SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14D-1
(Amendment No. 16)
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934

Conrail Inc.
(Name of Subject Company)

Norfolk Southern Corporation
Atlantic Acquisition Corporation
(Bidders)

COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)

208368 10 0
(CUSIP Number of Class of Securities)

SERIES A ESOP CONVERTIBLE JUNIOR
PREFERRED STOCK, WITHOUT PAR VALUE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)

NOT AVAILABLE
(CUSIP Number of Class of Securities)

JAMES C. BISHOP, JR.
EXECUTIVE VICE PRESIDENT-LAW
NORFOLK SOUTHERN CORPORATION
THREE COMMERCIAL PLACE
NORFOLK, VIRGINIA 23510-2191
TELEPHONE: (757) 629-2750
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)

with a copy to:
RANDALL H. DOUD, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000

This Amendment No. 16 amends the Tender Offer Statement on
Schedule 14D-1 filed on October 24, 1996, as amended (the "Schedule
14D-1"), by Norfolk Southern Corporation, a Virginia corporation
("Parent"), and its wholly owned subsidiary, Atlantic Acquisition
Corporation, a Pennsylvania corporation ("Purchaser"), relating to
Purchaser's offer to purchase all outstanding shares of (i) Common Stock,
par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP
Convertible Junior Preferred Stock, without par value (the "ESOP Preferred
Shares" and, together with the Common Shares, the "Shares"), of Conrail
Inc. (the "Company"), including, in each case, the associated Common Stock
Purchase Rights, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated October 24, 1996 (the "Offer to Purchase"), as
amended and supplemented by the Supplement thereto, dated November 8, 1996
(the "Supplement"), and in the revised Letter of Transmittal (which,
together with any amendments or supplements thereto, constitute the
"Offer"). Unless otherwise defined herein, all capitalized terms used
herein shall have the respective meanings given such terms in the Offer to
Purchase, the Supplement or the Schedule 14D-1.

ITEM 5.  PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.

Item 5 is hereby amended and supplemented by the following:

(e) On December 6, 1996, CSX commenced a tender offer to
purchase for cash an aggregate of up to 18,344,845 Shares of the Company at
a price of $110 in cash per Share.

ITEM 10. ADDITIONAL INFORMATION.

Item 10 is hereby amended and supplemented by the following:

(e) On December 5, 1996, Defendants in the Pennsylvania
Litigation filed their Answer and Defenses to Plaintiffs' Second Amended
Complaint, generally denying, and asserting various defenses to, the
allegations contained therein and requesting judgment on all claims and an
award of costs and attorneys fees. The Company and CSX also filed a
Counterclaim to Plaintiffs' Second Amended Complaint (the "Counterclaim"),
naming Parent, Purchaser and Kathryn B. McQuade as counterclaim defendants,
alleging that David R. Goode and Henry C. Wolf are co-conspirators/aiders
and abettors, and purporting to state the following claims: tortious
interference with current and prospective contractual relationships,
intentional infliction of harm, unfair competition and civil conspiracy.
Further, the Counterclaim alleges that Parent and certain of its executive
officers have engaged in (i) dissemination of materially false and
misleading information, (ii) promotion of an illusory tender offer, (iii)
purportedly improper commencement of a lawsuit, (iv) false and misleading
solicitation of proxies for the upcoming Company shareholder vote and (v)
efforts to manipulate the market through unfair, tortious conduct, in
violation of the federal securities laws. The Counterclaim requests a jury
trial and an award of damages, punitive damages, costs and attorneys fees.
Parent believes that the Counterclaim is without merit and intends to
defend it vigorously.

ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.

Item 11 is hereby amended and supplemented by the following:

(a)(51)  Press Release issued by Parent on December 5, 1996.

(g)(6)   Answer and Defenses of Defendants to Plaintiffs' Second
Amended Complaint and the Counterclaim of the Company and
CSX (dated December 5, 1996, United States District Court
for the Eastern District of Pennsylvania).

SIGNATURE

After due inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement
is true, complete and correct.

Dated:  December 6, 1996

NORFOLK SOUTHERN CORPORATION

By: /s/ JAMES C. BISHOP, JR.              

Name:  James C. Bishop, Jr.
Title: Executive Vice President-Law

ATLANTIC ACQUISITION CORPORATION

By: /s/ JAMES C. BISHOP, JR.              

Name:  James C. Bishop, Jr.
Title: Vice President and General
Counsel

EXHIBIT INDEX

Exhibit
Number                  Description

(a)(51)     Press Release issued by Parent on December 5, 1996.

(g)(6)      Answer and Defenses of Defendants to Plaintiffs' Second 
Amended Complaint and the Counterclaim of the Company
and CSX (dated December 5, 1996, United States District 
Court for the Eastern District of Pennsylvania).

FOR IMMEDIATE RELEASE
DECEMBER 5, 1996

Media Contact:  Robert Fort
(757) 629-2714

NORFOLK SOUTHERN CALLS CONRAIL CLAIMS FRIVOLOUS

NORFOLK, VA - Norfolk Southern Corporation issued the
following statement in response to the counterclaims filed
today in the U.S. District Court for the Eastern District of
Pennsylvania by Conrail and CSX Corporation.  The response
is based on a joint statement issued by Conrail and CSX:

"The Conrail/CSX claims are frivolous -- an obvious
attempt to divert attention away from the fact that the
CSX/Conrail deal remains inferior to Norfolk Southern's
better offer of $110 a share in cash.  If they really
believe that Norfolk Southern is not serious about buying
Conrail, as they have alleged, then they should remove the
barriers they put up and we'll find out quickly that their
claims are nothing more than total fabrication."

###

World Wide Web Site - http://www.nscorp.com

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

- ------------------------------------------x
NORFOLK SOUTHERN CORPORATION,             :
a Virginia corporation,                   :
ATLANTIC ACQUISITION CORPORATION,         :
a Pennsylvania corporation, and           :
KATHRYN B. McQUADE, an individual,        :
:
Plaintiffs,               :
:
v.             :    C.A. No. 96-CV-7167 
:
CONRAIL INC., a Pennsylvania corporation, :
DAVID M. LEVAN, an individual,            :
H. FURLONG BALDWIN, an individual,        :    JURY TRIAL DEMANDED 
:    -------------------
DANIEL B. BURKE, an individual,           :
ROGER S. HILLAS, an individual,           :
CLAUDE S. BRINEGAR, an individual,        :
KATHLEEN FOLEY FELDSTEIN, an              :
individual, DAVID B. LEWIS, an individual,:
JOHN C. MAROUS, an individual,            :
DAVID H. SWANSON, an individual,          :
E. BRADLEY JONES, an individual,          :
RAYMOND T. SCHULER, an individual,        :
and CSX CORPORATION, a Virginia           :
corporation,                              :
:
Defendants.         :
- ------------------------------------------x

ANSWER AND DEFENSES OF CONRAIL, CSX AND THE
INDIVIDUAL DEFENDANTS TO SECOND AMENDED
COMPLAINT, AND COUNTERCLAIM OF CONRAIL AND CSX
----------------------------------------------

ANSWER
------

Defendants Conrail Inc. ("Conrail"), CSX Corporation ("CSX") and the
individual Defendants (collectively "Defendants"), by their undersigned
attorneys, answer as follows:

1. Denied. Defendants' actions are lawful and this Court found no
evidence of any breach of fiduciary duty by the Board of Directors of
Conrail.

2. The averments in paragraph 2 are conclusions of law which require
no answer. To the extent an answer is deemed required, those averments are
denied. After two days of hearings, this Court found no coercion, no
violations of the Williams Act, no evidence of any breach of fiduciary duty
by th e Conrail Board, and denied Plaintiffs' request for injunctive
relief.

3. It is admitted that the merger of Conrail and CSX is to be
accomplished through a multi-tier structure requiring regulatory approvals,
and that Conrail shareholders will have the opportunity to receive cash and
stock. The remaining averments in paragraph 3 are denied.

4. The averments in paragraph 4 are denied, with the exception that on
October 23, 1996, Norfolk Southern Corporation ("Norfolk Southern")
announced its illusory tender offer and that the tender offer commenced on
October 24, 1996.

5. Denied. Conrail and CSX have entered into a valid and binding
merger agreement. After two days of hearings, this Court found that each of
the contested provisions of the Conrail Shareholder Rights Plan and the
Conrail/CSX strategic Merger Agreement, as amended, are athorized by the
Pennsylv ania Business Corporation Law ("BCL") including, without
limitation, BCL ss.ss. 1502, 1712, 1715, 1721, 2513, Subchapter 25E and
Subchapter 25F.

6. Denied. The averments in paragraph 6 also contain conclusions of
law which require no answer. To the extent an answer is deemed required,
those averments are denied.

7-8. Admitted.

9. Defendants admit the averments in the first sentence of paragraph
9. Conrail is without knowledge or information sufficient to form a belief
as to the truth of the averments in the second through fifth sentences of
paragraph 9. The averments in the last sentence of paragraph 9 are denied,
e xcept that it is admitted that Norfolk Southern appears to have purchased
100 shares of Conrail common stock in street name after the merger
agreement between Conrail and CSX was announced.

10. Defendants are without knowledge or information sufficient to form
a belief as to the truth of the averments in paragraph 10.

11. Denied as stated. It is denied that McQuade is or ever was a
record owner of any Conrail stock at any relevant time. It is admitted that
McQuade appears to be the beneficial owner of 50 shares of Conrail common
stock.

12. Admitted.

13. The averments in the first and second sentences of paragraph 13
are admitted. The averments in the third sentence are legal conclusions
which require no answer. To the extent an answer is deemed required, those
averments are denied as stated. The fiduciary duties owed by Conrail's
director s are as set forth in the BCL.

14. Admitted.

15. Denied. By way of further answer, Norfolk Southern's tender offer
is a writing which speaks for itself.

16. Denied as stated. The letter referred to in paragraph 16 is a
writing which speaks for itself.

17. Denied. By way of further answer, the merger agreement, as
amended, between Conrail and CSX is a writing which speaks for itself.

18. Denied. This Court specifically found that CSX's offer is not
coercive and that Conrail's shareholders have numerous options about which
they have been fully informed.

19. The averments in the first sentence of paragraph 19 are admitted.
The remaining averments in paragraph 19 are denied. Norfolk Southern failed
to reach agreement with Conrail in 1994, and failed to reach agreement with
CSX regarding a break-up of Conrail in 1995. In 1996, prior to the anno
uncement of the Conrail/CSX Merger Agreement, Norfolk Southern still had no
concrete proposal to present to Conrail's Board.

20. Admitted.

21. Denied as stated.

22-23. Denied.

24. The averments in the first three sentences in paragraph 24 are
admitted. The remaining averments are denied.

25. Defendants are without knowledge or information sufficient to form
a belief as to the truth of the averments in the first sentence of
paragraph 25. The remaining averments are denied.

26. The averments in the first sentence of paragraph 26 are denied as
stated. The remaining averments are denied.

27. Denied as stated.

28. Denied. By way of further answer, the Merger Agreement, as
amended, between Conrail and CSX is a writing which speaks for itself.

29. Denied as stated. The excerpts cited by Plaintiffs are incomplete
and out of context. The referenced newspaper reports are writings which
speak for themselves.

30. Denied. This Court found no evidence that the Conrail Board had
acted without good faith after reasonable investigation, and ruled that the
actions of the Conrail Board were authorized by the BCL.

31. The averments in the first sentence of paragraph 31 are admitted.
The remaining averments are denied.

32. Defendants are without knowledge or information sufficient to form
a belief as to the truth of the averments in the first two sentences of
paragraph 32. The remaining averments are admitted.

33. The averments in the first sentence of paragraph 33 are denied.
The remaining averments are denied as stated. The excerpts cited by
Plaintiffs are incomplete and out of context. The referenced newspaper
reports are writings which speak for themselves.

34. Denied. This Court has ruled that the CSX offer is not coercive
and that the Conrail shareholders have numerous options about which they
have been fully informed.

35. The averments in the first and third sentences of paragraph 35 are
admitted. The remaining averments are denied. By way of further answer,
Norfolk Southern initiated the meeting to devise the break-up of Conrail
and to use the withdrawal of its offer as leverage to extort Conrail's
routes and assets for itself.

36-37. Denied.

38. Denied, except that the movement of Conrail's stock price is
admitted.

39. It is admitted that Norfolk Southern issued its own press release.
The contents of that press release and the remaining averments in paragraph
39 are denied.

40. Denied, except that the closing price of Conrail stock is
admitted.

41. Denied. In addition, the excerpts cited by Plaintiffs in paragraph
41 are incomplete and out of context. The referenced newspaper report is a
writing which speaks for itself.

42. Denied as stated. The Conrail Shareholder Rights Plan is a writing
which speaks for itself.

43. Denied. This Court held that actions of the Conrail directors in
approving the provisions of the Conrail Shareholder Rights Plan were not a
breach of fiduciary duty and were authorized by the BCL.

44. Denied, with the exception that it is admitted that the Court
scheduled a hearing on the motion for noon on November 4, 1996.

45. The averments in the first sentence of paragraph 45 are denied.
The remaining averments are admitted.

46. Admitted that the Conrail Board met on November 5, 1996, and that
on November 6, 1996, Conrail announced that it had considered and approved
an amended tender offer by CSX. The remaining averments in paragraph 46 are
denied as stated.

47. Admitted.

48. The averments in the first sentence of paragraph 48 are admitted.
The remaining averments in paragraph 48 are denied as stated.

49. Denied. This Court has ruled that the CSX offer is not coercive
and that Conrail's shareholders have numerous options about which they have
been fully informed.

50. Denied. The excerpts cited by Plaintiffs in paragraph 50 are
incomplete and out of context. The referenced newspaper report is a writing
which speaks for itself.

51. Denied as stated. The excerpt cited in paragraph 51 is incomplete
and out of context. Schedule 14D-9 is a writing which speaks for itself.

52. Denied, except that it is admitted that Conrail and CSX issued a
joint press release on November 6, 1996.

53. Denied. Further, the press release, the Lazard Freres and Morgan
Stanley fairness opinion letters, and CSX's Schedule 14D-9, are writings
which speak for themselves.

54. Denied. The excerpts cited in paragraph 54 are incomplete and out
of context. Further, the press release is a writing which speaks for
itself.

55. The first sentence in paragraph 55 is admitted. The remaining
averments in paragraph 55 are denied.

56. The first sentence in paragraph 56 is admitted. The remaining
averments in paragraph 56 are denied as stated.

57-58. Denied.

59. Denied as stated. The Merger Agreement, as amended, between
Conrail and CSX and the Conrail Shareholder Rights Plan are writings which
speaks for themselves.

60. Denied.

61. Denied as stated. The Conrail Shareholder Rights Plan is a writing
which speaks for itself.

62. The averments in paragraph 62 are legal conclusions which require
no answer. To the extent an answer is deemed required, those averments are
denied.

63-69. The averments in paragraphs 63-69 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied. By way of further answer, the Conrail Shareholder
Rights Plan is a writing which speaks for itself.

70. Denied, except that it is admitted that the Conrail Board met on
November 4, 1996, extended the distribution date, and the Court denied
Plaintiffs' motion.

71-75. The averments in paragraphs 71-75 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied. By way of further answer, the Merger Agreement, as
amended, between Conrail and CSX is a writing which speaks for itself.

76. Denied. This Court found no evidence that the Conrail Board
breached its fiduciary duties and held that each of the contested
provisions of the Merger Agreement, as amended, are authorized by the BCL.

77. Admitted to the extent not inconsistent with the Merger Agreement,
as amended, between Conrail and CSX, which is a writing and which speaks
for itself.

78. The averments in paragraph 78 are legal conclusions which require
no answer. To the extent an answer is deemed required, those averments are
denied. By way of further answer, the Merger Agreement, as amended, between
Conrail and CSX and the preliminary proxy materials are writings which
speak for themselves.

79. Denied.

80-81. Denied as stated. Conrail's preliminary proxy materials are
writings which speak for themselves. The excerpts cited in paragraphs 80-81
are incomplete and out of context. By way of further answer, those
preliminary proxy materials were never disseminated by Conrail to Conrail's
shareholders.

82. The averments in paragraph 82 are legal conclusions which require
no answer. To the extent an answer is deemed required, those averments are
denied. By way of further answer, the Merger Agreement, as amended, between
Conrail and CSX is a writing which speaks for itself.

83. Denied.

84-86. Denied as stated. The Stock Option Agreement and the Merger
Agreement, as amended, between Conrail and CSX are writings which speak for
themselves.

87. The averments in paragraph 87 are legal conclusions which require
no answer. To the extent an answer is deemed required, those averments are
denied. By way of further answer, the Stock Option Agreement and the Merger
Agreement, as amended, between Conrail and CSX are writings which speak f
or themselves.

88. Denied. This Court has held that the contested provisions of the
Merger Agreement, as amended, between Conrail and CSX, including without
limitation, the break-up fee provisions and Stock Option Agreement, and
the actions of the Conrail Board in relation thereto, are valid and
authorized under Pennsylvania law, and that the Conrail directors did not
breach their fiduciary duties.

89. Denied. This Court has held that the contested provisions of the
Merger Agreement, as amended, between Conrail and CSX, and the actions of
the Conrail Board in relation thereto, are valid and authorized under
Pennsylvania law, and that the Conrail directors did not breach their
fiduciary duties.

90. The averments in paragraph 90 are legal conclusions which require
no answer. To the extent an answer is deemed required, those averments are
denied, with the exception that it is admitted that Pennsylvania law does
not require directors to amend or redeem poison pill rights or to take 
action rendering anti-takeover provisions inapplicable.

91. Denied. This Court has ruled that the actions of the Conrail Board
in relation to the Merger Agreement, as amended, between Conrail and CSX
are valid and authorized under Pennsylvania law, and that the Conrail
directors did not breach their fiduciary duties.

92. It is denied that Mr. LeVan's Employment Agreement is an integral
part of the CSX transaction. The remaining averments in paragraph 92 are
legal conclusions which require no answer. To the extent an answer is
deemed required, those averments are denied. By way of further answer, Mr.
LeVan's Employment Agreement and the Merger Agreement, as amended, between
Conrail and CSX are writings which speak for themselves.

93-94. Denied as stated. Mr. LeVan's Employment Agreement and the
Merger Agreement, as amended, between Conrail and CSX are writings which
speak for themselves.

95. The averments in the first and second sentences of paragraph 95
are admitted. The averments in the third sentence are denied.

96(a)-(b). Denied. Conrail's Preliminary Proxy Statement is a writing
which speaks for itself.

97(a)-(c). Denied. CSX's Schedule 14D-1 is a writing which speaks for
itself.

98. Denied. Conrail's Schedule 14D-9 is a writing which speaks for
itself.

99(a)-(u). Denied. Conrail's Preliminary Proxy Statement, CSX's
Schedule 14D-1, and Conrail's Schedule 14D-9 are each writings which speak
for themselves.

100(a)-(d). Denied. The referenced press release, CSX's Schedule 14D-1
Amendment No. 4, Conrail's Schedule 14D-9 with respect to the Norfolk
Southern offer, and Conrail's Schedule 14D-9 Amendment No. 4 with respect
to the CSX offer are each writings which speak for themselves.

101. Denied.

102. Admitted.

103. Denied. Conrail's Shareholders Right Plan, including its
continuing director provisions, is a writing which speaks for itself.

104-105. Denied as stated. Conrail's Shareholder Rights Plan is a
writing which speaks for itself.

106. Denied.

107-108. The averments in paragraphs 107-108 are legal conclusions
which require no answer. To the extent an answer is deemed required, those
averments are denied.

109-110. Denied.

111. Defendants are without knowledge or information sufficient to
form a belief as to the truth of the averments in the first sentence of
paragraph 111. The averments in the second sentence of paragraph 111 are
denied as stated; Conrail's April 3, 1996 Proxy Statement is a writing
which speaks for itself.

112. Denied.

113. Denied as stated. Conrail's By-Laws is a writing which speaks for
itself.

114. Admitted.

115. The averments in paragraph 115 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied. Conrail's Articles of Incorporation is a writing
which speaks for itself.

116. The averments in paragraph 116 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied.

117-118. Denied.

119. The averments in paragraph 119 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied.

120.(a)-(h). Denied, with the exception that it is admitted that no
demand has been made on Conrail's Board.

121. It is admitted that Norfolk Southern and McQuade appear to be
beneficial owners of Conrail common stock. The remaining averments are
denied.

122. Defendants are without knowledge or information sufficient to
form a belief as to the truth of the averments in paragraph 122.

COUNT ONE
---------

123. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

124. Denied as stated. The duties of the Defendant Directors are as
set forth in the BCL.

125. The averments in the first sentence of paragraph 125 are
admitted. The remaining averments are denied.

126. Denied as stated.

127-128. Denied.

COUNT TWO
---------

129. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

130. Denied as stated.

131. Admitted.

132. Denied as stated.

133-134. Denied.

COUNT THREE
-----------

135. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

136. The averments in paragraph 136 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied as stated.

137-138 Denied.

COUNT FOUR
----------

139. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

140. The averments in paragraph 140 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied. By way of further answer, the Merger Agreement, as
amended, between Conrail and CSX is a writing which speaks for itself.

141. The averments in paragraph 141 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied except that it is admitted that Conrail is not a
statutory close corporation.

142. Denied, with the exception that the averments in the second
sentence of paragraph 142 are denied as stated.

143. Denied.

COUNT FIVE
----------

144. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

145-148. Denied.

COUNT SIX
---------

149. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

150-151. Denied.

152. Denied, except that it is admitted that Conrail is not a
statutory close corporation.

153. Denied, with the exception that the averments in the second
sentence of paragraph 153 are denied as stated. The Merger Agreement, as
amended, between Conrail and CSX is a writing which speaks for itself.

154-155. Denied.

COUNT SEVEN
-----------

156. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

157-159. Denied.

COUNT EIGHT
-----------

160. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

161. Denied as stated. The Merger Agreement, as amended, between
Conrail and CSX is a writing which speaks for itself.

162-164. Denied.

COUNT NINE
----------

165. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

166-167. The averments in paragraphs 166-167 are legal conclusions
which require no answer.

168. Denied, with the exception that the averments in the second
sentence of paragraph 168 are denied as stated.

169. Denied. The Conrail Shareholder Rights Plan, including its
continuing director provisions, is a writing which speaks for itself.

170. It is admitted that Plaintiffs seek such a declaration, but it is
denied that they are entitled to it.

171. Denied.

COUNT TEN
---------

172. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

173. Admitted.

174. The averments in paragraph 174 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied. By way of further answer, the Conrail Shareholder
Rights Plan and Conrail's By-Laws are both writings which speak for
themselves.

175. Denied. Conrail's Shareholder Rights Plan, including its
continuing director provisions, and Conrail's By-Laws are writings which
speak for themselves.

176. Denied. Conrail's Shareholder Rights Plan, including its
continuing director provisions, its Articles of Incorporation and its
By-Laws are writings which speak for themselves.

177. Denied.

COUNT ELEVEN
------------

178. Defendants repeat and reallege each of the foregoing as if fully
set forth in this paragraph.

179. Denied.

180. Denied. Conrail's Shareholder Rights Plan, including its
continuing director provisions, is a writing which speaks for itself.

181. It is admitted that Plaintiffs seek such a declaration, but it is
denied that they are entitled to it.

182. Denied.

COUNT TWELVE
------------

183. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

184. The averments in paragraph 184 are legal conclusions which
require no answer. To the extent an answer is deemed required, it is
admitted that the Director Defendants owe fiduciary duties to Conrail and
their actions are governed by the BCL.

185-186. Admitted.

187-191. Denied.

COUNT THIRTEEN
--------------

192. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

193-195. Denied.

COUNT FOURTEEN
--------------

196. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

197. The averments in paragraph 197 are legal conclusions which
require no answer. Section 14(a) of the Exchange Act speaks for itself.

198. The averments in paragraph 198 are legal conclusions which
require no answer. Rule 14a-9 speaks for itself.

199-203. Denied.

COUNT FIFTEEN
-------------

204. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

205. The averments in paragraph 205 are legal conclusions which
require no answer. Section 14(d) of The Exchange Act speaks for itself.

206. Admitted.

207. Denied. CSX's Schedule 14D-1, including Amendment No. 4, is a
writing which speaks for itself.

208-209. Denied.

COUNT SIXTEEN
-------------

210. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

211. The averments in paragraph 211 are legal conclusions which
require no answer. Section 14(d)(4) and Rule 14d-9 of The Exchange Act
speak for themselves.

212. Admitted.

213-215. Denied.

COUNT SEVENTEEN
---------------

216. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

217. The averments in paragraph 217 are legal conclusions which
require no answer. Section 14(e) of The Exchange Act speaks for itself.

218-219. The averments in paragraphs 218 and 219 are legal conclusions
which require no answer. To the extent an answer is deemed required, those
averments are denied. By way of further answer, CSX's Schedule 14D-1 and
Conrail's Schedule 140-9 and Proxy Statement are writings which speak for
themselves.

220. Denied. Defendants also incorporate their answers to paragraphs
97, 99 and 100 (a)-(b) above.

221. Denied. Defendants also incorporate by reference their answers to
paragraphs 98, 99 and 100 (a), (c) and (d) above.

222. Denied. Defendants also incorporate by reference their answer to
paragraphs 96, 99 above.

223-226. Denied.

COUNT EIGHTEEN
--------------

227. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

228. Denied. Defendants also incorporate by reference their answers to
paragraphs 95 through 101 above.

229. Denied.

COUNT NINETEEN
--------------

230. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

231-238. Denied.

COUNT TWENTY
------------

239. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

240. Denied.

241. Admitted.

242. Denied as stated. The proxy materials are writings which speak
for themselves.

243. The averments to paragraph 243 are legal conclusions which
require no answer. To the extent that an answer is deemed necessary, these
averments are denied.

244-246. Denied.

COUNT TWENTY-ONE
----------------

247. Defendants repeat and reallege each of the foregoing answers as
if fully set forth in this paragraph.

248. Defendants are without knowledge or information sufficient to
form a belief as to the truth of the averments in paragraph 248.

249. The averments in paragraph 249 are legal conclusions which
require no answer. To the extent an answer is deemed required, those
averments are denied.

250. It is admitted that Plaintiffs seek such a declaration, but it is
denied that they are entitled to it.

251. Denied.

WHEREFORE, Defendants respectfully request that this Court enter
judgment in their favor and against all Plaintiffs on all claims and award
to Defendants all their costs and attorney's fees, and grant any further
relief that is right and just. 

DEFENSES
--------

First Defense
-------------

Plaintiffs have failed, in whole or in part, to state a claim upon
which relief can be granted.

Second Defense
--------------

Plaintiffs are barred from proceeding with their claims by the
doctrine of law of the case.

Third Defense
-------------

Plaintiffs' claims are barred by the doctrine of unclean hands.

Fourth Defense
--------------

Plaintiffs' claims are barred by their fraudulent and deceitful
conduct.

Fifth Defense
-------------

Plaintiffs' state law claims are barred by the Pennsylvania Business
Corporation Law of 1990, as amended, which authorizes the contested conduct
of the Conrail Board.

Sixth Defense
-------------

Plaintiffs' state law claims are barred because the actions of the
Conrail Board were carried out in the exercise of their fiduciary duties to
the corporation, in good faith after reasonable investigation, and in the
best interests of Conrail.

Seventh Defense
---------------

Plaintiffs' claims for injunctive relief are barred because of the
absence of fraud or fundamental unfairness.

Eighth Defense
--------------

Plaintiffs' claims are barred for failure to satisfy the requirements
of Federal Rule of Civil Procedure 23.1, including without limitation, the
requirement that Plaintiffs be adequate representatives of the interests of
Conrail's shareholders.

Ninth Defense
-------------

Plaintiffs' federal securities law claims should be dismissed as moot.

Tenth Defense
-------------

Plaintiffs lack standing to pursue their state law claims because they
are not suing in their capacity as shareholders, as such, as required by
BCL ss. 1717.

Eleventh Defense
----------------

Plaintiffs' claims are barred for failure to comply with the
requirements precedent to maintenance of a shareholder derivative action,
including without limitation, their unjustified failure to make a pre-suit
demand upon the Conrail Board.

Twelfth Defense
---------------

Plaintiffs' claims are barred, in whole or in part, because Conrail
and CSX are entitled to recoupment and/or an offset for the amounts claimed
as damages in the Counterclaim which is incorporated herein by reference.

Thirteenth Defense
------------------

Defendants hereby deny, to the extent not previously denied, any and
all allegations previously made by Plaintiffs, including, but not limited
to, those made in Plaintiffs' original Complaint and their First Amended
Complaint.

WHEREFORE, Defendants respectfully request that this Court enter
judgment in their favor and against all Plaintiffs on all claims and award
to Defendants all their costs and attorney's fees and grant any further
relief that is right and just.

COUNTERCLAIM
------------

Counterclaim-Plaintiffs, Conrail and CSX, by their undersigned
counsel, allege upon knowledge with respect to themselves and their acts,
and upon information and belief as to all other matters, as follows:

INTRODUCTION
------------

1. Their plans frustrated by the sound business judgment of the
Conrail Board that a strategic merger of equals between Conrail and CSX --
rather than a sale of Conrail to Norfolk Southern--is in the best interests
of Conrail and its constituencies, Norfolk Southern and certain of its
executiv e officers have engaged in a sustained and systematic effort to
cause the breach, frustration or termination of Conrail/CSX merger
agreement ("Merger Agreement") or to otherwise prevent the contemplated
Conrail/CSX merger. This attack on the merger has been implemented through
the broad disseminati on of materially false and misleading information and
the announcement and promotion of an illusory tender offer; the
commencement and prosecution of a lawsuit premised upon false allegations
of fact, deceptive characterizations, and a blatant misapplication of
Pennsylvania law; the false and misleading solicitation of proxies for the
upcoming Conrail shareholder votes; and other efforts to manipulate the
market through conduct that is unfair, tortious, and in violation of the
federal securities laws.

2. As set forth in detail in this Counterclaim, Norfolk Southern has
announced and promoted an illusory, hostile tender offer for Conrail's
stock, which includes as its linchpin the unlawful and unachievable
condition that the Conrail/CSX Merger Agreement end, either by breach of
the agreement by Conrail or by termination of the agreement by Conrail and
CSX. That tender offer is also conditioned upon the Conrail Board adopting
a strategic direction for Conrail that it had already rejected.

3. Norfolk Southern has been continuously and intentionally misleading
the market, and Conrail's shareholders, by failing to tell them that a
tender by Conrail shareholders of their shares to Norfolk Southern would be
futile, because payment of the current $110 per share price cannot occur on
the scheduled expiration of the offer unless a breach of the Merger
Agreement occurs. That the tender offer was merely a tactical ploy was made
clear when, barely a week after it was announced, David R. Goode ("Goode"),
the Chief Executive Officer of Norfolk Southern, arranged a meeting with
the Chief Executive Officer of CSX and offered to drop the Norfolk
Southern tender offer in return for obtaining the Conrail assets that
Norfolk Southern covets.

4. Norfolk Southern has extended its tender offer to December 16,
1996, but it is still expressly conditioned on the same unachievable and
unlawful conditions. Norfolk Southern continues its offer so as to continue
to confuse, mislead and manipulate shareholders of Conrail, to tortiously
interfere with the Conrail/CSX strategic merger, to injure Conrail and
CSX, and to induce a breach of the Conrail/CSX merger agreement.

5. By these tactics, Norfolk Southern hopes it can: (a) induce or
coerce a breach or termination of the merger agreement; (b) blackmail
Conrail and CSX into allowing Norfolk Southern to "cherry pick" the routes
and assets of Conrail which Norfolk Southern has been overtly and covertly
seeking to acquire over the past several years; and/or (c) disrupt the
merged entity's relationships with prospective business partners, customers
and employees.

6. Norfolk Southern's lawsuit is meritless and a sham. On November 19,
1996, after two days of hearings, the Court rejected Norfolk Southern's
demand to enjoin the CSX tender offer. The Court found that "directors have
every right to favor one competing bid over another and particularly have 
the right to resist hostile takeovers . . . " The Court further found
"absolutely" no evidence of any lack of good faith or reasonable
investigation by the Conrail Board of Directors.

7. In this action, Conrail and CSX seek to obtain money damages for
the economic injuries and damage inflicted upon, and to be inflicted upon,
them by Counterclaim-Defendants' continuing tortious interference with the
Merger Agreement, which damages include loss of Conrail's bargain and
potential bargain and the resultant consequential and incidental damages;
increased costs and burdens in connection with the Merger Agreement; and
attorneys' fees, consultant fees, expert fees, court costs and other
expenses incurred in defending against the illegal and improper actions of
Counterclaim-Defendants. Further, because Counterclaim-Defendants'
wrongdoing is and has been malicious, intentional and outrageous, punitive
damages are hereby requested.

THE PARTIES
-----------

8. Counterclaim-Plaintiff Conrail is a Pennsylvania corporation with
its principal office at Two Commerce Square, 2001 Market Street,
Philadelphia County, Philadelphia, PA 19101. Conrail's rail service
subsidiary provides rail freight transportation service over approximately
17,700 route miles in the Midwest and Northeast. Conrail is a publicly
held company whose stock is traded on the New York and Philadelphia Stock
Exchanges.

9. Counterclaim-Plaintiff CSX is a Virginia corporation with its
principal office at One James Center, 901 East Carey Street, Richmond, VA
23219. CSX is a transportation company providing rail, intermodal, ocean
container-shipping, barging, trucking and contract logistic services. CSX's
rail transportation operations serve the Southeastern and Mid-Western
United States. CSX is a publicly held company whose stock is traded on the
New York Stock Exchange.

10. Counterclaim-Defendant Norfolk Southern is a Virginia corporation
with its principal office located at Three Commercial Place, Norfolk, VA
23510-2191. Norfolk Southern is a holding company for Norfolk Southern
Railway Company and its subsidiaries, which operate rail and motor
transportation services. Norfolk Southern is the owner of and/or controls,
directly or indirectly, Counterclaim-Defendant Atlantic Acquisition
Corporation. Norfolk Southern is a publicly held company whose stock is
traded on the New York Stock Exchange.

11. Counterclaim-Defendant Kathryn B. McQuade ("McQuade") is an
individual residing at 5114 Hunting Hills Drive, Roanoke, VA 24014. McQuade
is Vice President-Iternal Audit of Norfolk Southern. At all times relevant
herein, McQuade is alleged to have acted individually in her own behalf,
and she has conspired with Norfolk Southern to engage in some of the acts
alleged herein.

JURISDICTION AND VENUE
----------------------

12. This Court has jurisdiction over this counterclaim pursuant to 28
U.S.C. section 1367.

13. Venue is proper in this district pursuant to 28 U.S.C. _section 
1391.

FACTUAL BACKGROUND
------------------

Norfolk Southern's Prior Attempts To Acquire Conrail 
---------------------------------------------------- 

14. Conrail is one of the great corporate success stories of recent
years. Originally a government-created enterprise that emerged from the
collapse of Penn Central and other bankrupt Northeastern railroads, Conrail
is now a strong, cost-efficient, financially stable Northeastern-Midwest
railroad that provides competitive transportation over lines stretching
from Boston and New York West to St. Louis and Chicago.

15. Norfolk Southern has coveted the lines and assets of Conrail for
many years. Norfolk Southern first sought vigorously to acquire Conrail's
assets from the Federal Government, but was rebuffed by Congress, which
ordered Conrail's privatization by way of a public offering of its stock in
1987.

16. Commencing in the Spring of 1994, Norfolk Southern again attempted
to purchase Conrail. Conrail's Board considered the Norfolk Southern
proposal, but found it not to be in the best interests of the corporation
for various reasons. Conrail did offer to consider a transaction with
Norfolk Southern with an exchange ratio of 1.1 shares of Norfolk Southern
stock for 1 share of Conrail stock, which Norfolk Southern through Goode
refused. At then-current market prices, the premium offered by Norfolk
Southern for Conrail shares would have been less than 20% or a value of
about $65 per share. In addition, Norfolk Southern was unwilling to
consider placing the shares in a voting trust, pending regulatory approval
of the proposed purchase.

17. Undeterred by the failure of these direct talks with Conrail, 
Norfolk Southern then had discussions with CSX during the Summer and Fall 
of 1995 to develop a plan whereby Norfolk Southern would acquire Conrail 
and then carve it up by selling substantial Conrail assets to CSX. Norfolk 
Southern and CSX could not reach agreement between themselves on the terms 
of the carve up and talks between them ceased.

18. During the winter of 1995-96, Norfolk Southern and Goode then
considered a hostile takeover of Conrail, a course of conduct that Goode
implied to David LeVan, Conrail's President, Chairman and CEO ("LeVan") in
a meeting with LeVan in October 1995. No such offer was forthcoming. While
Norfolk Southern publicly stated it was dropping the idea of a hostile
takeover, it in fact continued to hold the intention of somehow acquiring
the Conrail lines most valuable to Norfolk Southern.

The Railroad Industry Consolidation
-----------------------------------

19. During this same general time period, the mergers of other
railroads were changing the structure of the railroad industry. In June of
1994, Burlington Northern ("BN") and the Atchison, Topeka and Sante Fe
railroads ("SF") announced a far-reaching consolidation of their Western
and Midwestern rail lines.

20. In August 1995, Union Pacific ("UP")--which had just acquired the
Chicago and North Western Railroad--and Southern Pacific ("SP") agreed to
join their extensive rail holdings. Only days after the UP/SP announcement,
the Interstate Commerce Commission ("ICC") (subsequently abolished and rep
laced by the Surface Transportation Board ("STB")) rendered its final
approval of the 1994 BN/SF merger. In both the BN/SF and the UP/SP
decisions, the ICC and STB reaffirmed long-standing ICC views that rail
mergers produce significant service, cost savings and efficiency benefits.

21. After the mid-1995 announcement of the UP/SP merger agreement,
Conrail attempted to acquire the eastern lines of SP in order to expand
Conrail's network in the Southeast as far as the Gulf of Mexico, ultimately
offering a price of $1.9 billion. The STB's subsequent approval of the
UP/SP merger foreclosed Conrail's attempt to purchase the SP lines.

Conrail's Search for a Strategic Partner
----------------------------------------

22. The STB decision in the UP/SP case was perceived to clarify and
confirm the types of merger benefits and efficiencies which the STB would
find to be in the public interest and the types of remedies for competitive
concerns that the STB would consider appropriate. In addition, changes in
the time limits for STB merger reviews were made in the governing statute
and in STB procedures, significantly reducing the time period for
completion of the merger review process. These developments were believed
to provide opportunities to Conrail to expand its rail operations through a
strategic alliance with another railroad. At the same time, they generated
a risk of a hostile tender offer and also raised fears that Conrail might
be left behind if further consolidation occurred without Conrail.

23. In light of these developments, Conrail continued to analyze its
strategic alternatives, including consolidations with other railroads.
Conrail devoted substantial time and energy in 1995 and 1996 to determining
what strategic alternative would offer the greatest opportunities to its
constituencies, including its shareholders, customers and the public.

24. At no time did the Conrail Board elect to put Conrail on the 
auction block for sale to the highest bidder.

The September 25-26, 1996 Conrail Board Retreat
-----------------------------------------------

25. The results of Conrail's analyses were put before the Conrail
Board on September 25 and 26, 1996, during the Board's retreat in Ligonier,
Pennsylvania. Presentations were made concerning possible strategic
partnerships, the state of the industry, and the economic priorities of
Conrail. Management recommended to the Board that a combination with CSX
was Conrail's most attractive opportunity. A strategic combination with CSX
was predicted to yield $150 million per year in greater benefits than those
obtainable in a combination with Norfolk Southern. These benefits included
enhanced revenue opportunities by joining CSX's steam coal and phosphate
fertilizer producers with Conrail's generating plant and farm consumers;
expansion of Conrail's service area throughout Florida (where Norfolk
Southern had little reach); tremendous enlargement of Conrail's single-line
service; and greater opportunity for improved profitability through
reduced operating ratios and enhanced management and operating
efficiencies.

26. During the presentation, the Board also considered Norfolk
Southern's ongoing interest in acquiring Conrail, and LeVan apprised the
Board of his recent contacts with Goode, in which Goode had expressed
Norfolk Southern's interest in purchasing Conrail.

27. After duly considering all of these factors over the course of the
two-day retreat, Conrail's Board reaffirmed that Conrail was not for sale,
and authorized Conrail management to initiate negotiations with CSX to
explore the possibility of a strategic combination with CSX.

28. Pursuant to the Board's directions, Conrail management and its 
legal and financial advisors participated in early October in frequent and
intensive negotiations with CSX to hammer out the terms of a possible
merger agreement. LeVan established early on Conrail's requirements for any
such agreement, including a full and fair price for Conrail's shareholders
and a true merger-of-equals in which the management and Boards of
Directors of both CSX and Conrail would play an instrumental role in the
combined entity's operation and development.

29. In pursuing negotiations with CSX, Conrail and its Board also
rejected any notion of putting Conrail up for public auction, because an
auction approach carried a substantial risk that, given the small number of
potential bidders, one bidder might collude with another competitor and
purchase Conrail for a lower price. Such collusive bidding would, thus,
risk losing CSX as a partner and deny Conrail's shareholders higher share
value. In fact, as further set forth herein, CSX and Norfolk Southern had
considered a joint bid in the recent past; therefore, an auction approach
would have been detrimental to achieving the best transaction for Conrail,
its shareholders and its other constituencies.

30. Conrail initially pursued a stock-for-stock exchange with CSX, but
ultimately considered other structures because of the potential for
dilution of CSX's stock. Conrail also continued to reject an all-cash
merger because Conrail's shareholders would not have continuing
participation in the combined company and because the merger would become a
taxable transaction. The companies finally agreed upon a structure of 40%
cash and 60% stock, which yielded an efficient transaction in light of
CSX's existing capital structure.

31. The "price" ultimately negotiated with CSX was at the high end of
prices paid in other railroad mergers. At the then-current prices, the
merger reflected over a 30% premium for Conrail shareholders, and a premium
of over 40% if the Conrail trading price was adjusted for price distortion
due to recent take-over speculation. The relative values were dramatically
superior to the premium that Goode had rejected in 1994.

32. The governance terms of the agreement negotiated were also
important and favorable to Conrail and ensured that Conrail's various
constituencies would be treated fairly and favorably by, and would be full
participants in, the combined entity:

(a) The new entity's headquarters would be located in 
Philadelphia;

(b) LeVan would be President of the railroad operations 
initially and succeed CSX's Chairman and Chief Executive Officer, 
John W. Snow ("Snow"), as Chief Executive Officer of the holding 
company in two years;

(c) Half of the board seats and committees of the combined 
entity would be filled by Conrail directors; and

(d) Shareholders would maintain a significant continuing 
equity interest in the combined entity.

33. These management discussions with CSX were reported to the Conrail
Board at a meeting on October 10, 1996.

The October 14, 1996 Conrail Board Meeting
------------------------------------------

34. On October 14, 1996, the Conrail Board gave final consideration to
the proposed Conrail/CSX strategic merger. The Board was presented with a
detailed analysis of the relative benefits of a Conrail/CSX strategic
merger, which included, among other things, high potential growth, high
synergistic potential, a diversified customer base, expanded service
partnerships with utilities, coal producers, and other customers, greater
single-line service and other benefits for customers, operating savings,
the benefit of the similar operating and commercial visions that pervaded
the two companies and good strategic placement for Conrail in ongoing indus
try-wide consolidation. In addition, the Board was presented with a
comparison of the structure of the CSX and Norfolk Southern operations and
analyses of the fairness of CSX's purchase price.

35. After determining that the merger was in the best interests of
Conrail, the Board unanimously agreed, and in a separate vote the outside
directors unanimously agreed, to approve the Conrail/CSX strategic merger
and enter into a merger agreement.

The Merger Agreement
--------------------

36. That same day, October 14, 1996, Conrail and CSX executed the
Merger Agreement. The Merger Agreement includes the following terms:

(a) A tender offer (the "Initial Tender") for up to 19.9% of 
Conrail's shares at a price of $92.50 per share.

(b) A Special Shareholders Meeting ("First Shareholders 
Meeting") currently scheduled for December 23, 1996, to consider 
an amendment to Conrail's Articles of Incorporation to opt-out of 
Chapter 25, Subchapter E of the BCL (the "Articles Amendment"). 

(c) If Conrail shareholders approve the Articles Amendment, 
a second tender offer for up to an additional 20.1% of Conrail 
shares at a price of $92.50 per share, representing a premium of 
more than 30% over Conrail's October 15, 1996 stock price 
("Second CSX Tender Offer").

(d) A Special Shareholders Meeting (the "Second Shareholders 
Meeting") at which Conrail shareholders will have the opportunity 
to approve or reject the strategic merger.

(e) If approved at the Second Shareholders Meeting, a merger 
with Conrail under which Conrail shareholders will receive 
1.85619 shares of CSX stock for each share of Conrail common 
stock.

(f) A provision that the board of directors of the surviving 
corporation will be divided equally between directors selected by 
Conrail and directors selected by CSX.

(g) Location of the corporate headquarters of the combined 
entity in Philadelphia, PA, with LeVan as the immediate President 
and Chief Operating Officer of the combined entity, his selection 
as the Chief Executive Officer of the combined entity in two 
years, and his selection as Chairman of the combined entity in 
four years.

A copy of the Merger Agreement is not attached hereto because it is 
extremely lengthy and because it is already in the possession of 
Counterclaim-Defendants. 

37. On October 15, 1996, Conrail publicly announced that it had agreed
to a strategic merger with CSX. In accordance with the Merger Agreement, on
October 16, 1996, CSX commenced the Initial Tender to purchase up to 19.9%
of the shares of stock of Conrail at a price of $92.50 per share. Conrail
concurrently filed a Schedule 14D-9 with the Securities and Exchange
Commission ("SEC") and recommended the Initial Tender to Conrail
shareholders.

38. The Conrail/CSX strategic merger met with immediate praise from
the financial community.

Norfolk Southern's Scheme to
Sabotage the Conrail/CSX Strategic Merger
-----------------------------------------

39. In its Complaint, Norfolk Southern has alleged that at a meeting
of the Norfolk Southern Board on September 24, 1996, Goode was directed by
his Board to contact LeVan and present LeVan with a concrete proposal for a
combination of Norfolk Southern and Conrail.

40. Goode has misrepresented that he called LeVan after the Norfolk
Southern Board meeting on September 24 and before Conrail's strategic
meetings on September 25 and 26, 1996, in Ligonier. In fact, Goode did not
make this call to LeVan, and he never told LeVan that he had a concrete
proposal or that he wanted to make a presentation to the Board. Moreover,
at that time no concrete proposal had been formulated by Norfolk Southern.

41. Upon learning of the Conrail/CSX strategic merger announcement,
and knowing that he had failed to carry out the recently expressed wishes
of his Board, Goode and others on behalf of Norfolk Southern immediately
began formulating a scheme to destroy the merger, take over Conrail or
certain of its key assets, damage financially the merged Conrail/CSX
company and reduce its ability to compete with Norfolk Southern, and/or
disrupt the merged entity's relationships with current and prospective
business partners, customers and employees.

(1)  Norfolk Southern's Hostile Tender Offer and its False and 
Misleading Public Statements About the Offer and the 
Conrail/CSX Merger Agreement

42. Norfolk Southern announced an illusory and unlawfully conditioned
hostile tender offer (and initiated a media campaign concerning the offer)
specifically designed to: (1) deceive Conrail shareholders into tendering
their shares to Norfolk Southern and not to CSX and/or vote against the ste
ps necessary to consummate the merger; (2) induce Conrail or CSX to breach
and/or terminate the Merger Agreement; and/or (3) deny Conrail and its
shareholders the future benefits of the strategic merger and future
prospective business relations arising from the merger.

43. On October 23, 1996, Norfolk Southern announced that it would
launch an unsolicited tender offer for 100% of Conrail's shares at $100 per
share, conditioned, among other things, upon: (a) sufficient financing for
the tender offer; (b) affirmative action by the Board or shareholders of
Conrail to render Chapter 25, Subchapter F of the BCL inapplicable to the
offer; (c) termination of the Merger Agreement "according to its terms or
otherwise"; and (d) the inapplicability or invalidity of Conrail's
Shareholder Rights Plan.

44. Norfolk Southern's offer contained material conditions that it
must have known could not and would not be satisfied by its expiration date
- -- in particular, termination or breach of the Conrail/CSX Merger
Agreement. Given the conditions imposed by Norfolk Southern its offer was
aptly described by Norfolk Southern's own expert witness as a "pie in the
sky." Hearing, Nov. 18, 1996, Tr. 85.

45. The entire tender offer was an attempt to coerce and induce a
breach of the Merger Agreement and to mislead and manipulate the Conrail
shareholders and the investing public.

46. Even prior to the opening of trading on October 23, 1996, senior
executives of Norfolk Southern met with securities analysts to announce
that Norfolk Southern was making an offer to purchase Conrail shares at
$100 per share. At this meeting, Norfolk Southern intentionally made
material misstatements by failing to inform these analysts that: (1) the
Conrail Board had no duty whatsoever to auction Conrail; (2) that Conrail
had informed Norfolk Southern that Conrail was not for sale; and (3) that
the tender offer could not be consummated pursuant to its terms.

47. Completion of the Norfolk Southern tender offer was never possible
because, as Norfolk Southern well knew or should have known when it
announced its tender offer, the Merger Agreement specifically precluded
Conrail until April 13, 1997 (or, if earlier, the date on which the Merger
Agreement is terminated for any other reason, such as the failure by
Conrail's shareholders to approve the merger at a meeting duly called to
vote thereon) from: (i) withdrawing or modifying, or publicly proposing to
withdraw or modify, its approval or recommendation of the CSX tender offer
and the merger in a manner adverse to CSX; (ii) approving or recommending,
or publicly proposing to approve or recommend, any competing proposal (such
as the Norfolk Southern tender offer); or (iii) causing Conrail to enter
into any agreement related to any such competing proposal. Indeed, Norfolk
Southern knew that the Conrail Board was under no obligation ever to
recommend the Norfolk Southern offer.

48. To bolster their scheme to disrupt the Merger Agreement and
strategic merger, Norfolk Southern and its subsidiaries omitted material
information from the Schedule 14D-1 filed with the SEC on October 24, 1996,
regarding the impossibility of Norfolk Southern paying to Conrail
shareholders the $100 per share in its tender offer, including the fact
that the Norfolk Southern offer could close only if Conrail and CSX agreed
to terminate the Merger Agreement or if the Merger Agreement were breached
by Conrail, with the resulting potential damages and other legal
consequences.

49. In addition, Norfolk Southern and its subsidiaries omitted material
information from the definitive proxy statement filed on November 4, 1996,
regarding Norfolk Southern's inability to pay Conrail shareholders $100 per
share in accordance with its offer and falsely insinuated that Norfolk Sout
hern could force the Conrail Board to apply auction rules to a strategic
merger of equals transaction where they do not apply.

50. Norfolk Southern also launched an aggressive and misleading media
campaign, including full page ads in the Wall Street Journal, New York
Times, and Philadelphia Inquirer in an effort to dissuade Conrail's
shareholders from voting to opt out of Subchapter 25E of the BCL and also
to persuade them to make a futile tender of their shares to Norfolk
Southern. The advertisements again misleadingly omitted material facts
regarding the timing of Norfolk Southern's purchase of shares (i.e., that
the Conrail shareholders could not successfully tender their shares to
Norfolk Southern because Norfolk Southern's tender offer was conditioned
upon termination or breach of the Conrail/CSX Merger Agreement),
perpetuated the illusion of an offer that could result in the payment to
Conrail shareholders $100 per share, and falsely insinuated that Norfolk
Southern could force the Conrail Board to apply auction rules to a
strategic merger of equals transaction.

51. Norfolk Southern's campaign of deceit and misinformation succeeded
in illegally manipulating the market. Numerous investors accepted Norfolk
Southern's $100 offer on its face without discounting the offer's value
based upon Norfolk Southern's inability to actually consummate the tender
offer within 180 days (it could never take place without the approval of
the Conrail Board). Some analysts and investors also incorrectly inferred
that Conrail was being auctioned.

(2) Norfolk Southern's Vexatious and Deceptive Lawsuit
--------------------------------------------------

52. On October 23, 1996 -- the same day Norfolk Southern announced its
tender offer -- Counterclaim-Defendant Norfolk Southern and Kathryn B.
McQuade ("McQuade") (Vice President-Internal Audit of Norfolk Southern)
filed the Complaint in this action. The Complaint, the proposed First
Amended Complaint, and the Second Amended Complaint were verified by Henry
C. Wolf, Executive Vice President-Finance of Norfolk Southern.

53. The lawsuit constitutes part of Norfolk Southern's scheme of
unfair and unlawful interference with the Merger Agreement and the merger
by, among other things, seeking to enjoin: (a) a meeting of Conrail's
shareholders, thus preventing Conrail's shareholder's from having the
opportunity to approve or reject the proposed amendments to Conrail's
Articles of Incorporation; and (b) any steps toward consummation of the
Merger Agreement.

54. Norfolk Southern knew or in the exercise of reasonable judgment
should have known that it lacked standing to sue Conrail, its Board or CSX.
Desperate to interfere with the Merger Agreement, however, Norfolk Southern
hurriedly acquired 100 shares of Conrail stock in someone else's name and
recruited Counterclaim-Defendant McQuade to join the suit as a shareholder
in an effort to disguise its deficient "shareholder" derivative lawsuit.

55. Central to the lawsuit are allegations that Norfolk Southern
offered Conrail a 1.1 to 1 exchange ratio in 1994, that Norfolk Southern
had a concrete proposal for combining with Conrail in September 1996, and
that therefore Conrail somehow has an obligation to negotiate with Norfolk
Southern concerning a possible merger. Norfolk Southern intentionally made
these false and materially misleading allegations even though Norfolk
Southern and Goode knew, or in the exercise of reasonable judgment should
have known that: (a) it was Norfolk Southern that walked away from a 1.1 to
1 exchange with Conrail; (b) Goode had no concrete proposal to make to
Conrail in September 1996; and (c) Conrail had no obligation to negotiate
with Norfolk Southern at any time and had contractual obligations not to do
so beginning in October 1996.

56. This groundless and deceptive lawsuit was used by Norfolk Southern
as a basis for publicizing the false allegations and misleading
characterizations that are the heart of Counterclaim-Defendants' improper,
unlawful and unfair scheme to undermine the Merger Agreement, prevent the
merger, and impair Conrail's and CSX's future business relations.

57. On November 19, 1996, following a two-day evidentiary hearing, the
Court denied Norfolk Southern's request for preliminary injunctive relief
on the grounds that Plaintiffs were not likely to succeed on the merits of
their claim, but this decision only came after Conrail and CSX were forced
to spend substantial amounts in legal fees, consultant fees, expert witness
fees, and other costs and expenses related to that groundless litigation.

(3)  Norfolk Southern's Attempted Intimidation of the Officers 
and Directors of Conrail and CSX and Solicitation of a 
Breach of the Merger Agreement

58. Norfolk Southern and Goode have publicly and privately attempted
to intimidate the officers and directors of Conrail and CSX, in an effort
to induce a breach or termination of the Merger Agreement. These efforts at
intimidation include statements by Goode that, among other things, Norfolk
Southern will take a "scorched earth" approach, will "stop at nothing" to
halt the strategic merger, and will "destroy" the deal, because Norfolk
Southern's corporate pride is at stake. A Norfolk Southern spokesman told
The Boston Globe on November 5, 1996, that "[w]e are pursuing this with a
vengeance."

59. Norfolk Southern and Goode have also publicly and falsely alleged 
that the Conrail/CSX strategic merger is being orchestrated by LeVan for his
personal aggrandizement and to increase his pay. Norfolk Southern made
these statements with the intent to deceive the market and to cause a
breach of the Merger Agreement. Norfolk Southern has the temerity to make
these charges despite the fact that it knows full well, or in the exercise
of reasonable judgment should have known, that provisions for corporate
successors are common in merger agreements and that LeVan is currently
under-compensated by industry standards. In fact, the Court specifically
found as follows:

There have been allegations suggesting that the whole 
CSX-Conrail merger is being motivated by Mr. LeVan or because it 
would assure him by contract of certain higher personal income. I 
see nothing wrong with the merger agreement providing who will be 
the main executive officers for the first few years after the 
completion of the merger, and I think the witnesses who testified 
explained very clearly why it was really important that they have 
this assurance in order that the merger should succeed.

I can see why the directors of Conrail might very well want 
to be sure that their existing top executive officer would 
continue in top management in the merged corporation, and that 
the first board of directors at least will consist equally of 
former CSX and former Conrail board members.

60. Norfolk Southern and Goode have also actively solicited CSX to
breach its Merger Agreement with Conrail. Over the weekend of November 2,
1996, Goode, who knew of Conrail's agreement with CSX, met with Snow in
Williamsburg, Virginia. At that meeting, Goode produced a map and proposed,
with the intention to cause CSX to breach or circumvent the intent of the
Merger Agreement with Conrail, that Conrail's assets and rail lines be
divided between CSX and Norfolk Southern. In return, Norfolk Southern
stated that it would drop its tender offer.

61. This solicitation was an attempt by Norfolk Southern to re-institute
the talks which Norfolk Southern had held with CSX in 1995, wherein Norfolk
Southern would have carved-up Conrail.

(4)  Norfolk Southern's Public Relations Effort to Falsely 
Portray the Merger Agreement to the Investing Public in 
Further Support of its Wrongful Scheme

62. Norfolk Southern has launched an extensive public relations effort
designed to mislead the investing public and sow doubt and confusion among
Conrail's shareholders and institutional investors concerning the economic
viability of the merger, to publicly disparage the business methods and j
udgments of Conrail's and CSX's Boards of Directors, and to falsely suggest
that the Conrail/CSX strategic merger was being undertaken by Conrail to
benefit the senior management of Conrail rather than the company and its
constituencies. Norfolk Southern has, among many other examples, made the
fol lowing false public statements knowing them to be false, with the
intent to deceive the market, and to pressure Conrail and CSX into
breaching or terminating the Merger Agreement:

(a) In proxy solicitation materials dated November 8, 1996, 
Norfolk Southern stated that Conrail shareholders have "nothing 
to gain from approving the amendment proposal." This statement is 
false. Approval of the amendment proposal would create immediate 
potential shareholder benefits, including a second tender offer 
by CSX for Conrail shares, and would take a further step toward 
realizing the benefits of the Conrail/CSX merger.

(b) In a November 9, 1996 statement in the Dow Jones 
Commodities Service, Norfolk Southern said it would purchase 
the shares in a manner that would provide an immediate cash 
payment to Conrail Shareholders, adding that Conrail Shareholders 
may have to wait longer to receive the total value of the CSX offer.

In addition, just yesterday, on December 4, 1996, Norfolk 
Southern stated in a shareholder presentation that Norfolk 
Southern's offer entails "[i]mmediate value" for Conrail 
shareholders, and that a vote against the Subchapter 25E opt out 
would help "NS win" and would lead to "higher" and "more 
immediate value" for Conrail shareholders. 

These statements are false. Norfolk Southern currently 
cannot implement its offer to pay any Conrail shareholders cash 
for their shares at the scheduled expiration date of its offer. 

(c) In an advertisement in the Wall Street Journal dated 
November 11, 1996, Norfolk Southern made the following false and 
misleading statements:

"1.  The value of the back-end stock will fluctuate with 
price of CSX stock, and there is no downside
protection."

This statement is misleading because it only tells part of 
the story -- shareholders will also share in any upside (a matter 
which the Court has found).

"2.  Exactly the kind of two-tiered, coercive offer that the 
Pennsylvania Fair Value Statute was intended to 
address."

This statement is false. First, the Pennsylvania Fair Value 
Statute was intended to protect against hostile tender offers 
that a board of directors has not approved or determined are in 
the best interests of the corporation. The CSX merger is a 
friendly transaction approved and recommended by the Conrail 
Board because it is in the best interest of the corporation, 
considering all of its constituencies. Second,
the CSX offer is neither coercive nor unlawful, and the Court 
agreed: Fluctuation of the CSX stock price, "as I see it, does 
not make the matter inherently unfair, unlawful or coercive." 

"3. Does not maximize shareholder value."

This is false and misleading. In denying Norfolk Southern a 
preliminary injunction, the Court stated:

Until the merger actually goes through, if it does, the 
actual amount or valuation of the backend cannot be 
accurately determined. CSX stock has apparently -- may 
advance or it may decline in the open market prior to the 
time that the exchange actually takes place. And we really 
have no way of knowing what that is.

Moreover, the testimony revealed that CSX's internal 
projections indicate a per share value for the stock portion of 
the CSX offer higher than the current market price, which would 
significantly exceed Norfolk Southern's $110 per share offer. 

(d) In a November 11, 1996 advertisement in the New York 
Times, Norfolk Southern stated that up to 100% of Conrail's 
shares can be purchased by Norfolk Southern through a voting 
trust in the near term. This is misleading. Norfolk Southern 
either knew or in the exercise of reasonable judgment should have 
known, that without Conrail breaching or terminating its 
agreement with CSX, Norfolk Southern could not purchase shares 
pursuant to its offer prior to mid-April, 1997.

(e) In Amendment No. 10 to Schedule 14D-1, Exhibit (a) (45), 
filed on November 18, 1996 (and appearing in the New York Times) 
Norfolk Southern stated:

Norfolk Southern and Conrail can both boast overfunded
pension funds, ensuring peace of mind for retirees. CSX's
claim to fame is its recent recognition as one of the "Top
50 Companies with the Largest Underfunded Pension Liability"
[footnote omitted]. CSX could merge its anemic fund with
Conrail's, thereby using money accumulated for Conrail
employees to fund CSX's promises to its own employees. In
addition, in Amendment No. 7 to Schedule 14D-1, Exhibit (a)
(38), filed on November 12, 1996, Norfolk Southern included
remarks by Goode at a transportation conference which state:

At the same time, I'd be concerned about my retirement. I'd
want my overfunded Conrail pension fund to be combined with
Norfolk Southern's overfunded pension fund. I would not want
it anywhere close to CSX's, which had been on the Pension
Benefit Guarantee Corporation's list of Ten Most Underfunded
Pension Plans.

This is an attempt to mislead Conrail's retiree-shareholders 
into believing that the merger with CSX would jeopardize their 
retirement pensions by creating a plan that was underfunded. In 
fact, simple arithmetic based on Conrail's and CSX's most recent 
annual reports demonstrates that the post-merger pension fund 
would be overfunded.

(f) In a press release dated November 19, 1996, Norfolk
Southern stated that:

Throughout two days of testimony before the District Court,
there was no dispute that Norfolk Southern's offer was
financially superior to CSX's.

This statement is false. The future value of the Merger back-end
is unknown, but it may substantially increase to a value in excess of
Norfolk Southern's "offer". In fact, the Court found at the hearing,
based upon the testimony presented, that the relative value of the
offers was uncertain:

Until the merger actually goes through, if it does, the 
actual amount of valuation of the back end cannot be 
accurately determined. CSX stock has apparently -- may 
advance or it may decline in the open market prior to the 
time the exchange actually takes place. And we really have 
no way of knowing what that is.

(g) In Amendment No. 13 to Schedule 14D-1, Exhibit (a)(47), 
filed on November 21, 1996, Counterclaim-Defendants stated that 
"the only major conditions that remain to be satisfied are those 
requiring actions by Conrail's board of directors". This 
statement is materially misleading in that it suggests that the 
Conrail Board could freely chose to satisfy the condition. The 
statement does not disclose that Norfolk Southern's remaining 
conditions would require Conrail to "act" by breaching its 
Agreement with CSX or that, if the Merger Agreement is to be 
terminated, the consent of CSX is necessary.

(h) On December 4, 1996, Norfolk Southern ran a full page 
advertisement in the Philadelphia Inquirer and the Pittsburgh 
Post Gazette aimed at Conrail's shareholders, employees and 
retirees that again makes false and materially misleading 
statements regarding the effect of the Conrail/CSX merger on the 
jobs and pensions of Conrail's employees. Norfolk Southern also 
made the following statement:

Employees should also know that a number of senior 
Conrail executives have been selling Conrail shares not only 
pursuant to the CSX offer but also in the open market. Does 
this manifest a lack of confidence in the value and the 
chances of completion of CSX's proposed deal, which would 
have 75% of the remaining Conrail shares converted into CSX 
stock in the back-end merger?

This statement is false and misleading. As disclosed in Amendment 
No. 7 to Conrail's Schedule 14D-9, Item 6, certain of Conrail's 
executives exercised stock options for the purpose of tendering 
to CSX, and they continue to hold their remaining Conrail shares, 
thus demonstrating their confidence in the Conrail/CSX merger. 
These executives were only selling their shares for the purpose 
of covering the exercise price. Norfolk Southern's statements are 
a deliberate attempt to scare and mislead Conrail's
employee-shareholders and retiree-shareholders. Finally, Norfolk 
Southern's statement that "Conrail Board action [is] required" to 
satisfy the Norfolk Southern offer conditions is materially 
misleading for reasons already explained in this paragraph 62. 

(i) Finally, Counterclaim-Defendants intentionally and 
falsely (for the reasons explained above) stated in
advertisements filed with the SEC that the merger was a 
"sweetheart deal" (Amendment No. 5 to Scheduled 14D-1, Exhibit 
(a)(28) and Amendment No. 8 to Schedule 14D-1, Exhibit (a)(41)); 
that the Board was "self-serving" (Amendment No. 8 to Schedule 
14D-1, Exhibit (a)(42)); was "putting its own interests ahead of 
everyone else's" (Amendment No. 10 to Schedule 14D-1, Exhibit 
(a)(45)) and was "acting for the personal interests of
[Conrail's] officers and directors". (Amendment No. 2 to Schedule 
14D-1, Exhibit (a)(12)).

63. The conduct of Norfolk Southern set forth in paragraphs 39
through 62 is outrageous, wanton, malicious and oppressive, by reason
of which Conrail and CSX are entitled to significant damages,
including punitive damages.

The Conrail Board's Judgment with Respect to Subsequent Events
--------------------------------------------------------------

64. On November 5, 1996, CSX increased its tender for 19.9% of
Conrail's shares from $92.5 to $110.

65. On November 5, 1996, the Conrail Board met to consider
Norfolk Southern's and CSX's proposals. The Board also addressed
meetings that occurred between CSX and Norfolk Southern on November 2
and 3, 1996, in which CSX and Norfolk Southern discussed the division
between them of material assets of Conrail. The Board expressed
concern that Norfolk Southern and CSX might decide to join together
and carve up Conrail.

66. In light of these and other events, Conrail demanded that a
provision be added to the Merger Agreement by which Conrail and CSX
would agree not to separately discuss, or enter into any agreement,
with any railroad regarding the assets or securities of Conrail. For
its part, CSX agreed to increase its tender offer to $110 per share,
an increase of over $600 million from CSX's previous offer, and
demanded an extension of the 180-day no-solicitation provision to 270
days.

67. After considering all relevant factors, the Conrail Board
decided to reject Norfolk Southern's unsolicited bid and affirm the
newly enhanced Merger Agreement with CSX. The Board found that the
Conrail/CSX strategic merger continued to provide the greatest overall
benefit to Conrail and its various constituencies.

68. On November 7, 1996, Norfolk Southern raised its hostile,
unlawfully conditioned takeover bid for Conrail to $110 per share. The
Conrail Board recommended on November 13, 1996 that shareholders not
tender their shares pursuant to the revised Norfolk Southern tender
offer, because, among other things, shares tendered into the Norfolk
Southern offer, which was to expire on November 22, could not be
accepted for payment under the terms of that offer. The Norfolk
Southern tender offer has now been extended to December 16, 1996.
Conrail's Board also recommended that shareholders who desire to
receive cash now for a portion of their shares tender to the offer of
CSX, which expired on November 20.

The Conrail Board Exercised its Proper Business Judgment Under the BCL
----------------------------------------------------------------------

69. The Conrail Board's decision to pursue, approve, enter into,
and recommend the Merger Agreement with CSX was the result of a
careful and deliberate analyses of the strategic alternatives
available to Conrail. That analysis led to a reasoned decision that
brings to all of Conrail's constituents the unique benefits of this
strategic merger of equals.

70. This deliberative process was recognized in the Court's
decision:

Section 1716 reiterates that in considering the effects of 
any action, directors may consider the effects on stockholders, 
employees, suppliers, customers and the communities in which the 
officers and/or facilities are located and all pertinent factors, 
and that no factor need be predominant.

In this case there has not been shown any type of lack of 
good faith after a reasonable investigation by any director so 
far as I have been able to determine from the evidence that has 
been presented, including any of the exhibits that have been 
presented, and clearly if there is any evidence at all of such of 
which I say I find absolutely none on the present record, it has 
not been proven by clear and convincing evidence. . . . 

For this reason alone, the grant of preliminary injunction 
as I see it may not be granted. Basically it seems to me that the 
plaintiffs are contending that the sole or at least the primary 
consideration by a board of directors in considering a competing 
offer by potential acquirers of the control of a corporation 
should be which competitor offers the best short-range price or 
profit for shareholders. Clearly Pennsylvania statutory law is 
expressly against such a contention.

(Emphasis added).

MONETARY DAMAGES CAUSED OR THREATENED BY
----------------------------------------
NORFOLK SOUTHERN'S CONDUCT
--------------------------

71. As a direct and proximate result of the acts and omissions of
the Counterclaim-Defendants, as set forth in this Counterclaim,
Conrail and CSX have suffered, will continue to suffer, and are
further threatened with, severe economic injuries and damages
including, among other things, loss of the bargain negotiated between
Conrail and CSX, the loss of present and prospective business
relations and other economic benefits as a result of the strategic
merger, and the resultant consequential and incidental damages from
Norfolk Southern's conduct, and attorneys' fees, consultant fees, 
expert fees, court costs and other expenses incurred in defending against
the illegal and improper actions of Norfolk Southern.

REQUEST FOR PUNITIVE DAMAGES
----------------------------

72. The conduct of Counterclaim-Defendants Norfolk Southern,
Atlantic Acquisition and McQuade, and of co-conspirators/aiders and
abettors Goode and Wolf, is and has been intentional, malicious, and
of such a nature to warrant the imposition by this Court of
substantial punitive damages.

COUNT ONE
---------

Norfolk Southern's Tortious Interference With
Conrail's and CSX's Contractual Relationships
---------------------------------------------

73. Paragraphs 1 through 72 are incorporated by reference as if fully
set forth herein.

74. In its ongoing campaign to destroy the Merger Agreement and
the Conrail/CSX strategic merger and to induce Conrail and/or CSX to
breach the Merger Agreement, Norfolk Southern made false statements of
material fact, and omitted material facts that were and are necessary
to make other of their statements not false or misleading in Norfolk
Southern's proxy and tender materials pursuant to Schedule 14A and
Schedule 14D-1 and/or the amendments the reto, in continuing violation
of Sections 9, 10(b), 14(a), (d), and (e) of the Exchange Act of 1934,
15 U.S.C. ss.ss. 78i, 78j(b), 78n(a), 78n(d)(1), 78n(e), and the rules
and regulations promulgated thereunder.

75. In connection with their stated intention to purchase shares of
Conrail stock and in order to give the false impression that it was
ready, willing, and able to make a truly competitive and deliverable
offer, Norfolk Southern has, with an intent to deceive, manipulate and
defraud, made false and misleading statements or omissions of
material facts upon which Conrail's shareholders or other past or
prospective purchasers or sellers would and did rely in tendering and
in deciding whether and at what price to tender their shares to
Norfolk Southern and/or CSX, and may rely in casting their votes at
critical junctures in the consummation of the merger, and have
otherwise used and employed manipulative and deceptive devices and
contrivances as alleged above, in continuing violation of Sections 9
and 10(b) of the Exchange Act of 1934, 15 U.S.C. ss.ss. 78i, 78j(b),
and the rules and regulations promulgated thereunder.

76. Norfolk Southern, through the illegal, improper, unprivileged
and unfair conduct described above, and with the intent to harm
Conrail and CSX, has intentionally, wrongfully, and tortiously
interfered, and continues to do so, through illegal and improper means
with the Merger Agreement between Conrail and CSX and the contractual
relations between Conrail and CSX and between Conrail and its
shareholders.

77. Counterclaim-Defendant McQuade, as well as Goode and Wolf,
conspired with, and aided and abetted Norfolk Southern's deliberate
course of tortious interference with contractual relations as set
forth above.

COUNT TWO
---------

Norfolk Southern's Tortious Interference With
Conrail's and CSX's Prospective Contractual Relationships 
--------------------------------------------------------- 

78. Paragraphs 1 through 77 are incorporated by reference as if fully
set forth herein.

79. Norfolk Southern, through the illegal, improper, unprivileged and
unfair conduct described above, and with the intent to harm Conrail
and CSX, has intentionally, wrongfully, and tortiously interfered, and
continues to do so, through illegal and improper means with the
prospective business relations of Conrail and CSX by threatening and
disrupting: consummation of Conrail's strategic merger with CSX;
orderly consideration of the strategic merger by Conrail's
shareholders; the merged entity's relationships with prospective
business partners, customers and employees; and other prospective
business relationships of Conrail and the combined entity.

80. Counterclaim-Defendant McQuade, as well as Goode and Wolf,
conspired with, and aided and abetted Norfolk Southern's deliberate
course of tortious interference with prospective contractual relations
as set forth above.

COUNT THREE
-----------

Norfolk Southern's Intentional Infliction of Harm on Conrail and CSX
--------------------------------------------------------------------

81. Paragraphs 1 through 80 are incorporated by reference as if fully
set forth herein.

82. Norfolk Southern, through the illegal, improper,
unprivileged, unfair, and unjustified conduct described above, and
with the intent to harm Conrail and CSX, has and continues to injure
the legally protected interests of Conrail and CSX. Those interests
include, but are not limited to: the right to consummate Conrail's
strategic merger with CSX; the right to have that merger considered
in an orderly fashion by Conrail's shareholders; the right of the
merged entity to enjoy unfettered relationships with its prospective
business partners, customers and employees; and the right to be free
from the tortious, defamatory campaign of deceit being waged by
Norfolk Southern.

83. This conduct, together with the conduct more fully set out 
above and the other counts alleged herein, is tortious and is causing
significant and intentional damage to Conrail and CSX.

84. Counterclaim Defendant McQuade, as well as Goode and Wolf,
conspired with, and aided and abetted Norfolk Southern's deliberate
course of intentional, unjustified culpable conduct set forth above.

COUNT FOUR
----------

Norfolk Southern's Unfair Competition
-------------------------------------

85. Paragraph 1 through 84 are incorporated by reference or if fully
set forth herein.

86. Norfolk Southern's campaign of deceit and misrepresentation
designed to confuse and mislead Conrail shareholders, and disparage
the conduct of the Conrail Board, together with the other tactics and
schemes set forth above, constitute unfair competition that is
contrary to honest commercial practices and falls below any minimum
standards of fair dealing and legitimate competitive conduct.

87. Counterclaim Defendant McQuade, as well as Goode and Wolf,
conspired with, and aided and abetted Norfolk Southern's deliberate
course of intentional deceit, misinformation and disparagement set
forth above.

COUNT FIVE
----------

Civil Conspiracy
----------------

88. Paragraphs 1 through 87 are incorporated by reference as if
fully set forth herein.

89. Norfolk Southern has conspired with, among others, Goode,
Wolf and McQuade to commit many of the actions described above,
including, without limitation, the institution of a groundless,
deceptive lawsuit and the dissemination of false and misleading
statements.

90. On information and belief, Counterclaim-Defendant Norfolk
Southern combined and conspired with Goode, Wolf and McQuade with a
common purpose to undertake to do an unlawful act and/or to do a
lawful act by unlawful means or for an unlawful purpose, and took acts
in furtherance of the conspi racy, as set forth above.

PRAYER FOR RELIEF
-----------------

WHEREFORE, Conrail and CSX request that this Honorable Court:

1. Enter a judgment in favor of Conrail and against
Counterclaim-Defendants, individually, jointly and severally, in an
amount in excess of $50,000, exclusive of interest and costs, together
with an appropriate award of punitive damages. Conrail further
requests that this Court award Conrail the costs of this action and
its reasonable attorney's fees.

2. Enter a judgment in favor of CSX and against
Counterclaim-Defendants, individually, jointly and severally, in an
amount in excess of $50,000, exclusive of interest and costs, together
with an appropriate award of punitive damages. CSX further requests
that this Court award CSX the costs of this action and its reasonable
attorney's fees.

3. Grant such other and further relief as may be necessary or
appropriate.

JURY TRIAL DEMAND
-----------------

Conrail and CSX hereby demand a trial by jury on all issues
raised in the foregoing Counterclaim.

Dated:  December 5, 1996               Respectfully submitted,

BALLARD SPAHR ANDREWS &                BUCHANAN INGERSOLL
INGERSOLL                             PROFESSIONAL CORPORATION 

- --------------------------------       ----------------------------------
David H.  Pittinsky, Esquire           Thomas L. VanKirk, Esquire 
PA ID #04552                           PA ID #01583
Stanley Yorsz, Esquire 
1735 Market Street
PA ID #28979
51st Floor                             Anthony J. Guida Jr.
Philadelphia, PA  19103-7599             PA ID #47103
(215) 665-8500                         Raymond McGarry, Esquire 
PA ID #56520
and                           Sheila Smith DiNardo,. Esquire 
PA ID #62994
Theodore N. Mirvis, Esquire
Paul K. Rowe, Esquire                                and
George T. Conway, Esquire
WACHTELL, LIPTON, ROSEN & KATZ         John Beerbower, Esquire    
New York, NY 10019-6150                Gerald Ford, Esquire
(212) 403-1000                         51 West 52nd Street 
Matthew C. Garrison, Esquire 
Jeffrey R. Knight, Esquire 
Counsel for CSX Corporation
Cravath, Swaine & Moore  
825 8th Avenue
Worldwide Plaza
New York, NY   10019

Counsel for Conrail Inc. 
and the Individual Defendants 
David M. LeVan, H. Furlong Baldwin, 
Daniel B. Burke, Roger S. Hillas, 
Claude S. Brinegar, Kathleen Foley 
Feldstein, David B. Lewis, 
John C. Marous, David H. Swanson, E. 
Bradley Jones and Raymond T. Schuler. 

CERTIFICATE OF SERVICE
----------------------

The undersigned hereby certifies that on this 5th day of
December, 1996, true and correct copies of the foregoing Answer and
Defenses of Conrail, CSX and the Individual Defendants to Second
Amended Complaint and Counterclaim of Conrail and CSX were served via
fax and first class United States Mail, postage prepaid, as follows:

Mary A. McLaughlin, Esquire
DECHERT, PRICE & RHODES
4000 Bell Atlantic
Tower 1717 Arch Street
Philadelphia, PA 19103

Steven J. Rothschild, Esquire
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
One Rodney Square
P.O. Box 636
Wilmington, DE 19899

Stuart H. Savett, Esquire
SAVETT, FRUTKIN, PODELL & RYAN, P.C.
Walnut Place
In Society Hill, Suite 5080
320 Walnut Street
Philadelphia, PA 19106