon request at any
         time. Railway shall, in  addition  to  complying  with  this  Paragraph
         7(h), cause  all determinations and certifications  under Paragraphs
         7(h)-(o) to be made as soon as  reasonably  possible  and in  adequate
         time to permit  the Executive to prepare and file the Executive's
         individual tax returns on a timely basis.

                  (i)      Determination by the Executive.

                           (i)  If   Railway   shall   fail  (A)  to  deliver  a
         Certificate  to the Executive or (B) to pay to the Executive the amount
         of the Gross-up Payment,  if any, within 14 days after receipt from the
         Executive  of a written  request for a  Certificate,  or if at any time
         following receipt of a Certificate the Executive disputes the amount of
         the Gross-up  Payment set forth  therein,  the  Executive  may elect to
         demand the payment of the amount  which the  Executive,  in  accordance
         with  an  opinion  of  counsel  to the  Executive  ("Executive  Counsel
         Opinion"),  determines to be the Gross-up  Payment.  Any such demand by
         the Executive  shall be made by delivery to Railway of a written notice
         which specifies the Gross-up Payment determined by the Executive and an
         Executive Counsel Opinion regarding such Gross-up Payment (such written
         notice and  opinion  collectively,  the  "Executive's  Determination").
         Within 14 days  after  delivery  of the  Executive's  Determination  to
         Railway,  Railway  shall  either  (A) pay the  Executive  the  Gross-up
         Payment  set  forth  in the  Executive's  Determination  (less  the
         portion of such amount,  if any,  previously  paid to the  Executive by
         Railway) or (B) deliver to the Executive a Certificate  specifying  the
         Gross-up  Payment  determined by  Railway's  independent  auditors,
         together  with  an  opinion  of  Railway's  counsel  ("Railway  Counsel
         Opinion"), and pay the Executive the Gross-up Payment specified in such
         Certificate.  If for any reason Railway fails to comply with clause (B)
         of the  preceding  sentence,  the  Gross-up  Payment  specified  in the
         Executive's Determination shall be controlling for all purposes.

                           (ii) If the  Executive  does not make a request  for,
         and Railway does not deliver to the Executive,  a Certificate,  Railway
         shall,  for purposes of Paragraph  7(j),  be deemed to have  determined
         that no Gross-up Payment is due.

                  (j)  Additional  Gross-up  Amounts.  If,  despite  the initial
conclusion  of Railway  and/or the Executive  that certain  Payments are neither
subject to Excise Taxes nor to be counted in determining  whether other Payments
are subject to Excise Taxes (any such item, a "Non-Parachute Item"), it is later
determined  (pursuant  to  subsequently-enacted  provisions  of the Code,  final
regulations or published rulings of the IRS, final IRS determination or judgment
of a court of competent jurisdiction or Railway's independent auditors) that any
of the Non-Parachute  Items are subject to Excise Taxes, or are to be counted in
determining  whether any Payments are subject to Excise  Taxes,  with the result
that the amount of Excise  Taxes  payable by the  Executive  is greater than the
amount  determined  by Railway or the  Executive  pursuant to Paragraph  7(h) or
Paragraph  7(i), as  applicable,  then Railway shall pay the Executive an amount
(which shall also be deemed a Gross-up Payment) equal to the product of:

                           (i) the sum of (A) such  additional  Excise Taxes and
         (B) any interest, fines, penalties, expenses or other costs incurred by
         the Executive as a result of having taken a position in accordance with
         a determination made pursuant to Paragraph 7(h); multiplied by

                           (ii)     the Gross-up Multiple.

                  (k) Gross-up  Multiple.  The Gross-up  Multiple  shall equal a
fraction,  the numerator of which is one (1.0),  and the denominator of which is
one (1.0) minus the sum,  expressed as a decimal  fraction,  of the rates of all
federal,  state,  local and other  income and other  taxes and any Excise  Taxes
applicable to the Gross-up  Payment;  provided that, if such sum exceeds 0.8, it
shall be deemed equal to 0.8 for  purposes of this  computation.  (If  different
rates of tax are  applicable  to various  portions  of a Gross-up  Payment,  the
weighted average of such rates shall be used.)

                  (l) Opinion of Counsel.  "Executive  Counsel  Opinion" means a
legal opinion of nationally recognized executive compensation counsel that there
is a  reasonable  basis  to  support  a  conclusion  that the  Gross-up  Payment
determined by the Executive has been  calculated in accord with this Paragraph 7
and  applicable  law.  "Company  Counsel  Opinion"  means  a  legal  opinion  of
nationally  recognized  executive  compensation  counsel  that  (i)  there  is a
reasonable  basis to support a conclusion that the Gross-up Payment set forth in
the  Certificate of  Railway's  independent  auditors has been calculated in
accord with this Paragraph 7 and applicable law, and (ii) there is no reasonable
basis for the calculation of the Gross-up Payment determined by the Executive.

                  (m) Amount Increased or Contested.  The Executive shall notify
Railway in writing of any claim by the IRS or other taxing  authority  that,  if
successful,  would  require the payment by Railway of a Gross-up  Payment.  Such
notice  shall  include the nature of such claim and the date on which such claim
is due to be paid. The Executive  shall give such notice as soon as practicable,
but no later than 10 business  days,  after the Executive  first obtains  actual
knowledge of such claim; provided, however, that any failure to give or delay in
giving such notice shall affect Railway's obligations under this Paragraph 7
only if and to the  extent  that such  failure  results in actual  prejudice  to
Railway.  The  Executive  shall not pay such  claim  less than 30 days after the
Executive gives such notice to Railway (or, if sooner, the date on which payment
of such claim is due). If Railway  notifies the Executive in writing  before the
expiration  of such period that it desires to contest such claim,  the Executive
shall:
                           (i) give Railway any information that it reasonably
         requests relating to such claim;

                           (ii) take such action in connection  with  contesting
         such claim as Railway reasonably requests in writing from time to time,
         including,  without  limitation,  accepting legal  representation  with
         respect to such claim by an attorney reasonably selected by Railway;

                           (iii) cooperate with Railway in good faith to contest
         such claim; and (iv) permit Railway to participate in any proceedings
         relating to such claim;
         provided,  however,  that Railway 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  related interest and penalties,  imposed as a result of such
         representation and payment of costs and expenses.  Without limiting the
         foregoing,  Railway shall control all  proceedings  in connection  with
         such contest 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 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. 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 Railway shall determine;  provided,  however, that
         if  Railway  directs  the  Executive  to pay such  claim  and sue for a
         refund,  Railway  shall  advance  the  amount  of such  payment  to the
         Executive, on an interest-free basis and shall indemnify the Executive,
         on an  after-tax  basis,  for any Excise Tax or income  tax,  including
         related  interest or  penalties,  imposed 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.  The Railway's control of the contest
         shall be limited  to issues  with  respect to which a Gross-up  Payment
         would be payable. The Executive shall be entitled to settle or contest,
         as the case may be, any other issue  raised by the IRS or other  taxing
         authority.

                  (n)  Refunds.  If,  after the receipt by the  Executive  of an
amount advanced by Railway  pursuant to Paragraph  7(m), the Executive  receives
any refund with respect to such claim, the Executive shall (subject to Railway's
complying  with the  requirements  of Paragraph  7(m))  promptly pay Railway 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 Railway pursuant to Paragraph 7(m), a determination is made that the
Executive  shall not be entitled to a full refund with respect to such claim and
Railway  does not notify the  Executive in writing of its intent to contest such
determination  before the expiration of 30 days after such  determination,  then
the applicable  part of 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. Any contest of a denial of
refund shall be controlled by Paragraph 7(m).

                  (o) Expenses. If any dispute should arise under this Agreement
after the  Control  Change Date  involving  an effort by  Executive  to protect,
enforce or secure  rights or benefits  claimed by Executive  hereunder,  Railway
shall pay (promptly upon demand by Executive  accompanied by reasonable evidence
of incurrence) all reasonable expenses (including  attorneys' fees) incurred
by  Executive  in  connection  with such  dispute,  without  regard  to  whether
Executive prevails in such dispute except that Executive shall repay Railway any
amounts  so  received  if a  court  having  jurisdiction  shall  make  a  final,
nonappealable  determination that Executive acted frivolously or in bad faith by
such dispute.  To assure Executive that adequate funds will be made available to
discharge Railway's obligations set forth in the preceding sentence, Railway has
established  a trust  and  upon the  occurrence  of a Change  in  Control  shall
promptly  deliver to the  trustee of such trust to hold in  accordance  with the
terms and  conditions  thereof  that sum  which the  Railway  Board  shall  have
determined is reasonably sufficient for such purpose.

                  (p)  Prevailing  Provisions.  On and after the Control  Change
Date, the provisions of this Paragraph 7 shall control and take  precedence over
any other provisions of this Agreement which are in conflict with or address the
same or a similar subject matter as the provisions of this Paragraph 7.

         8.   Mitigation   and  Other   Employment.   After  a  termination   of
Executive's  employment pursuant to Paragraph 4(d)(i) or a Change in Control
as defined in Paragraph  7(d),  Executive  shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or  otherwise,  and  except as  otherwise  specifically  provided  in  Paragraph
4(d)(ii) with respect to health and life  insurance  and in Paragraph  7(e) with
respect to health,  prescription and dental benefits,  no such other employment,
if obtained,  or compensation or benefits payable in connection  therewith shall
reduce any amounts or benefits to which  Executive is entitled  hereunder.  Such
amounts or  benefits  payable to  Executive  under this  Agreement  shall not be
treated as damages but as severance  compensation to which Executive is entitled
because Executive's employment has been terminated.

         9. KCSI Not An Obligor.  Notwithstanding  that KCSI has  executed  this
Agreement,  it shall have no obligation for the payment of salary,  benefits, or
other  compensation  hereunder,  and all  such  obligations  shall  be the  sole
responsibility of Railway.

         10.  Notice.  Notices  and all other  communications  to  either  party
pursuant to this Agreement  shall be in writing and shall be deemed to have been
given when  personally  delivered,  delivered  by  facsimile or deposited in the
United States mail by certified or registered mail, postage prepaid,  addressed,
in the case of  Railway or KCSI,  to  Railway  or KCSI at 114 West 11th  Street,
Kansas  City,  Missouri  64105,  Attention:  Secretary,  or,  in the case of the
Executive,  to at 6410 Wenonga Road,  Mission  Hills,  Kansas 66208,  or to such
other address as a party shall designate by notice to the other party.

         11. Amendment. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or discharge is
agreed to in writing  signed by  Executive,  the  President  of Railway  and the
President  of KCSI.  No waiver by any party  hereto at any time of any breach by
another party hereto of, or compliance  with, any condition or provision of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the time or at any prior or
subsequent time.

         12.  Successors  in Interest.  The rights and  obligations  of KCSI and
Railway  under this  Agreement  shall  inure to the benefit of and be binding in
each and every  respect upon the direct and indirect  successors  and assigns of
KCSI and Railway,  regardless of the manner in which such  successors or assigns
shall succeed to the interest of KCSI or Railway  hereunder,  and this Agreement
shall not be terminated by the voluntary or  involuntary  dissolution of KCSI or
Railway or by any  merger or  consolidation  or  acquisition  involving  KCSI or
Railway,  or upon any  transfer of all or  substantially  all of  KCSI's  or
Railway's assets, or terminated  otherwise than in accordance with its terms. In
the  event of any such  merger or  consolidation  or  transfer  of  assets,  the
provisions  of this  Agreement  shall be  binding  upon and  shall  inure to the
benefit of the surviving corporation or the corporation or other person to which
such assets shall be transferred. Neither this Agreement nor any of the payments
or benefits  hereunder  may be pledged,  assigned or  transferred  by  Executive
either in whole or in part in any manner,  without the prior written  consent of
Railway.

         13. Severability.  The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other  provisions  hereof,  and
this  Agreement  shall  be  construed  in all  respects  as if such  invalid  or
unenforceable provisions were omitted.

         14. Controlling Law and Jurisdiction. The validity,  interpretation and
performance of this Agreement  shall be subject to and construed  under the laws
of the State of Missouri, without regard to principles of conflicts of law.

         15. Entire Agreement.  This Agreement  constitutes the entire agreement
among the parties with respect to the subject  matter hereof and  terminates and
supersedes all other prior agreements and understandings, both written and oral,
between the  parties  with  respect to the terms of  Executive's  employment  or
severance arrangements.

         IN WITNESS  WHEREOF,  the parties hereto have executed this Amended and
Restated Agreement as of the 1st day of January, 1999.

                                 THE KANSAS CITY SOUTHERN RAILWAY
                                 COMPANY

                                 By       /s/ Michael R. Haverty
                                   ----------------------------------
                                       Michael R. Haverty, President

                                 KANSAS CITY SOUTHERN INDUSTRIES, INC.

                                 By     /s/ Landon H. Rowland
                                   ----------------------------------
                                     Landon H. Rowland, President

                                 EXECUTIVE

                                        /s/ Michael H. Haverty
                                 -----------------------------------
                                          Michael R. HavertyEMPLOYMENT AGREEMENT
                      Amended and Restated January 1, 1999

         THIS  AGREEMENT,  made and entered  into as of this 1st day of January,
1999,  by  and  between  Kansas  City  Southern  Industries,  Inc.,  a  Delaware
corporation   ("KCSI")  Joseph  D.  Monello,   an  individual ("Executive").

         WHEREAS,  Executive  is now  employed by KCSI,  and KCSI and  Executive
desire for KCSI to continue to employ  Executive on the terms and conditions set
forth in this  Agreement  and to provide an  incentive to Executive to remain in
the employ of KCSI hereafter, particularly in the event of any change in control
(as herein defined) of KCSI,  Kansas City Southern Lines,  Inc.  ("KCSL") or The
Kansas City Southern  Railway  Company  ("Railway"),  thereby  establishing  and
preserving continuity of management of KCSI.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between KCSI and Executive as follows:

         1. Employment. KCSI hereby continues the employment of Executive as its
Vice President and Chief Financial Officer to serve at the pleasure of the Board
of  Directors  of KCSI (the "KCSI  Board") and to have such  duties,  powers and
responsibilities  as may be  prescribed  or  delegated  from time to time by the
President  or other  officer to whom  Executive  reports,  subject to the powers
vested  in the KCSI  Board  and in the  stockholders  of KCSI.  Executive  shall
faithfully  perform his duties  under this  Agreement to the best of his ability
and shall  devote  substantially  all of his  working  time and  efforts  to the
business and affairs of KCSI and its affiliates.

         2.       Compensation.

                  (a)  Base   Compensation.   KCSI   shall  pay   Executive   as
compensation  for his  services  hereunder  an  annual  base  salary at the rate
approved by the KCSI  Compensation  Committee on November  17,  1998.  Such rate
shall not be increased  prior to January 1, 2000 and shall not be reduced except
as agreed by the parties or except as part of a general salary reduction program
imposed by KCSI and applicable to all officers of KCSI.

                  (b)      Incentive  Compensation.  For  the  year  1999,
Executive  shall  not  be  entitled  to participate in any KCSI incentive
compensation plan.

         3. Benefits.  During the period of his employment hereunder, KCSI shall
provide  Executive  with  coverage  under such benefit plans and programs as are
made generally  available to similarly situated employees of KCSI,  provided (a)
KCSI shall have no  obligation  with respect to any plan or program if Executive
is not eligible for coverage  thereunder,  and (b) Executive  acknowledges  that
stock options and other stock and equity participation awards are granted in the
discretion of the KCSI Board or the Compensation Committee of the KCSI Board and
that   Executive  has  no  right  to  receive  stock  options  or  other  equity
participation awards or any particular number or level of stock options or other
awards. In determining contributions, coverage and benefits under any disability
insurance  policy  and  under  any  cash  compensation-based  plan  provided  to
Executive by KCSI, it shall be assumed that the value of Executive's  annual
compensation,  pursuant to this Agreement,  is 166.67% of Executive's annual
base salary.  Executive  acknowledges that all rights and benefits under benefit
plans and programs  shall be governed by the official  text of each such plan or
program and not by any summary or  description  thereof or any provision of this
Agreement (except to the extent this Agreement  expressly  modifies such benefit
plans or  programs)  and that KCSI is not under any  obligation  to  continue in
effect or to fund any such plan or program,  except as  provided in  Paragraph 7
hereof.  KCSI also shall reimburse  Executive for ordinary and necessary  travel
and  other  business   expenses  in  accordance  with  policies  and  procedures
established by KCSI.

<PAGE>

         4.       Termination.
]
                  (a)  Termination  by Executive.  Executive may terminate  this
Agreement  and his  employment  hereunder  by at least  thirty (30) days advance
written notice to KCSI,  except that in the event of any material breach of this
Agreement by KCSI,  Executive may terminate  this  Agreement and his  employment
hereunder immediately upon notice to KCSI.

                  (b)  Death  or  Disability.  This  Agreement  and  Executive's
employment hereunder shall terminate automatically on the death or disability of
Executive,  except  to the  extent  employment  is  continued  under  KCSI's
disability plan. For purposes of this Agreement, Executive shall be deemed to be
disabled if he qualifies for  disability  benefits  under  KCSI's  long-term
disability plan.

                  (c)  Termination  by KCSI For Cause.  KCSI may terminate  this
Agreement and Executive's  employment "for cause" immediately upon notice to
Executive.  For purposes of this Agreement (except for Paragraph 7), termination
"for cause" shall mean termination based upon any one or more of the following:

                           (i)  Any  material   breach  of  this   Agreement  by
                           Executive;

                           (ii) Executive's dishonesty involving KCSI
                           or any subsidiary of KCSI;

                           (iii) Gross negligence or
         willful misconduct in the performance of Executive's
         duties as determined in good faith by the KCSI Board;

                           (iv)   Willful   failure  by   Executive   to  follow
         reasonable  instructions  of the  President  or other  officer  to whom
         Executive reports  concerning the operations or business of KCSI or any
         subsidiary of KCSI;

                           (v)  Executive's fraud or criminal activity; or

                           (vi) Embezzlement or misappropriation by Executive.

                  (d)      Termination by KCSI Other Than For Cause.

                           (i)   KCSI   may   terminate   this   Agreement   and
         Executive's employment other than for cause immediately upon notice
         to Executive,  and in such event, KCSI shall provide severance benefits
         to Executive in accordance with Paragraph 4(d)(ii) below.

                           (ii)  Unless the  provisions  of  Paragraph 7 of this
         Agreement are applicable,  if Executive's  employment is terminated
         under Paragraph 4(d)(i),  KCSI shall continue,  for a period of one (1)
         year following such  termination,  (a) to pay to Executive as severance
         pay a monthly amount equal to  one-twelfth  (1/12th) of the annual base
         salary  referenced  in  Paragraph  2(a)  above,  at the rate in  effect
         immediately prior to termination,  and, (b) to reimburse  Executive for
         the cost (including state and federal income taxes payable with respect
         to this  reimbursement)  of continuing  the health  insurance  coverage
         provided  pursuant to this  Agreement  or  obtaining  health  insurance
         coverage  comparable to the health insurance  provided pursuant to this
         Agreement,  and obtaining  coverage  comparable  to the life  insurance
         provided  pursuant  to this  Agreement,  unless  Executive  is provided
         comparable  health or life insurance  coverage in connection with other
         employment.  The foregoing obligations of KCSI shall continue until the
         end of such one (1) year period notwithstanding the death or disability
         of Executive  during said period  (except,  in the event of death,  the
         obligation to reimburse  Executive for the cost of life insurance shall
         not continue).  In the year in which termination of employment  occurs,
         Executive  shall  be  eligible  to  receive  benefits  under  the  KCSI
         Incentive  Compensation Plan and the KCSI Executive Plan (if such Plans
         then  are in  existence  and  Executive  was  entitled  to  participate
         immediately  prior to termination) in accordance with the provisions of
         such plans then  applicable,  and  severance  pay received in such year
         shall be taken into account for the purpose of determining benefits, if
         any, under the KCSI Incentive  Compensation Plan but not under the KCSI
         Executive Plan. After the year in which termination  occurs,  Executive
         shall not be  entitled  to accrue or  receive  benefits  under the KCSI
         Incentive  Compensation Plan or the KCSI Executive Plan with respect to
         the severance pay provided herein,  notwithstanding that benefits under
         such plan then are still generally  available to executive employees of
         KCSI. After termination of employment,  Executive shall not be entitled
         to accrue or receive  benefits under any other employee benefit plan or
         program,  except that Executive shall be entitled to participate in the
         KCSI Profit Sharing Plan,  the KCSI Employee  Stock  Ownership Plan and
         the KCSI Section  401(k) Plan in the year of  termination of employment
         only  if   Executive   meets  all   requirements   of  such  plans  for
         participation in such year. 5. Non-Disclosure.  During the term of this
         Agreement and at all times after any termination of
this  Agreement,  Executive  shall not,  either  directly or indirectly,  use or
disclose any KCSI trade secret,  except to the extent necessary for Executive to
perform his duties for KCSI while an employee.  For purposes of this  Agreement,
the term "KCSI trade secret" shall mean any  information  regarding the business
or  activities of KCSI or any  subsidiary  or affiliate,  including any formula,
pattern,  compilation,  program, device, method,  technique,  process,  customer
list,  technical  information or other confidential or proprietary  information,
that (a) derives independent economic value, actual or potential, from not being
generally  known to, and not being  readily  ascertainable  by proper  means by,
other persons who can obtain  economic value from its disclosure or use, and (b)
is the  subject of  efforts  of KCSI or its  subsidiary  or  affiliate  that are
reasonable under the  circumstance to maintain its secrecy.  In the event of any
breach of this Paragraph 5 by Executive, KCSI shall be entitled to terminate any
and all  remaining  severance  benefits  under  Paragraph  4(d)(ii) and shall be
entitled to pursue such other legal and equitable remedies as may be available.

<PAGE>

         6.       Duties Upon Termination; Survival.

                  (a) Duties.  Upon  termination  of this  Agreement  by KCSI or
Executive for any reason,  Executive shall  immediately  return to KCSI all KCSI
trade  secrets  which  exist  in  tangible  form and  shall  sign  such  written
resignations  from all  positions  as an  officer,  director  or  member  of any
committee  or  board  of KCSI  and all  direct  and  indirect  subsidiaries  and
affiliates  of KCSI as may be  requested  by KCSI  and  shall  sign  such  other
documents and papers  relating to Executive's  employment,  benefits and benefit
plans as KCSI may reasonably request.

                  (b)  Survival.  The  provisions of Paragraphs 5, 6(a) and 7 of
this  Agreement  shall  survive any  termination  of this  Agreement  by KCSI or
Executive,   and  the  provisions  of  Paragraph   4(d)(ii)  shall  survive  any
termination of this Agreement by KCSI under Paragraph 4(d)(i).

         7.       Continuation of Employment Upon Change in Control of KCSI.

                  (a)  Continuation  of  Employment.  Subject  to the  terms and
conditions of this  Paragraph 7, in the event of a Change in Control (as defined
in  Paragraph  7(d)) at any time  during the term of this  Agreement,  Executive
agrees  to  remain  in the  employ  of KCSI for a period  of  three  years  (the
"Three-Year  Period")  from the date of such  Change in  Control  (the  "Control
Change  Date").  KCSI agrees to continue to employ  Executive for the Three-Year
Period.  During the Three-Year Period, (i) the Executive's  position  (including
offices,  titles,  reporting requirements and  responsibilities),  authority and
duties shall be at least  commensurate  in all material  respects  with the most
significant  of those  held,  exercised  and  assigned at any time during the 12
month  period   immediately   before  the  Control  Change  Date  and  (ii)  the
Executive's  services shall be performed at the location where Executive was
employed  immediately  before the Control  Change Date or at any other  location
less than 40 miles from such former location. During the Three-Year Period, KCSI
shall  continue to pay to  Executive an annual base salary on the same basis and
at the same  intervals as in effect  prior to the Control  Change Date at a rate
not less than 12 times the  highest  monthly  base salary paid or payable to the
Executive  by KCSI in  respect of the  12-month  period  immediately  before the
Control Change Date.

                  (b) Benefits. During the Three-Year Period, Executive shall be
entitled to participate,  on the basis of his executive position, in each of the
following KCSI plans (together,  the "Specified Benefits") in existence,  and in
accordance with the terms thereof, at the Control Change Date:

                           (i) any  benefit  plan,  and  trust  fund  associated
         therewith, related to (a) life, health, dental, disability,  accidental
         death and dismemberment  insurance or accrued but unpaid vacation time,
         (b) profit  sharing,  thrift or deferred  savings  (including  deferred
         compensation,  such as under Sec.  401(k)  plans),  (c)  retirement  or
         pension  benefits,  (d) ERISA excess benefits and similar plans and (e)
         tax favored  employee stock ownership (such as under ESOP, and Employee
         Stock Purchase programs); and

                           (ii) any other benefit plans hereafter made generally
         available to  executives  of  Executive's  level or to the employees of
         KCSI generally.  In addition,  KCSI shall use its best efforts to cause
         all outstanding options held by Executive under
any  stock  option  plan  of  KCSI  or  its  affiliates  to  become  immediately
exercisable  on the Control  Change Date and to the extent that such options are
not  vested  and are  subsequently  forfeited,  the  Executive  shall  receive a
lump-sum cash payment within 5 days after the options are forfeited equal to the
difference  between the fair market value of the shares of stock  subject to the
non-vested,  forfeited  options  determined  as of the  date  such  options  are
forfeited and the exercise price for such options.  During the Three-Year Period
Executive  shall be  entitled  to  participate,  on the  basis of his  executive
position,  in any incentive  compensation  plan of KCSI in  accordance  with the
terms thereof at the Control  Change Date;  provided that if under KCSI programs
or Executive's  Employment  Agreement in existence  immediately prior to the
Control  Change  Date,  there are written  limitations  on  participation  for a
designated  time period in any incentive  compensation  plan,  such  limitations
shall continue after the Control Change Date to the extent so provided for prior
to the Control Change Date.

         If  the  amount  of  contributions  or  benefits  with  respect  to the
Specified   Benefits  or  any   incentive   compensation   is  determined  on  a
discretionary  basis under the terms of the Specified  Benefits or any incentive
compensation  plan  immediately  prior to the Control Change Date, the amount of
such  contributions  or benefits  during the  Three-Year  Period for each of the
Specified  Benefits shall not be less than the average annual  contributions  or
benefits for each Specified Benefit for the three plan years ending prior to the
Control  Change Date and, in the case of any incentive  compensation  plan,  the
amount of the incentive  compensation  during the Three-Year Period shall not be
less than 75% of the maximum  that could have been paid to the  Executive  under
the terms of the incentive compensation plan.

                  (c) Payment. With respect to any plan or agreement under which
Executive  would be  entitled at the  Control  Change Date to receive  Specified
Benefits or incentive compensation as a general obligation of KCSI which has not
been  separately  funded  (including  specifically,  but not limited  to,  those
referred to under Paragraph  7(b)(i)(d)  above),  Executive shall receive within
five (5) days  after  such date full  payment  in cash  (discounted  to the then
present  value on the basis of a rate of seven  percent  (7%) per  annum) of all
amounts to which he is then entitled thereunder.

                  (d) Change in Control. Except as provided in the last sentence
of this Paragraph  7(d), for purposes of this  Agreement,  a "Change in Control"
shall be deemed to have occurred if:

<PAGE>

                           (i) for any reason at any time less than seventy-five
         percent (75%) of the members of the KCSI Board shall be individuals who
         fall into any of the following  categories:  (a)  individuals  who were
         members  of the  KCSI  Board  on the  date  of  the  Agreement;  or (b)
         individuals  whose  election,  or nomination for election by KCSI's
         stockholders,  was approved by a vote of at least seventy-five  percent
         (75%) of the  members  of the KCSI  Board then still in office who were
         members  of the  KCSI  Board  on the  date  of  the  Agreement;  or (c)
         individuals whose election,  or nomination for election,  by KCSI's
         stockholders,  was approved by a vote of at least seventy-five  percent
         (75%) of the  members  of the KCSI  Board then still in office who were
         elected in the manner described in (a) or (b) above, or

                           (ii) any  "person"  (as such term is used in Sections
         13(d)  and  14(d)(2)  of  the  Securities  Exchange  Act of  1934  (the
         "Exchange  Act"))  other than KCSI (as to KCSL and Railway  securities)
         shall have become,  according to a public  announcement or filing,  the
         "beneficial  owner" (as defined in Rule 13d-3 under the Exchange  Act),
         directly  or  indirectly,  of  securities  of  KCSI,  KCSL  or  Railway
         representing  thirty  percent (30%) (or, with respect to Paragraph 7(c)
         hereof,  40%) or more (calculated in accordance with Rule 13d-3) of the
         combined voting power of KCSI's,  KCSL's or Railway's  then
         outstanding voting securities; or

                           (iii) the stockholders of KCSI, KCSL or Railway shall
         have approved a merger,  consolidation  or dissolution of KCSI, KCSL or
         Railway  or  a  sale,   lease,   exchange  or  disposition  of  all  or
         substantially all of KCSI's, KCSL's or Railway's assets, if
         persons who were the beneficial  owners of the combined voting power of
         KCSI's,  KCSL's or Railway's voting securities  immediately
         before  any  such  merger,  consolidation,  dissolution,  sale,  lease,
         exchange or disposition  do not  immediately  thereafter,  beneficially
         own,  directly or indirectly,  in substantially  the same  proportions,
         more than 60% of the combined  voting power of any corporation or other
         entity resulting from any such transaction.

Notwithstanding the foregoing provisions of this Paragraph 7(d) to the contrary,
the sale of  shares  of stock of  Kansas  City  Southern  Lines,  Inc.  ("KCSL")
pursuant  to an  initial  public  offering  of shares of stock of KCSL shall not
constitute a Change in Control.

                  (e) Termination After Control Change Date. Notwithstanding any
other  provision of this Paragraph 7, at any time after the Control Change Date,
KCSI may terminate the employment of Executive (the  "Termination"),  but unless
such  Termination is for Cause as defined in subparagraph (g) or for disability,
within five (5) days of the  Termination  KCSI shall pay to  Executive  his full
base salary through the Termination,  to the extent not theretofore paid, plus a
lump  sum  amount  (the  "Special  Severance  Payment")  equal  to  the  product
(discounted  to the then present  value on the basis of a rate of seven  percent
(7%) per annum) of (i) 166.67% of his annual base salary  specified in Paragraph
7(a)  multiplied by (ii) Three and Specified  Benefits  (excluding any incentive
compensation) to which Executive was entitled  immediately  prior to Termination
shall continue until the end of the 3-year period ("Benefits  Period") beginning
on the date of Termination. If any plan pursuant to which Specified Benefits are
provided   immediately   prior  to  Termination   would  not  permit   continued
participation by Executive after  Termination,  then KCSI shall pay to Executive
within five (5) days after Termination a lump sum payment equal to the amount of
Specified  Benefits  Executive  would have received under such plan if Executive
had been fully vested in the average annual  contributions or benefits in effect
for the three plan years ending prior to the Control Change Date  (regardless of
any  limitations  based on the earnings or performance of KCSI) and a continuing
participant in such plan to the end of the Benefits Period. Following the end of
the Benefits  Period,  KCSI shall  continue to provide to the  Executive and the
Executive's family the following benefits ("Post-Period Benefits"): (1) prior to
the Executive's  attainment of age sixty (60),  health,  prescription and dental
benefits  equivalent to those then  applicable to active peer executives of KCSI
and their  families,  as the same may be  modified  from  time to time,  and (2)
following the  Executive's  attainment of age sixty (60) (and without  regard to
the Executive's period of service with KCSI),  health and prescription  benefits
equivalent to those then applicable to retired peer executives of KCSI and their
families,  as the  same  may be  modified  from  time to  time.  The cost to the
Executive  of such  Post-Period  Benefits  shall  not  exceed  the  cost of such
benefits to active or retired (as applicable) peer  executives,  as the same may
be modified  from time to time.  Notwithstanding  the preceding two sentences of
this Paragraph 7(e), if the Executive is covered under any health,  prescription
or dental plan provided by a subsequent employer, then the corresponding type of
plan coverage (i.e., health,  prescription or dental) required to be provided as
Post-Period  Benefits  under this Paragraph  7(e) shall cease.  The  Executive's
rights  under this  Paragraph  7(e) shall be in addition to, and not in lieu of,
any  post-termination  continuation  coverage or conversion rights the Executive
may have pursuant to applicable law, including without  limitation  continuation
coverage  required by Section 4980 of the Code.  Nothing in this  Paragraph 7(e)
shall be deemed to limit in any manner the reserved  right of KCSI,  in its sole
and  absolute  discretion,  to at any time amend,  modify or  terminate  health,
prescription or dental benefits for active or retired employees generally.

                  (f)  Resignation  After Control Change Date. In the event of a
Change in Control as defined in Paragraph 7(d), thereafter, upon good reason (as
defined  below),  Executive may, at any time during the 3-year period  following
the Change in  Control,  in his sole  discretion,  on not less than  thirty (30)
days'  written notice (the "Notice of Resignation") to the Secretary of KCSI
and effective at the end of such notice period,  resign his employment with KCSI
(the "Resignation").  Within five (5) days of such a Resignation, KCSI shall pay
to  Executive  his  full  base  salary   through  the  effective  date  of  such
Resignation, to the extent not theretofore paid, plus a lump sum amount equal to
the Special  Severance  Payment  (computed as provided in the first  sentence of
Paragraph 7(e),  except that for purposes of such  computation all references to
"Termination"  shall  be  deemed  to  be  references  to  "Resignation").   Upon
Resignation  of Executive,  Specified  Benefits to which  Executive was entitled
immediately prior to Resignation shall continue on the same terms and conditions
as provided in Paragraph 7(e) in the case of Termination  (including  equivalent
payments  provided for therein),  and Post-Period  Benefits shall be provided on
the same terms and  conditions  as  provided  in  Paragraph  7(e) in the case of
Termination.  For purposes of this  Agreement,  "good  reason"  means any of the
following:

                           (i) the  assignment  to the  Executive  of any duties
         inconsistent   in  any  respect  with  the   Executive's   position
         (including    offices,     titles,     reporting     requirements    or
         responsibilities),  authority  or duties  as  contemplated  by  Section
         7(a)(i),  or any other action by KCSI which  results in a diminution or
         other material adverse change in such position, authority or duties;

                           (ii) any  failure  by KCSI to comply  with any of the
         provisions of Paragraph 7;

                           (iii) KCSI's requiring the  Executive  to be based at
         any office or location other than the location described in Section
         7(a)(ii);
                           (iv)     any  other  material  adverse  change  to
         the  terms  and  conditions  of  the Executives employment; or

                           (v)  any  purported   termination   by  KCSI  of  the
         Executive's  employment  other  than  as  expressly  permitted  by this
         Agreement  (any such purported  termination  shall not be effective for
         any other purpose under this Agreement).

A passage of time prior to delivery of the Notice of Resignation or a failure by
the Executive to include in the Notice of Resignation  any fact or  circumstance
which  contributes  to a showing of Good Reason shall not waive any right of the
Executive  under this  Agreement or preclude the Executive  from  asserting such
fact or circumstance in enforcing rights under this Agreement.

                  (g)   Termination   for  Cause  After  Control   Change  Date.
Notwithstanding  any other  provision of this Paragraph 7, at any time after the
Control  Change Date,  Executive  may be  terminated  by KCSI "for cause." Cause
means commission by the Executive of any felony or willful breach of duty by the
Executive  in the course of the  Executive's  employment;  except that Cause
shall not mean:

                           (i)      bad judgment or negligence;

                           (ii) any act or omission believed by the Executive in
         good  faith to have  been in or not  opposed  to the  interest  of KCSI
         (without  intent of the Executive to gain,  directly or  indirectly,  a
         profit to which the Executive was not legally entitled);

                           (iii) any act or  omission  with  respect  to which a
         determination  could properly have been made by the KCSI Board that the
         Executive met the applicable standard of conduct for indemnification or
         reimbursement under KCSI's by-laws, any applicable  indemnification
         agreement,  or  applicable  law,  in each case in effect at the time of
         such act or omission; or

                           (iv) any act or omission with respect to which Notice
         of  Termination of the Executive is given more than 12 months after the
         earliest date on which any member of the KCSI Board, not a party to the
         act or omission, knew or should have known of such act or omission.

Any  Termination  of the  Executive's  employment by KCSI for Cause shall be
communicated to the Executive by Notice of Termination.

                  (h) Gross-up for Certain  Taxes.  If it is determined  (by the
reasonable computation of KCSI's independent auditors,  which determinations
shall be  certified to by such  auditors and set forth in a written  certificate
("Certificate")  delivered to the Executive) that any benefit received or deemed
received by the  Executive  from KCSI  pursuant to this  Agreement  or otherwise
(collectively, the "Payments") is or will become subject to any excise tax under
Section  4999 of the Code or any  similar tax  payable  under any United  States
federal,  state,  local or other law (such excise tax and all such similar taxes
collectively,   "Excise  Taxes"),  then  KCSI  shall,   immediately  after  such
determination, pay the Executive an amount (the "Gross-up Payment") equal to the
product of:
                      (i)   the amount of such Excise Taxes;
         multiplied by

                      (ii)  the Gross-up Multiple (as defined in Paragraph 7(k).
                           The Gross-up  Payment is intended to  compensate  the
         Executive for the Excise Taxes and any federal,  state,  local or other
         income or excise  taxes or other taxes  payable by the  Executive  with
         respect to the Gross-up Payment.

                           KCSI shall cause the  preparation and delivery to the
         Executive of a  Certificate  upon request at any time.  KCSI shall,  in
         addition   to   complying   with  this   Paragraph   7(h),   cause  all
         determinations and certifications  under Paragraphs 7(h)-(o) to be made
         as soon as  reasonably  possible  and in  adequate  time to permit  the
         Executive to prepare and file the Executive's individual tax returns on
         a timely basis.

                  (i)      Determination by the Executive.

                           (i) If KCSI shall  fail (a) to deliver a  Certificate
         to the  Executive  or (b) to pay to the  Executive  the  amount  of the
         Gross-up  Payment,  if any,  within  14 days  after  receipt  from  the
         Executive  of a written  request for a  Certificate,  or if at any time
         following receipt of a Certificate the Executive disputes the amount of
         the Gross-up  Payment set forth  therein,  the  Executive  may elect to
         demand the payment of the amount  which the  Executive,  in  accordance
         with  an  opinion  of  counsel  to the  Executive  ("Executive  Counsel
         Opinion"),  determines to be the Gross-up  Payment.  Any such demand by
         the  Executive  shall be made by delivery  to KCSI of a written  notice
         which specifies the Gross-up Payment determined by the Executive and an
         Executive Counsel Opinion regarding such Gross-up Payment (such written
         notice and opinion collectively, the "Executive's  Determination").
         Within 14 days after delivery of the  Executive's  Determination to
         KCSI, KCSI shall either (a) pay the Executive the Gross-up  Payment set
         forth in the  Executive's  Determination  (less the portion of such
         amount,  if any,  previously  paid to the  Executive  by  KCSI)  or (b)
         deliver to the Executive a Certificate  specifying the Gross-up Payment
         determined by KCSI's independent auditors, together with an opinion
         of KCSI's counsel ("KCSI Counsel  Opinion"),  and pay the Executive
         the Gross-up Payment specified in such  Certificate.  If for any reason
         KCSI fails to comply with  clause (b) of the  preceding  sentence,  the
         Gross-up Payment specified in the  Executive's  Determination shall
         be controlling for all purposes.

                           (ii) If the  Executive  does not make a request  for,
         and KCSI does not deliver to the Executive, a Certificate,  KCSI shall,
         for purposes of Paragraph  7(j), be deemed to have  determined  that no
         Gross-up Payment is due.

                  (j)  Additional  Gross-up  Amounts.  If,  despite  the initial
conclusion  of KCSI  and/or the  Executive  that  certain  Payments  are neither
subject to Excise Taxes nor to be counted in determining  whether other Payments
are subject to Excise Taxes (any such item, a "Non-Parachute Item"), it is later
determined  (pursuant  to  subsequently-enacted  provisions  of the Code,  final
regulations or published rulings of the IRS, final IRS determination or judgment
of a court of competent  jurisdiction or KCSI's  independent  auditors) that
any of the Non-Parachute Items are subject to Excise Taxes, or are to be counted
in determining whether any Payments are subject to Excise Taxes, with the result
that the amount of Excise  Taxes  payable by the  Executive  is greater than the
amount  determined  by KCSI  or the  Executive  pursuant  to  Paragraph  7(h) or
Paragraph  7(i),  as  applicable,  then KCSI shall pay the  Executive  an amount
(which shall also be deemed a Gross-up Payment) equal to the product of:

                           (i) the sum of (a) such  additional  Excise Taxes and
         (b) any interest, fines, penalties, expenses or other costs incurred by
         the Executive as a result of having taken a position in accordance with
         a determination made pursuant to Paragraph 7(h); multiplied by

                           (ii)     the Gross-up Multiple.

                  (k) Gross-up  Multiple.  The Gross-up  Multiple  shall equal a
fraction,  the numerator of which is one (1.0),  and the denominator of which is
one (1.0) minus the sum,  expressed as a decimal  fraction,  of the rates of all
federal,  state,  local and other  income and other  taxes and any Excise  Taxes
applicable to the Gross-up  Payment;  provided that, if such sum exceeds 0.8, it
shall be deemed equal to 0.8 for  purposes of this  computation.  (If  different
rates of tax are  applicable  to various  portions  of a Gross-up  Payment,  the
weighted average of such rates shall be used.)

                  (l) Opinion of Counsel.  "Executive  Counsel  Opinion" means a
legal opinion of nationally recognized executive compensation counsel that there
is a  reasonable  basis  to  support  a  conclusion  that the  Gross-up  Payment
determined by the Executive has been  calculated in accord with this Paragraph 7
and  applicable  law.  "Company  Counsel  Opinion"  means  a  legal  opinion  of
nationally  recognized  executive  compensation  counsel  that  (i)  there  is a
reasonable  basis to support a conclusion that the Gross-up Payment set forth in
the Certificate of KCSI's independent auditors has been calculated in accord
with this Paragraph 7 and applicable law, and (ii) there is no reasonable  basis
for the calculation of the Gross-up Payment determined by the Executive.

                  (m) Amount Increased or Contested.  The Executive shall notify
KCSI in  writing  of any claim by the IRS or other  taxing  authority  that,  if
successful, would require the payment by KCSI of a Gross-up Payment. Such notice
shall  include  the nature of such claim and the date on which such claim is due
to be paid. The Executive shall give such notice as soon as practicable,  but no
later than 10 business days,  after the Executive first obtains actual knowledge
of such claim;  provided,  however,  that any failure to give or delay in giving
such notice shall affect  KCSI's  obligations under this Paragraph 7 only if
and to the extent that such failure  results in actual  prejudice  to KCSI.  The
Executive  shall not pay such claim less than 30 days after the Executive  gives
such notice to KCSI (or, if sooner,  the date on which  payment of such claim is
due). If KCSI notifies the  Executive in writing  before the  expiration of such
period that it desires to contest such claim, the Executive shall:

                           (i) give  KCSI  any  information  that it  reasonably
         requests  relating  to such  claim;

                           (ii) take such action in connection with contesting
         such claim as KCSI reasonably requests in writing from time to time,
         including,  without limitation, accepting  legal  representation with
         respect  to  such  claim  by an attorney reasonably selected by KCSI;

                           (iii)  cooperate  with KCSI in good  faith to contest
         such claim;  and

                           (iv) permit KCSI to participate in any proceedings
         relating to such claim; provided, however, that KCSI 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  related interest and penalties,
         imposed as a result of such representation and payment of costs and
         expenses. Without limiting the foregoing, KCSI shall control all
         proceedings in connection with such contest  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 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. 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 KCSI
         shall determine;  provided, however, that if KCSI directs the Executive
         to pay such claim and sue for a refund, KCSI shall advance the amount
         of such payment to the Executive, on an interest-free basis and shall
         indemnify the Executive,  on an after-tax basis, for any Excise Tax or
         income tax,  including related interest or penalties,  imposed 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.
         The  KCSI's  control  of the  contest  shall be  limited to issues
         with  respect to which a Gross-up  Payment  would be payable.
         The Executive shall be entitled to settle or contest,  as the case may
         be,  any  other  issue  raised  by the IRS or  other  taxing
         authority.

                  (n)  Refunds.  If,  after the receipt by the  Executive  of an
amount advanced by KCSI pursuant to Paragraph  7(m), the Executive  receives any
refund with respect to such claim,  the Executive  shall  (subject to KCSI's
complying with the  requirements of Paragraph 7(m)) promptly pay KCSI 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 KCSI pursuant to Paragraph  7(m), a  determination  is made that the
Executive  shall not be entitled to a full refund with respect to such claim and
KCSI does not notify  the  Executive  in  writing of its intent to contest  such
determination  before the expiration of 30 days after such  determination,  then
the applicable  part of 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. Any contest of a denial of
refund shall be controlled by Paragraph 7(m).

                  (o) Expenses. If any dispute should arise under this Agreement
after the  Control  Change Date  involving  an effort by  Executive  to protect,
enforce or secure rights or benefits claimed by Executive hereunder,  KCSI shall
pay (promptly  upon demand by Executive  accompanied  by reasonable  evidence of
incurrence) all reasonable expenses (including  attorneys' fees) incurred by
Executive in connection with such dispute,  without regard to whether  Executive
prevails in such dispute except that  Executive  shall repay KCSI any amounts so
received  if a court  having  jurisdiction  shall  make a  final,  nonappealable
determination  that Executive acted frivolously or in bad faith by such dispute.
To assure  Executive  that  adequate  funds will be made  available to discharge
KCSI's obligations set forth in the preceding sentence, KCSI has established
a trust and upon the occurrence of a Change in Control shall promptly deliver to
the trustee of such trust to hold in  accordance  with the terms and  conditions
thereof  that sum which the KCSI  Board  shall  have  determined  is  reasonably
sufficient for such purpose.

                  (p)  Prevailing  Provisions.  On and after the Control  Change
Date, the provisions of this Paragraph 7 shall control and take  precedence over
any other provisions of this Agreement which are in conflict with or address the
same or a similar subject matter as the provisions of this Paragraph 7.

         8.   Mitigation   and  Other   Employment.   After  a  termination   of
Executive's  employment pursuant to Paragraph 4(d)(i) or a Change in Control
as defined in Paragraph  7(d),  Executive  shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or  otherwise,  and  except as  otherwise  specifically  provided  in  Paragraph
4(d)(ii) with respect to health and life  insurance  and in Paragraph  7(e) with
respect to health,  prescription and dental benefits,  no such other employment,
if obtained,  or compensation or benefits payable in connection  therewith shall
reduce any amounts or benefits to which  Executive is entitled  hereunder.  Such
amounts or  benefits  payable to  Executive  under this  Agreement  shall not be
treated as damages but as severance  compensation to which Executive is entitled
because Executive's employment has been terminated.

         9.  Notice.  Notices  and all  other  communications  to  either  party
pursuant to this Agreement  shall be in writing and shall be deemed to have been
given when  personally  delivered,  delivered  by  facsimile or deposited in the
United States mail by certified or registered mail, postage prepaid,  addressed,
in the case of KCSI,  to KCSI at 114 West 11th  Street,  Kansas  City,  Missouri
64105, Attention:  Secretary,  or, in the case of the Executive, to him at 10051
Hardy Drive,  Overland Park,  Kansas 66212,  or to such other address as a party
shall designate by notice to the other party.

         10. Amendment. No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or discharge is
agreed to in a writing  signed by Executive and the President of KCSI. No waiver
by any party  hereto at any time of any  breach by another  party  hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the time or at any prior or subsequent time.

         11.  Successors in Interest.  The rights and  obligations of KCSI under
this  Agreement  shall  inure to the benefit of and be binding in each and every
respect upon the direct and indirect successors and assigns of KCSI,  regardless
of the manner in which such  successors or assigns shall succeed to the interest
of KCSI  hereunder,  and this Agreement shall not be terminated by the voluntary
or  involuntary  dissolution  of  KCSI,  KCSL or  Railway  or by any  merger  or
consolidation  or  acquisition  involving  KCSI,  KCSL or  Railway,  or upon any
transfer of all or substantially all of KCSI's,  KCSL's or Railway's
assets, or terminated  otherwise than in accordance with its terms. In the event
of any such merger or  consolidation  or transfer of assets,  the  provisions of
this  Agreement  shall be  binding  upon and shall  inure to the  benefit of the
surviving  corporation  or the  corporation or other person to which such assets
shall be transferred. Neither this Agreement nor any of the payments or benefits
hereunder may be pledged,  assigned or transferred by Executive  either in whole
or in part in any manner, without the prior written consent of KCSI.

         12. Severability.  The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other  provisions  hereof,  and
this  Agreement  shall  be  construed  in all  respects  as if such  invalid  or
unenforceable provisions were omitted.

         13. Controlling Law and Jurisdiction. The validity,  interpretation and
performance of this Agreement  shall be subject to and construed  under the laws
of the State of Missouri, without regard to principles of conflicts of law.

         14. Entire Agreement.  This Agreement  constitutes the entire agreement
between the parties with respect to the subject matter hereof and terminates and
supersedes all other prior agreements and understandings, both written and oral,
between the  parties  with  respect to the terms of  Executive's  employment  or
severance arrangements.

<PAGE>

         IN WITNESS  WHEREOF,  the parties hereto have executed this Amended and
Restated Agreement as of the 1st day of January, 1999.

                        KANSAS CITY SOUTHERN INDUSTRIES, INC.

                        By    /s/ Landon H. Rowland
                          ---------------------------------
                            Landon H. Rowland, President

                        EXECUTIVE
                              /s/ Joseph D. Monello
                        -----------------------------------
                                 Joseph D. Monello

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