NORFOLK SOUTHERN CORP, SC 14D1/A, 1997-08-25

NORFOLK SOUTHERN CORP
SC 14D1/A, 1997-08-25
RAILROADS, LINE-HAUL OPERATING

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1997

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

SCHEDULE 14D-1

(AMENDMENT NO. 1)

TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)

SCHEDULE 13D
OF CSX CORPORATION AND
CSX TRANSPORTATION, INC.

(AMENDMENT NO. 5)

(PURSUANT TO SECTION 13(d) OF THE SECURITIES EXCHANGE ACT OF 1934)

SCHEDULE 13D
OF NORFOLK SOUTHERN CORPORATION

(AMENDMENT NO. 3)

(PURSUANT TO SECTION 13(d) OF THE SECURITIES EXCHANGE ACT OF 1934)

SCHEDULE 13D
OF WALTER G. RICH

(AMENDMENT NO. 4)

(PURSUANT TO SECTION 13(d) OF THE SECURITIES EXCHANGE ACT OF 1934)

DELAWARE OTSEGO CORPORATION
(NAME OF ISSUER)

DOCP ACQUISITION LLC
CSX CORPORATION
NORFOLK SOUTHERN CORPORATION
WALTER G. RICH
(NAME OF PERSONS FILING STATEMENT)

COMMON STOCK, PAR VALUE $0.125 PER SHARE
(TITLE OF CLASS OF SECURITIES)

246244 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)

PETER J. SHUDTZ
GENERAL COUNSEL
CSX CORPORATION
ONE JAMES CENTER
901 EAST CARY STREET
RICHMOND, VIRGINIA 23219-4031
(804) 782-1400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF PERSONS FILING
STATEMENT)

WITH A COPY TO:

<TABLE>
<S> <C> <C> <C>
PAMELA S. SEYMON RONALD B. RISDON J. GARY LANE ERIC J. FRIEDMAN
WACHTELL, LIPTON, ROSEN & KATZ KELLEY DRYE & WARREN LLP GENERAL COUNSEL CORPORATE SKADDEN, ARPS, SLATE,
51 WEST 52ND STREET 101 PARK AVENUE NORFOLK SOUTHERN CORPORATION MEAGER & FLOM LLP
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10178 THREE COMMERCIAL PLACE 919 THIRD AVENUE
TELEPHONE: (212) 403-1000 TELEPHONE: (212) 808-7800 NORFOLK, VIRGINIA 23510-9241 NEW YORK, NEW YORK 10022
TELEPHONE: (757) 629-2600 TELEPHONE: (212) 735-3000
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CALCULATION OF FILING FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
$46,578,752 $9,316
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

* FOR PURPOSES OF CALCULATING THE FILING FEE ONLY. THIS CALCULATION ASSUMES THE
PURCHASE OF AN AGGREGATE OF 2,117,216 SHARES OF COMMON STOCK, PAR VALUE $.125
PER SHARE, OF DELAWARE OTSEGO CORPORATION (THE "SHARES") AT $22.00 NET PER
SHARE IN CASH.

** THE AMOUNT OF THE FILING FEE, CALCULATED IN ACCORDANCE WITH RULE 0-11(d) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EQUALS 1/50TH OF 1% OF THE
AGGREGATE VALUE OF CASH OFFERED BY DOCP ACQUISITION LLC FOR SUCH NUMBER OF
SHARES.

[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.

<TABLE>
<S> <C>
AMOUNT PREVIOUSLY PAID: $9,232 FILING PARTY: DOCP ACQUISITION LLC, CSX CORPORATION,
NORFOLK SOUTHERN CORPORATION AND WALTER
G. RICH
FORM OR REGISTRATION NO.: SCHEDULE 14D-1 DATE FILED: AUGUST 22, 1997
</TABLE>

================================================================================
<PAGE> 2

CUSIP No. 246244 10 7

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON DOCP
ACQUISITION LLC
- ---------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [ ] (b) [X]
- ---------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS) AF
- ---------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [
]
- ---------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION STATE OF NEW YORK
- ---------------------------------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 384,681.6
- ---------------------------------------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ]
- ---------------------------------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 20.2%
- ---------------------------------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3

CUSIP No. 246244 10 7

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON CSX CORPORATION
62-1051971
- ---------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [ ] (b) [X]
- ---------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS) WC
- ---------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- ---------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION COMMONWEALTH OF VIRGINIA
- ---------------------------------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 110,250(1)
- ---------------------------------------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ]
- ---------------------------------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 5.8%
- ---------------------------------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) HC, CO
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) Excludes all shares beneficially owned by Walter G. Rich.
<PAGE> 4

CUSIP No. 246244 10 7

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NORFOLK SOUTHERN CORPORATION
52-1188014
- ---------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [ ]
(b) [X]
- ---------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC
- ---------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
[ ]
- ---------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
COMMONWEALTH OF VIRGINIA
- ---------------------------------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
384,181(1)
- ---------------------------------------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
[ ]
- ---------------------------------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
20.2%(1)
- ---------------------------------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) HC, CO
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) Only to the extent that NSC might or could, by reason of the NSC's
involvement in the arrangements with CSX and Mr. Rich set forth in the Offer
to Purchase, be deemed to be part of a group under Rule 13d-5(b)(1) of the
rules promulgated under the Securities and Exchange Act of 1934, as amended,
and thereby for the purposes of Section 13(d) of such Act be deemed
beneficially to own the 110,250 shares of the Company beneficially owned by
CSX Transportation, Inc. and the 273,931.6 Shares beneficially owned by Mr.
Rich.

<PAGE> 5

CUSIP No. 246244 10 7

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON WALTER G. RICH
###-##-####
- ---------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [ ] (b) [X]
- ---------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS) PF
- ---------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- ---------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION STATE OF NEW YORK
- ---------------------------------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 273,931
- ---------------------------------------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ]
- ---------------------------------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 14.4%
- ---------------------------------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6

INTRODUCTION

This Amendment No. 1 to the Transaction Statement on Schedule 14D-1 and
Amendment No. 5 to the Schedule 13D of CSX Corporation, a Virginia corporation
("CSX"), and CSX Transportation, Inc., a Virginia corporation and wholly owned
subsidiary of CSX ("CSXT"), Amendment No. 3 to the Schedule 13D of Norfolk
Southern Corporation, a Virginia corporation ("NSC"), and Amendment No. 4 to the
Schedule 13D of Walter G. Rich ("Mr. Rich") (collectively, this "Statement")
relate to the offer by DOCP Acquisition LLC, a New York limited liability
company ("Purchaser") formed by CSX, NSC and Mr. Rich, to purchase all
outstanding Shares of Delaware Otsego Corporation, a New York corporation (the
"Company"), at a price of $22.00 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in Purchaser's Offer to Purchase
dated August 22, 1997 (the "Offer to Purchase") and in the related Letter of
Transmittal (which together constitute the "Offer"), copies of which are
attached hereto as Exhibits (d)(1) and (d)(2), respectively. This Amendment
amends and supplements the Transaction Statement on Schedule 14D-1 and all such
Schedules 13D filed prior hereto.

ITEM 1. SECURITY AND SUBJECT COMPANY.

(a) The name of the subject company is Delaware Otsego Corporation, a New
York corporation, which has its principal executive offices at 1 Railroad
Avenue, Cooperstown, New York 13326.

(b) The class of equity securities being sought is all the outstanding
shares of common stock, par value $0.125 per share, of the Company. The
information set forth under "INTRODUCTION" and "THE TENDER OFFER -- Terms of the
Offer; Expiration Date" in the Offer to Purchase is incorporated herein by
reference.

(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market is set forth in "THE TENDER OFFER -- Price Range of Shares" in the Offer
to Purchase is incorporated herein by reference.

ITEM 2. IDENTITY AND BACKGROUND.

(a)-(d) and (g) This Statement is filed by Purchaser, CSX, NSC and Mr.
Rich. The information concerning the name, state or other place of organization,
principal business and address of the principal office of each of Purchaser,
CSX, NSC and Mr. Rich, and the information concerning the name, business
address, present principal occupation or employment and the name, principal
business and address of any corporation or other organization in which such
employment or occupation is conducted, material occupations, positions, offices
or employments during the last five years and citizenship of Mr. Rich and each
of the executive officers and directors of Purchaser, CSX and NSC are set forth
under "INTRODUCTION", "THE TENDER OFFER -- Certain Information Concerning
Purchaser, CSX, NSC and Mr. Rich" and Schedule I in the Offer to Purchase and
are incorporated herein by reference.

(e) and (f) During the last five years, none of Purchaser, CSX, NSC and Mr.
Rich, and, to the best knowledge of Purchaser, CSX, NSC and Mr. Rich, none of
the individuals listed in Schedule I of the Offer to Purchase, has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, United States federal or
state securities laws or finding any violation of such laws.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.

(a) The information set forth under "SPECIAL FACTORS -- Background of the
Offer and the Merger", "SPECIAL FACTORS -- Interests of Certain Persons in the
Offer and the Merger", "SPECIAL FACTORS -- The Merger Agreement and Related
Agreements" and "THE TENDER OFFER -- Certain Information Concerning Purchaser,
CSX, NSC and Mr. Rich" in the Offer to Purchase is incorporated herein by
reference.
<PAGE> 7

(b) The information set forth under "INTRODUCTION", "SPECIAL
FACTORS -- Background of the Offer and the Merger", "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger", "SPECIAL
FACTORS -- The Merger Agreement and Related Agreements", "SPECIAL
FACTORS -- Purpose and Effects of the Offer and the Merger; Reasons for the
Offer and the Merger", "SPECIAL FACTORS -- Plans for the Company After the Offer
and the Merger", "THE TENDER OFFER -- Certain Information Concerning the
Company" and "THE TENDER OFFER -- Certain Information Concerning Purchaser, CSX,
NSC and Mr. Rich" in the Offer to Purchase is incorporated herein by reference.

ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) The information set forth under "THE TENDER OFFER -- Source and Amount
of Funds" in the Offer to Purchase is incorporated herein by reference.

(b)-(c) Not applicable.

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

(a)-(e) The information set forth under "INTRODUCTION", "SPECIAL
FACTORS -- Background of the Offer and the Merger", "SPECIAL FACTORS -- Purpose
and Effects of the Offer and the Merger; Reasons for The Offer and The Merger",
"SPECIAL FACTORS -- Plans for the Company after the Offer and the Merger" and
"SPECIAL FACTORS -- The Merger Agreement and Related Agreements" in the Offer to
Purchase is incorporated herein by reference.

(f)-(g) The information set forth under "SPECIAL FACTORS -- Plans for the
Company after the Offer and the Merger" and "THE TENDER OFFER -- Effect of the
Offer on the Market for the Shares; Exchange Listing and Exchange Act
Registration" in the Offer to Purchase is incorporated herein by reference.

ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a)-(b) The information set forth under "INTRODUCTION", "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger", "THE
TENDER OFFER -- Certain Information Concerning Purchaser, CSX, NSC and Mr. Rich"
in the Offer to Purchase is incorporated herein by reference.

ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.

The information set forth under "INTRODUCTION", "SPECIAL
FACTORS -- Background of the Offer and the Merger", "SPECIAL FACTORS -- Purpose
and Effects of the Offer and the Merger; Reasons for The Offer and The Merger",
"SPECIAL FACTORS -- Plans for the Company after the Offer and the Merger",
"SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the Merger",
"SPECIAL FACTORS -- The Merger Agreement and Related Agreements", "THE TENDER
OFFER -- Certain Information Concerning Purchaser, CSX, NSC and Mr. Rich" and
"THE TENDER OFFER -- Source and Amount of Funds" in the Offer to Purchase is
incorporated herein by reference.

ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

The information set forth under "INTRODUCTION" and "THE TENDER
OFFER -- Fees and Expenses" in the Offer to Purchase is incorporated herein by
reference.

ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.

The information set forth under "THE TENDER OFFER -- Certain Information
Concerning Purchaser, CSX, NSC and Mr. Rich" in the Offer to Purchase is
incorporated herein by reference.

2
<PAGE> 8

ITEM 10. ADDITIONAL INFORMATION.

(a)-(f) The information set forth under "THE TENDER OFFER -- Certain Legal
Matters; Regulatory Approvals", "THE TENDER OFFER -- Effect of the Offer on the
Market for the Shares, Exchange Listing and Exchange Act Registration" and
"SPECIAL FACTORS -- Certain Litigation Relating to the Offer and the Merger" in
the Offer to Purchase and in Exhibit (c)(4) hereto is incorporated herein by
reference. The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Agreement and Plan of Merger, dated as of August 18, 1997,
among CSX, NSC, Mr. Rich and the Company, copies of which are attached hereto as
Exhibits (a)(1), (a)(2) and (c)(1), respectively, is incorporated herein by
reference.

ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.

<TABLE>
<S> <C>
(a)(1) Form of Definitive Offer to Purchase, dated August 22, 1997.
(a)(2) Form of Definitive Letter of Transmittal.
(a)(3) Form of Definitive Notice of Guaranteed Delivery.
(a)(4) Form of Definitive Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(5) Form of Definitive Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.
(a)(6) Form of Definitive Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on August 22,
1997.
(a)(8) Text of Press Release issued by the Company on August 17, 1997.
(b) Not Applicable.
(c)(1) Agreement and Plan of Merger, dated as of August 17, 1997, by and among CSX,
NSC, Mr. Rich and the Company, incorporated by reference to Exhibit 3 to
Amendment No. 3 to the Schedule 13D of CSX, filed with the Commission on
August 18, 1997.
(c)(2) Letter Agreement, dated August 17, 1997, by and among CSX, NSC and Mr. Rich,
incorporated by reference to Exhibit 4 to Amendment No. 3 to Schedule 13D of
CSX and CSXT, filed with the Commission on August 18, 1997.
(c)(3) Proposal Letter and Term Sheet, dated August 8, 1997, incorporated by reference
to Exhibit 2 to Amendment No. 2 to Schedule 13D of CSX and CSXT, filed with the
Commission on August 11, 1997.
(c)(4) Complaint, dated August 14, 1997, incorporated by reference to Exhibit 5 to
Amendment No. 2 to Schedule 13D of CSX and CSXT, filed with the Commission on
August 18, 1997.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
</TABLE>

3
<PAGE> 9

SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.

August 25, 1997 DOCP ACQUISITION LLC

By: /s/ MARK G. ARON
------------------------------------
Name: Mark G. Aron
Title: Authorized Person

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

------------------------------------
Name: James C. Bishop, Jr.
Title: Authorized Person

CSX CORPORATION

By: /s/ MARK G. ARON
------------------------------------
Name: Mark G. Aron
Title: Executive Vice President
-- Law and Public Affairs

NORFOLK SOUTHERN CORPORATION

By: /s/ JAMES C. BISHOP, JR.
------------------------------------
Name: James C. Bishop, Jr.
Title: Executive Vice
President -- Law

/s/ WALTER G. RICH
--------------------------------------
Walter G. Rich

4
<PAGE> 10

SIGNATURE
(SOLELY WITH RESPECT TO THE SCHEDULE 13D
OF CSX TRANSPORTATION, INC.)

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

August 25, 1997 CSX TRANSPORTATION, INC.

By: /s/ WILLIAM M. HART

------------------------------------
Name: William M. Hart
Title: Vice President --
Corridor Development

5
<PAGE> 11

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------
<S> <C> <C>
(a)(1) Form of Definitive Offer to Purchase, dated August 22, 1997. ............
(a)(2) Form of Definitive Letter of Transmittal. ...............................
(a)(3) Form of Definitive Notice of Guaranteed Delivery. .......................
(a)(4) Form of Definitive Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees. .................................................
(a)(5) Form of Definitive Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients. ......................................
(a)(6) Form of Definitive Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9. ...........................
(a)(7) Summary Advertisement as published in The Wall Street Journal on August
22, 1997. ...............................................................
(a)(8) Text of Press Release issued by the Company on August 17, 1997. .........
(b) Not Applicable. .........................................................
(c)(1) Agreement and Plan of Merger, dated as of August 17, 1997, by and among
CSX, NSC, Mr. Rich and the Company, incorporated by reference to Exhibit
3 to Amendment No. 3 to the Schedule 13D of CSX, filed with the
Commission on August 18, 1997. ..........................................
(c)(2) Letter Agreement, dated August 17, 1997, by and among CSX, NSC and Mr.
Rich, incorporated by reference to Exhibit 4 to Amendment No. 3 to
Schedule 13D of CSX and CSXT, filed with the Commission on August 18,
1997. ...................................................................
(c)(3) Proposal Letter and Term Sheet, dated August 8, 1997, incorporated by
reference to Exhibit 2 to Amendment No. 2 to Schedule 13D of CSX and
CSXT, filed with the Commission on August 11, 1997. .....................
(c)(4) Complaint, dated August 14, 1997, incorporated by reference to Exhibit 5
to Amendment No. 2 to Schedule 13D of CSX and CSXT, filed with the
Commission on August 18, 1997. ..........................................
(d) Not Applicable. .........................................................
(e) Not Applicable. .........................................................
(f) Not Applicable. .........................................................
</TABLE>

<PAGE> 1

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK
OF

DELAWARE OTSEGO CORPORATION
AT
$22.00 NET PER SHARE
BY
DOCP ACQUISITION LLC
A NEW YORK LIMITED LIABILITY COMPANY

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.

THE OFFER (AS DEFINED HEREIN) IS CONDITIONED UPON, AMONG OTHER THINGS, THERE
BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.125 PER SHARE (THE "SHARES"), OF
DELAWARE OTSEGO CORPORATION (THE "COMPANY") WHICH, TOGETHER WITH THE SHARES
OWNED BY WALTER G. RICH, PURCHASER (AS DEFINED HEREIN) OR ANY SUBSIDIARY OF
PURCHASER OR TO BE CONTRIBUTED TO PURCHASER PURSUANT TO BINDING AGREEMENTS
(WHICH PURCHASER, IN ITS REASONABLE JUDGMENT, BELIEVES WILL BE PERFORMED),
REPRESENTS, ON A FULLY DILUTED BASIS, AT LEAST 66 2/3% OF THE OUTSTANDING
SHARES.
------------------------

THE BOARD OF DIRECTORS OF THE COMPANY, ACTING ON THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS, BY THE VOTE OF
ALL DIRECTORS PRESENT WITH ONE ABSTENTION, (A) HAS DETERMINED THAT THE MERGER
AGREEMENT (AS DEFINED HEREIN) AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER (AS DEFINED HEREIN), ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY AND THE SHAREHOLDERS OF THE COMPANY (OTHER THAN
CSX CORPORATION AND WALTER RICH), (B) HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, AND (C) RECOMMENDS ACCEPTANCE OF THE OFFER BY SHAREHOLDERS OF THE
COMPANY.
------------------------
IMPORTANT

Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions set forth therein, have
such shareholder's signature thereon guaranteed if required by Instruction 1
thereto, mail or deliver the Letter of Transmittal (or such facsimile thereof)
and any other required documents to Citibank, N.A., who is acting as depositary
in connection with the Offer ("the Depositary"), and either deliver the Share
Certificates (as defined herein) to the Depositary along with the Letter of
Transmittal (or a facsimile thereof) or deliver such Shares pursuant to the
procedure for book-entry transfer set forth in "THE TENDER OFFER -- Procedures
for Accepting the Offer and Tendering Shares" or (b) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. A shareholder having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee, must
contact such broker, dealer, commercial bank, trust company or other nominee if
such shareholder desires to tender such Shares.

Any shareholder who desires to tender Shares and whose Share Certificates
are not immediately available, or who cannot comply with the procedures for
book-entry transfer described in this Offer to Purchase on a timely basis, may
tender such Shares by following the procedures for guaranteed delivery set forth
in "THE TENDER OFFER -- Procedures for Accepting the Offer and Tendering
Shares".

Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other related materials may be
directed to MacKenzie Partners, Inc., who is acting as information agent in
connection with the Offer (the "Information Agent"), at its address and
telephone number set forth on the back cover of this Offer to Purchase.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.

The Information Agent for the Offer is:

[MacKenzie Partners, Inc. Logo]

August 22, 1997
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION.......................................................................... 1

SPECIAL FACTORS....................................................................... 3
1. Background of the Offer and the Merger......................................... 3
2. Recommendation of the Special Committee and the Company Board; Fairness of the
Offer and the Merger........................................................... 7
3. Opinion of Financial Advisor to the Company.................................... 10
4. Position of Purchaser, CSX, NSC and Mr. Rich Regarding Fairness of the Offer
and the Merger................................................................. 12
5. Purpose and Effects of the Offer and the Merger; Reasons for the Offer and the
Merger......................................................................... 13
6. Plans for the Company after the Offer and the Merger........................... 14
7. Rights of Shareholders in the Merger........................................... 15
8. Interests of Certain Persons in the Offer and the Merger....................... 16
9. The Merger Agreement and Related Agreements.................................... 20
10. Certain U.S. Federal Income Tax Consequences................................... 30
11. Certain Litigation Relating to the Offer and the Merger........................ 31

THE TENDER OFFER...................................................................... 32
1. Terms of the Offer; Expiration Date............................................ 32
2. Acceptance for Payment and Payment for Shares.................................. 34
3. Procedures for Accepting the Offer and Tendering Shares........................ 35
4. Withdrawal Rights.............................................................. 37
5. Price Range of Shares.......................................................... 37
6. Effect of the Offer on the Market for the Shares; Exchange Listing and Exchange
Act Registration............................................................... 38
7. Certain Information Concerning the Company..................................... 39
8. Certain Information Concerning Purchaser, CSX, NSC and Mr. Rich................ 42
9. Source and Amount of Funds..................................................... 44
10. Purpose of the Offer and the Merger; Plans for the Company..................... 44
11. Dividends and Distributions.................................................... 45
12. Certain Conditions of the Offer................................................ 45
13. Certain Legal Matters; Regulatory Approvals.................................... 46
14. Fees and Expenses.............................................................. 48
15. Miscellaneous.................................................................. 49
</TABLE>

SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, CSX AND NSC

SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

SCHEDULE III TEXT OF SECTIONS 623 AND 910 OF THE STATE OF NEW YORK BUSINESS
CORPORATION LAW

ANNEX A OPINION OF SMITH BARNEY INC.

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<PAGE> 3

To the Holders of Shares of Common Stock
of Delaware Otsego Corporation:

INTRODUCTION

DOCP Acquisition LLC, a New York limited liability company ("Purchaser")
formed by CSX Corporation, a Virginia corporation ("CSX"), Norfolk Southern
Corporation, a Virginia corporation ("NSC"), and Walter G. Rich (Mr. Rich, the
Purchaser, CSX and NSC, collectively also referred to as the "Rich Group"),
hereby offers to purchase all outstanding shares of common stock, par value
$0.125 per share (the "Shares"), of Delaware Otsego Corporation, a New York
corporation (the "Company"), other than Shares owned beneficially or of record
by the Company, any member of the Rich Group or any of their respective
subsidiaries, at a price of $22.00 per Share, net to the seller in cash, without
interest (the "Offer Price"), upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal (which
together constitute the "Offer").

Tendering shareholders will not be obligated to pay brokerage fees or
commissions, or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
Citibank, N.A., who is acting as depositary in connection with the Offer (the
"Depositary"), and MacKenzie Partners, Inc., who is serving as information agent
in connection with the Offer (the "Information Agent"), incurred in connection
with the Offer. See "THE TENDER OFFER -- Fees and Expenses".

THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), ACTING ON THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS (THE
"SPECIAL COMMITTEE"), BY THE UNANIMOUS VOTE OF ALL DIRECTORS PRESENT WITH ONE
ABSTENSION, (A) HAS DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED HEREIN) AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS
DEFINED HEREIN), ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND THE
SHAREHOLDERS OF THE COMPANY (OTHER THAN CSX AND MR. RICH), (B) HAS APPROVED AND
ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND (C) RECOMMENDS ACCEPTANCE OF THE OFFER
BY SHAREHOLDERS OF THE COMPANY.

The Company's financial advisor, Smith Barney Inc. ("Smith Barney"), has
delivered to the Company Board a written opinion, dated August 17, 1997, to the
effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the $22.00 per Share cash consideration to be received
by the holders of Shares (other than CSX, NSC, Mr. Rich and their respective
affiliates) in the Offer and the Merger was fair from a financial point of view
to such holders. A copy of the opinion of Smith Barney is set forth in Annex A
hereto and is contained in the Solicitation/Recommendation Statement on Schedule
14D-9 filed by the Company with the United States Securities and Exchange
Commission (the "Commission") in connection with the Offer (together with any
exhibits, annexes, amendments or supplements thereto, the "Schedule 14D-9"),
which is being mailed to Company shareholders herewith and should be read
carefully in its entirety. The opinion of Smith Barney is directed to the
Company Board and relates only to the fairness of the cash consideration to be
received in the Offer and the Merger by holders of Shares (other than CSX, NSC,
Mr. Rich and their respective affiliates) from a financial point of view, does
not address any other aspect of the Offer or the Merger or related transactions,
and is not intended to constitute, and does not constitute, a recommendation to
any shareholder as to whether such shareholder should tender Shares in the
Offer. See "SPECIAL FACTORS -- Opinion of Financial Advisor to the Company".

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH SHARES OWNED BY MR. RICH, PURCHASER OR ITS
SUBSIDIARY OR TO BE CONTRIBUTED TO PURCHASER PURSUANT TO BINDING AGREEMENTS
(WHICH PURCHASER, IN ITS REASONABLE JUDGMENT, BELIEVES WILL BE PERFORMED),
REPRESENTS, ON A FULLY DILUTED BASIS, AT LEAST 66 2/3% OF THE OUTSTANDING SHARES
(THE "MINIMUM CONDITION"). SEE "THE TENDER OFFER -- CERTAIN CONDITIONS OF THE
OFFER", WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.

<PAGE> 4

The Company has advised Purchaser that, as of August 17, 1997, there were
1,893,219 Shares issued and outstanding, approximately 1,504 record holders of
Shares and approximately 168,251 Shares subject to employee stock options (the
"Options"). As of August 21, 1997, CSX (through its wholly owned subsidiary, CSX
Transportation, Inc. ("CSXT")) beneficially owned 110,250 Shares representing
approximately 5.8% of the Shares outstanding as of such date, and Mr. Rich owned
255,313 Shares and Options to acquire 8,698 Shares, collectively representing
approximately 14.4% of the Shares outstanding as of such date. The Company has
advised Purchaser that, as of August 17, 1997, 66,150 Shares were issuable upon
exercise of all outstanding Warrants (as defined herein) and 355,159 Shares were
issuable upon conversion of all Convertible Notes (as defined herein). Based
upon the foregoing information, the Minimum Condition would be satisfied if
1,289,623 Shares were validly tendered. In connection with the transactions
contemplated by the Merger Agreement, all of the Shares owned by CSX and a
portion of the Shares and Options owned by Mr. Rich having an aggregate value of
approximately $3,013,247 will be contributed to Purchaser prior to the
consummation of the Offer; and, in the event that a meeting of the Company's
shareholders is called to consider the approval and adoption of the Merger and
the Merger Agreement, all Shares contributed or owned by CSX or Mr. Rich will be
voted in favor of such matters.

The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 17, 1997, by and among CSX, NSC, Mr. Rich and the Company (the
"Merger Agreement"). The Merger Agreement provides that, among other things, as
promptly as practicable after the satisfaction of the other conditions set forth
in the Merger Agreement, and in accordance with the relevant provisions of the
New York Business Corporation Law (the "NYBCL"), a corporate subsidiary of
Purchaser to be organized by Purchaser prior to the Merger ("Buyer") will be
merged with and into the Company (the "Merger"). Following consummation of the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and will be a wholly owned subsidiary of Purchaser. At the
Effective Time, (as defined herein) each Share outstanding immediately prior
thereto (other than Shares held by the Company or its subsidiary or by Purchaser
or its subsidiary, and other than Shares held by shareholders who shall have
demanded and perfected appraisal rights under the NYBCL) will be canceled and
converted into the right to receive the Offer Price. The Merger Agreement is
more fully described in "SPECIAL FACTORS -- The Merger Agreement and Related
Agreements".

Consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger and the
Merger Agreement by the affirmative vote of the holders of 66 2/3% of the
outstanding Shares, if required. In the event required, the Company has agreed
to call a meeting of shareholders to consider such matters. If the Minimum
Condition is satisfied and such a meeting is called, Purchaser will own a
sufficient number of Shares to approve and adopt the Merger and the Merger
Agreement without requiring the vote or proxy of any other shareholder. See
"SPECIAL FACTORS -- Purpose and Effects of the Offer and the Merger; Reasons for
the Offer and the Merger". In addition, under the NYBCL, if Purchaser acquires
(pursuant to the Offer, the contributions of Mr. Rich and CSX to Purchaser or
otherwise) at least 90% of then outstanding Shares, Purchaser will be able to
approve and adopt the Merger and the Merger Agreement without calling a meeting
of the Company's shareholders and without the approval of any shareholders other
than Purchaser. Therefore, in accordance with the NYBCL, in the event that
Purchaser acquires at least 90% of then outstanding Shares pursuant to the
Offer, the contributions of Mr. Rich and CSX to Purchaser or otherwise, all
necessary and appropriate action will be taken to cause the Merger to become
effective as soon as reasonably practicable after such acquisition without a
meeting of shareholders. If, however, Purchaser does not acquire at least 90% of
then outstanding Shares pursuant to the Offer, the contributions of Mr. Rich and
CSX to Purchaser or otherwise, and a meeting and the approval of the Company's
shareholders is required under the NYBCL, as described above, a longer period of
time will be required to effect the Merger. Under the Merger Agreement, even if
the Minimum Condition is satisfied, if at any scheduled expiration date of the
Offer all conditions to the Offer shall have been satisfied but less than a
number of Shares that, together with the number of Shares to be contributed by
CSX and Mr. Rich to Purchaser, represents less than 90% of the outstanding
Shares, on a fully-diluted basis, shall have been tendered into the Offer,
Purchaser shall be entitled to extend the Offer from time to time without the
consent of the Company (for not more than 10 business days (as defined herein))
in order to permit Purchaser to

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<PAGE> 5

solicit additional Shares to be tendered into the Offer. See "SPECIAL
FACTORS -- Purpose and Effects of the Offer and the Merger; Reasons for the
Offer and the Merger".

No appraisal rights are available in connection with the Offer, but may be
available in connection with the Merger. See "SPECIAL FACTORS -- Rights of
Shareholders in the Merger".

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.

SPECIAL FACTORS

1. BACKGROUND OF THE OFFER AND THE MERGER.

The Company's annual report on Form 10-K for the year ended December 31,
1996 (the "Company's 10-K") states: The Company operates a 500-mile regional
railroad in New York, New Jersey and Pennsylvania, of which 200 miles consist of
trackage rights over the lines of other railroads, including Conrail, Inc.
("Conrail"). The Company's rail lines have been integrated into a coordinated
rail system which connects upstate New York with the northern New Jersey-New
York City metropolitan area and provides rail service via two Class I carriers,
through its connections with Conrail and the CP Rail System ("CP").
Additionally, pursuant to a Haulage Agreement with CP, the Company has direct
access with the NSC rail system and other carriers in Buffalo, New York. The
Company relies on, and its ability to compete is dependent upon, its rail
connections with Conrail for a substantial portion of its rail traffic. This
business mainly relates to freight traffic to the northern New Jersey and New
York City metropolitan area. Revenue derived by the Company from CSX and NSC
relating to freight traffic to the northern New Jersey-New York City
metropolitan area amounted to (a) $9,800,000 and $7,700,000, respectively, in
1994, (b) $17,200,000 and $7,500,000, respectively, in 1995, (c)$15,800,000 and
$6,300,000, respectively, in 1996, and (d) $7,530,000 and $3,070,000,
respectively, in the six months ended June 30, 1997. For 1994, 1995, 1996 and
the six months ended June 30, 1997, the Company derived approximately 39%, 49%,
49% and 49%, respectively, of its operating revenue from traffic hauled for a
CSX subsidiary, and approximately 31%, 21%, 16% and 20%, respectively, of its
operating revenue from intermodal traffic interchanged with NSC's rail
subsidiary. See also "THE TENDER OFFER -- Certain Information Concerning the
Company."

The following information is based on the knowledge of Mr. Rich, to the
extent describing matters within the knowledge of Mr. Rich (including certain
activities of the Company and the Company Board), and/or based on the knowledge
of CSX and/or NSC, to the extent describing matters within the knowledge of CSX
and/or NSC.

On October 15, 1996, CSX and Conrail announced plans to merge. Thereafter,
NSC announced a competing tender offer to acquire ownership of Conrail. During
February and March 1997, as a result of public statements by governmental
officials and others, it became apparent to the Company that the likely
resolution of the competing offers to acquire Conrail would be a roughly equal
division of Conrail between CSX and NSC. Although the Company's management was
not able to predict the impact on the Company of the restructuring of the
eastern U.S. railroad system, the Company Board was concerned that the Company's
future revenue base might be significantly impaired, and accordingly determined
that it should explore all options for the future of the Company, including a
possible sale or other transaction, and should retain an investment banking firm
to such end. One of such options was for the Company to seek "inclusion" in the
proceeding before the Surface Transportation Board regarding the application of
CSX and NSC to acquire and control Conrail and thereby be acquired, by order of
the Surface Transportation Board, by some or all such carriers ("Inclusion").

Based on the advice of counsel, the Company determined that it must be
prepared to seek Inclusion and/or other conditions from the Surface
Transportation Board in the Conrail proceeding. However, given the relative
financial strength of the Company, CSX and NSC, the financial burden that the
Company would have to bear to prepare an application for Inclusion and/or for
conditions, the amount of time that would pass

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<PAGE> 6

before any such application was finally determined, and the doubtful outcome of
any such application, the Company determined that it would be in the interests
of its shareholders to vigorously pursue alternative transactions.

On March 12, 1997, members of the Company Board and management interviewed
several investment banking firms. Thereafter in March 1997, the Company Board
retained Smith Barney Inc. ("Smith Barney") to advise and represent the Company
in a possible sale or other transaction. During the course of the next several
months, approximately 14 parties that were considered to have potential interest
in a transaction with the Company were contacted. Of those 14 parties, six
signed confidentiality agreements and received non-public information pertaining
to the Company. Of the six, possible interest in a transaction with the Company
as an entirety was expressed only by CSX and NSC jointly, and by one other party
(the "Strategic Investor"). Additional confidential information regarding the
Company's assets and operations was thereafter provided to CSX and NSC and to
the Strategic Investor upon their request.

Given the market performance of the Shares prior to March 1997, and based
upon conversations with representatives of CSX, NSC and the Strategic Investor,
the Company's management believed that the prospective purchasers considered the
current market price of the Shares to be overvalued. In an effort to persuade
them to consider a range of values, the Company's management prepared the
"Company Asset Valuation Package" (also referred to herein as the "Company
Estimates") as a negotiating tool. The valuation was based on data available to
the Company's management, such as the purchase price of recently acquired land,
the actual cost of improvements and on the experience of the Company's
management in disposing of rail lines which no longer operate.

In preparing the Company Asset Valuation Package, the Company's management
set values for those of its rail unloading facilities that it believed could be
of use to railroads based on the cost of property in the region and the actual
cost of improvements located on those lands, without regard for depreciation.
Certain contractual rights, including the existing revenues the Company receives
from allowing public utilities and others to use its properties, were valued
based on a capitalization of income. Using the Company Asset Valuation Package,
the Company's management proposed in negotiations that the underlying asset
value of the Company was approximately $108 million after payment of debt.
However, the valuation contained no adjustment for or consideration of (a) the
income tax consequences of a sale of the Company's assets, (b) the value that
the Company could receive for its facilities from parties other than another
railroad, (c) the costs that the Company would incur in disposing of its assets,
(d) the expense, or likelihood, of obtaining regulatory approval to sell its
railroad assets, (e) the amount of time that a disposition of assets would
likely take or (f) the relatively few number of prospective buyers which had
been identified.

On May 5, 1997, during a regularly scheduled meeting, the Executive
Committee of the Company Board (the "Executive Committee"), consisting of Mr.
Rich, Charles S. Brenner, Niles F. Curtis, Everett A. Gilmour and Robert L.
Marcalus (Chairman of the Executive Committee), reviewed the status of
discussions of the Company's management with CSX and NSC and with the Strategic
Investor.

On May 6, 1997, representatives of the Company's management and
representatives of Smith Barney met with representatives of CSX and NSC to
discuss CSX's and NSC's joint interest in a transaction with the Company.

On May 9, 1997, Albert B. Aftoora, a director of the Company and an officer
of CSXT, requested and was granted a leave of absence from the Company Board.

On May 14, 1997, representatives of the Company and representatives of
Smith Barney met with representatives of the Strategic Investor to discuss the
Strategic Investor's interest in the Company.

Representatives of the Company and Smith Barney again met with
representatives of CSX and NSC on May 21, 1997 and with representatives of the
Strategic Investor on May 22, 1997 to review and discuss the possible
acquisition of the Company by such parties.

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<PAGE> 7

On June 4, 1997, Mr. Rich and C. David Soule, Executive Vice President of
the Company, met with John W. Snow, Chairman and Chief Executive Officer of CSX,
and David R. Goode, Chairman and Chief Executive Officer of NSC, to discuss the
potential of a transaction involving the three companies.

On June 7, 1997, at a regularly scheduled meeting, the Executive Committee
reviewed the status (summarized above) of the discussions with CSX and NSC and
the Strategic Investor.

On June 26, 1997, at a regularly scheduled meeting of the Executive
Committee, Mr. Rich reported that the Strategic Investor was continuing to move
forward with its due diligence. Mr. Rich also reported that CSX and NSC had
informed him that they did not wish to control the Company and that they might
consider in general terms the possibility of providing financing in a
transaction in which one or more members of the Company's management, including
Mr. Rich, would buy the Company in a "market" transaction.

On July 1, 1997, representatives of the Company met with representatives of
CSX and NSC, the legal advisor to CSX, and Mr. Rich. CSX and NSC discussed in
general terms the possibility of Mr. Rich (and possibly other members of
management of the Company) acquiring the Company with financing from CSX and
NSC. The potential conflict of interest that this created was discussed and it
was determined that Mr. Rich would be kept apart from the other representatives
of the Company in all matters regarding the proposed transaction.

In May and July 1997, indications of interest were received by the Company
from two parties with respect to the purchase of The Toledo, Peoria and Western
Railway Corporation ("TP&W"). Both of these indications were predicated upon the
purchase of all of the outstanding shares of TP&W, the majority of which shares
are not owned by the Company. As a result, the indications did not become the
subject of subsequent negotiations.

On July 10, 1997, at the request of the Strategic Investor, Messrs. Rich
and Soule met with officers of the Strategic Investor to discuss the potential
for and the structure of a possible transaction.

On July 14, 1997, at a regularly scheduled meeting of the Executive
Committee, Mr. Rich disclosed that he anticipated that an offer from CSX and NSC
and himself would be received by the Company Board within several days. It was
determined that Mr. Rich would excuse himself from any Company Board or
Executive Committee meeting which considered any offer for an acquisition
transaction involving the Company.

During the early summer of 1997, the Company Board had determined that it
would be in the best interest of the Company's shareholders if a firm offer from
one of the prospective purchasers could be obtained in early August 1997 so that
the Company Board would have sufficient time to assess the offer or offers with
its advisors and determine whether to accept such offer or offers prior to
August 22, 1997. This was the final date established by the Surface
Transportation Board to receive descriptions of anticipated responsive
applications to be filed in connection with the application of CSX and NSC to
acquire and control Conrail. Based on the advice of counsel, the Company Board
determined that the Company should be prepared to seek Inclusion or other
conditions from the Surface Transportation Board in the Conrail proceeding in
order to protect itself from the competitive effects of the CSX and NSC
acquisition of Conrail. The Company Board, having determined that a consensual
transaction would likely be more favorable to shareholders, instructed Smith
Barney and the Company's management to notify the prospective purchasers that
they should submit their offers, if any, promptly.

On August 5, 1997, representatives of J.P. Morgan Securities Inc., which
has an ongoing role serving generally as financial advisor to NSC on various
matters, participated in a telephonic meeting of the Executive Committee of the
NSC Board of Directors. At such meeting such representatives discussed with the
Executive Committee of the NSC Board of Directors in general terms the financial
implications to NSC of a possible transaction involving the Company. J.P. Morgan
Securities Inc. was not specifically retained by NSC with respect to the Offer
or the Merger.

During the evening of Friday, August 8, 1997, the Rich Group delivered a
written offer to the Company Board to begin negotiations with respect to an
acquisition of the Company, including a non-binding term sheet describing the
potential structure for such a transaction involving the acquisition of all of
the outstanding

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<PAGE> 8

Shares at a price of $19.00 per Share. A copy of the Purchaser's letter, dated
August 8, 1997 (the "Proposal Letter"), is filed as an Exhibit to the Schedule
14D-1. The Proposal Letter provided that the offer contained therein would
expire if the Proposal Letter were not executed by the Company prior to 5:00
p.m. on August 10, 1997. The Proposal Letter also provided for exclusive
negotiations between the parties until August 19, 1997, and for certain expense
reimbursements.

On Saturday, August 9, 1997, a special meeting of the Company Board was
convened to review the sale process with the Company's legal and financial
advisors. Present at such meeting were William B. Blatter, Senior Vice President
and Chief Financial Officer of the Company, Nathan R. Fenno, Vice President-Law,
General Counsel and Secretary of the Company, the legal advisor to Mr. Rich and
various legal advisors to the Company. Mr. Rich and his legal advisor presented
the offer of the Rich Group that was delivered to the Company Board the prior
evening. Mr. Rich and his legal advisor were then excused from the meeting.

On Sunday, August 10, 1997, representatives of the Rich Group were informed
that the Company Board had met and appointed a Special Committee to deal with
matters relating to the proposed transaction and that the Special Committee had
retained Smith Barney and Carter, Ledyard & Milburn as the Company's financial
and legal advisors, respectively. Representatives of the Rich Group were further
advised that the Company Board had determined not to approve the Proposal Letter
(which requested exclusivity) and had received an indication of interest from
the Strategic Investor. The Proposal Letter was publicly disclosed on Monday,
August 11, 1997.

On Tuesday, August 12, 1997, the Company's financial and legal advisors
both requested a higher offer in discussions with representatives of the Rich
Group, but such an offer was not made. Also on Tuesday, August 12, 1997, the
legal advisors to the Rich Group submitted a proposed merger agreement to the
Company's legal advisor.

On Wednesday and Thursday, August 13 and 14, 1997, representatives of Smith
Barney continued to request that the Rich Group increase the price they would
offer for each Share, but no increase was made. At this time, the Rich Group was
aware of continuing discussions between the Company and the Strategic Investor.

On or about August 14, 1997, a complaint was filed in the Supreme Court of
the State of New York relating to the Proposal Letter and the proposed
transaction naming Mr. Rich, CSX, NSC, the Company and the members of the
Company Board, including Mr. Rich, as defendants. The complaint has been filed
as an exhibit to the Schedule 14D-1. See "THE TENDER OFFER -- Certain Litigation
Relating to the Offer and the Merger".

On Friday, August 15, 1997, representatives of Smith Barney continued to
request a higher per Share proposal from the Rich Group but no response to such
request was given at that time.

On Saturday, August 16, 1997, representatives of the Rich Group indicated a
willingness to consider a higher price in discussions with Smith Barney. Smith
Barney continued to negotiate for a higher price with the Rich Group and
informed them that the Company Board would convene a special meeting on Sunday
night, August 17, 1997 to consider any new proposal.

Later in the afternoon of Saturday, August 16, 1997, the Company's legal
advisor met with the legal advisors to the Rich Group. Mr. Fenno participated by
telephone. During the course of the meeting, the Company's legal advisor and Mr.
Fenno discussed and negotiated certain issues relating to the proposed merger
agreement with the Rich Group's legal advisors and also informed them that the
Special Committee requested a reduction in the termination fee from the
$5,000,000 figure then proposed and the deletion of certain of the conditions to
the closing of the tender offer. The advisor to the Rich Group was also informed
that the Special Committee did not believe it was appropriate for Mr. Rich to
receive any portion of the termination fee if paid. Later that afternoon, the
legal advisors to the Rich Group advised the Company's legal advisor that the
Rich Group had agreed to all of the changes requested by the Special Committee
(including the agreement among the Rich Group that Mr. Rich not participate in
the termination fee if paid), other than a request for the deletion of one of
the conditions to the closing of the tender offer, which condition would
continue to be discussed.

6
<PAGE> 9

During the morning and afternoon of Sunday, August 17, 1997, telephone
discussions continued between the Company's financial and legal advisors and
representatives of the Rich Group with respect to the remaining contractual
issue and the price of the offer. At approximately 8:00 p.m., Eastern time on
Sunday, August 17, 1997, the Rich Group's legal advisors informed the Company's
legal advisor that the outstanding issue had been resolved and that the
condition to the closing had been modified as had been requested.

At approximately 8:30 p.m. on Sunday, August 17, 1997, a meeting of the
Company Board was convened. All of the directors of the Company were present
except for Mr. Rich and Gerald D. Groff, Richard Nasti and Harvey J. Polly, each
of whom had previously indicated that he would be unable to attend. Also present
at the meeting were Mr. Fenno, Vice President - Law, Secretary and General
Counsel of the Company, Mr. Blatter, Senior Vice President and Chief Financial
Officer of the Company, representatives of Smith Barney and the Company's legal
advisor. At such meeting, Smith Barney discussed certain matters and rendered to
the Company Board an oral opinion (subsequently confirmed by delivery of a
written opinion, dated August 17, 1997) to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
$22.00 per Share cash consideration to be received in the Offer and the Merger
by holders of Shares (other than CSX, NSC, Mr. Rich and their respective
affiliates) was fair, from a financial point of view, to such holders (see
"SPECIAL FACTORS -- Opinion of Financial Advisor to the Company"). At such
meeting, the members of the Special Committee stated that they unanimously
concluded that the transactions proposed by the Rich Group were in the best
interests of the Company and its shareholders. After further extensive
discussion and deliberation, including consideration of the factors noted below
under "SPECIAL FACTORS -- Recommendations of the Special Committee and the
Company Board; Fairness of the Offer and the Merger -- Reasons for the
Recommendation", the Company Board approved the Merger Agreement and the
transactions contemplated thereby. On the evening of August 17, 1997, the
Company and the Rich Group executed and delivered the Merger Agreement. A motion
to recommend approval of the Merger Agreement and the transactions contemplated
thereby to the shareholders of the Company was made, seconded and unanimously
carried by a vote of all those directors present and voting. Mr. Common
expressed concurrence with the Company Board's action but abstained from voting
on the motion due to his employment with J.P. Morgan & Co., Inc., an affiliate
of J.P. Morgan Securities Inc. which has acted from time to time as NSC's
financial advisor.

A description of certain of the activities of the Company Board and the
Special Committee, including those not involving members or representatives of
the Rich Group, can be found in "Item 4. Background of the Offer and the Merger"
in the Schedule 14D-9.

2. RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE COMPANY BOARD; FAIRNESS OF
THE OFFER AND THE MERGER.

The following is based on information provided by the Company in the
Schedule 14D-9:

The Company Board has, by the vote of all directors present with one
abstention (Mr. Common), determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are fair
to and in the best interests of the Company and the holders of Shares, (other
than CSX and Mr. Rich), has approved and adopted the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and
recommends that the Company shareholders accept the Offer and tender their
Shares. David B. Common, a director of the Company and Vice President of J.P.
Morgan & Co., Inc., did not vote on the proposals respecting the Merger
Agreement and the transactions contemplated thereby, because of his affiliation
with J.P. Morgan Securities Inc., which has acted from time to time as NSC's
financial adviser. Mr. Rich was not present at the meeting at which the vote on
the Merger and the Merger Agreement was taken. As set forth in the Merger
Agreement, subject to the terms and conditions thereof, Purchaser will purchase
all outstanding Shares tendered prior to the expiration of the Offer if the
conditions to the Offer have been satisfied (or waived).

Reasons for the Recommendation. As described above and in "Item 4.
Background of the Offer and the Merger" in the Schedule 14D-9, the decision of
the Special Committee to approve, and recommend adoption and approval by the
Company shareholders of, the Merger Agreement, and the transactions contemplated
thereby, including the Offer and the Merger, followed extensive discussions of
the Special Committee,

7
<PAGE> 10

including those with its financial and legal advisors. Such decisions were based
on deliberations which included a detailed review of the Company's business,
results of operations and prospects, including the likelihood of effecting an
alternative transaction, the ranges of values to the Company shareholders that
might be achievable in an alternative transaction and the financial and other
terms of the Merger. In connection with its approval and recommendation set
forth above, the Company Board considered a number of factors, including, but
not limited to, the following:

(a) historical information concerning the Company's business
prospects, financial performance and condition, operations, management and
competitive position;

(b) the financial condition, results of operations, business and
strategic objectives of the Company, the risks involved in achieving those
objectives and the Company's capability in reaching those objectives;

(c) the performance of the Company on a historical basis and the
prospects and risks of the Company going forward as a public company in
light of the Conrail acquisition;

(d) the impact on the Company's business prospects, operations and
financial condition, as well as on its customers and employees, of the
proposed Offer and Merger;

(e) current financial market conditions, historical market prices and
trading information with respect to the common stock of the Company;

(f) a review of the possible alternatives to the Offer and the Merger
(including the possibility of continuing to operate the Company as a public
company), the range of possible benefits and risks to the Company's
shareholders of such alternatives and the timing and the likelihood of
actually accomplishing any of such alternatives;

(g) the uncertainty of whether the Company would be successful in
seeking Inclusion before the Surface Transportation Board in its review of
the acquisition of Conrail by CSX and NSC, and the uncertainty of the value
which might result from any such Inclusion;

(h) the consideration to be received by the Company shareholders in
the Offer and the Merger and a comparison of merger and acquisition
transactions deemed to be comparable to the Offer and the Merger or
otherwise relevant to the deliberations of the Company Board;

(i) the terms of the Merger Agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations;

(j) the potential for other third parties, particularly other
railroads, to acquire the Company;

(k) the opinion of Smith Barney, dated August 17, 1997, to the effect
that, as of such date and based upon and subject to certain matters stated
in such opinion, the $22.00 per Share cash consideration to be received by
holders of Shares (other than CSX, NSC, Mr. Rich and their respective
affiliates) in the Offer and the Merger was fair, from a financial point of
view, to such holders. The full text of Smith Barney's written opinion,
dated August 17, 1997, which sets forth the assumptions made, matters
considered and limitations on the review undertaken by Smith Barney, is
attached hereto as Annex A and is incorporated herein by reference. Smith
Barney's opinion is directed to the Company Board and relates only to the
fairness, from a financial point of view, of the cash consideration to be
received in the Offer and the Merger by holders of Shares (other than CSX,
NSC, Mr. Rich and their respective affiliates), and is not intended to
constitute, and does not constitute, a recommendation as to whether any
shareholder should tender Shares pursuant to the Offer. HOLDERS OF SHARES
ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS ENTIRETY;

(l) the fact that, pursuant to the Merger Agreement, the Company is
not prohibited from furnishing information or data relating to the Company
and participating in negotiations with respect to an unsolicited Superior
Proposal (as defined herein) to acquire the Company in certain
circumstances, and that the Company may, in certain circumstances,
terminate the Merger Agreement and accept any such Superior Proposal
subject to the Company's obligation to pay a termination fee as described
in the Merger Agreement;

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<PAGE> 11

(m) the relationship of the Offer Price to historical market prices of
the Shares and to the Company's book value per Share, and the fact that the
Offer Price of $22.00 per Share represented a premium of 6% over the sale
price of the Shares on July 29, 1997 (the last trading day before the
confirmation of discussions with CSX, NSC and Mr. Rich), a premium of
approximately 18.9% over the average sale price of the Shares on July 15,
1997 (one month preceding confirmation of such discussions), a premium of
approximately 31.3% over the average sale price of the Shares on May 15,
1997 (three months preceding confirmation of such discussions), and a
premium of approximately 137% over the average sale price of the Shares on
February 15, 1997 (six months preceding confirmation of such discussions);

(n) the likelihood that the proposed acquisition would be consummated,
including the experience, reputation and financial condition of CSX, NSC
and Mr. Rich and the risks to the Company if the acquisition were not
consummated; and

(o) the availability of appraisal rights in the Merger under the
NYBCL.

In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Company Board did not find it
practicable, and did not, quantify or otherwise attempt to assign relative
weights to the factors it considered.

IN LIGHT OF ALL THE FACTORS SET FORTH ABOVE, THE COMPANY BOARD HAS
DETERMINED, WITH MR. RICH NOT PRESENT AND MR. COMMON ABSTAINING, THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, ARE FAIR AND IN THE BEST INTERESTS OF THE HOLDERS OF THE SHARES (OTHER
THAN CSX AND MR. RICH), HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES THEREUNDER.

SIX OF THE EIGHT MEMBERS OF THE COMPANY BOARD WHO VOTED TO APPROVE THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND ALL OF THE
MEMBERS OF THE SPECIAL COMMITTEE, WERE NOT EMPLOYEES OF THE COMPANY OR ITS
SUBSIDIARIES.

The Company retained Smith Barney as its financial advisor in connection
with the Offer and the Merger. Pursuant to the terms of Smith Barney's
engagement, the Company has agreed to pay Smith Barney for its services in
connection with the Offer and the Merger an aggregate financial advisory fee
equal to 1.2% of the total consideration (including liabilities assumed),
payable in connection with the Offer and the Merger, but not less than $650,000.
The Company currently estimates that the Smith Barney fee will be approximately
$875,000. The Company has also agreed to reimburse Smith Barney for travel and
other out-of-pocket expenses, including reasonable legal fees and expenses, and
to indemnify Smith Barney and certain related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of Smith Barney's engagement. In the ordinary course of business, Smith
Barney and its affiliates may actively trade or hold the securities of the
Company, CSX and NSC for their own account or for the account of customers and,
accordingly, may at any time hold a long or short position in such securities.

The Company has a consulting agreement with McKenna Management Corp.
("McKenna") with respect to the Company's operations and profit improvement.
Pursuant to the terms of such consulting agreement, if a sale of 40% or more of
the Shares or the Company's assets is consummated, McKenna is entitled to
receive a commission of 1% of the gross sale price applicable to the Company's
shareholders. The Company currently estimates that the McKenna commission will
be approximately $550,000.

Other than their arrangements with the Information Agent (see "THE TENDER
OFFER -- Fees and Expenses"), no member of the Rich Group nor any person acting
on their respective behalves has or currently intends to employ, retain or
compensate any person to make solicitations or recommendations to the
shareholders of the Company on its behalf with respect to the Offer, except that
such solicitations or recommendations may be made by directors, officers or
employees of such persons in the Rich Group, for which services no additional
compensation will be paid.

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<PAGE> 12

3. OPINION OF FINANCIAL ADVISOR TO THE COMPANY.

The following is based on information provided by the Company:

Smith Barney was retained by the Company to act as its financial advisor in
connection with the proposed Offer and the Merger. In connection with such
engagement, the Company requested that Smith Barney evaluate the fairness, from
a financial point of view, to the holders of Shares (other than CSX, NSC, Mr.
Rich and their respective affiliates) of the consideration to be received by
such holders in the Offer and the Merger. On August 17, 1997, at a meeting of
the Company Board held to evaluate the proposed Offer and the Merger, Smith
Barney delivered to the Company Board an oral opinion (subsequently confirmed by
delivery of a written opinion, dated August 17, 1997, the date of execution of
the Merger Agreement) to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the $22.00 per Share
cash consideration to be received in the Offer and the Merger by holders of
Shares (other than CSX, NSC, Mr. Rich and their respective affiliates) was fair,
from a financial point of view, to such holders.

In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
held discussions with certain senior officers, directors and other
representatives and advisors of the Company and certain senior officers and
other representatives of CSX, NSC and Mr. Rich concerning the business,
operations and prospects of the Company. Smith Barney examined certain publicly
available business and financial information relating to the Company as well as
certain financial forecasts and other information and data for the Company,
which were provided to or otherwise discussed with Smith Barney by the
management of the Company. Smith Barney reviewed the financial terms of the
Offer and the Merger as set forth in the Merger Agreement in relation to, among
other things: current and historical market prices and trading volumes of the
Shares; the historical and projected earnings and other operating data of the
Company; and the capitalization and financial condition of the Company. Smith
Barney also considered, to the extent publicly available, the financial terms of
certain other similar transactions recently effected, which Smith Barney
considered relevant in evaluating the Offer and the Merger, and analyzed certain
financial, stock market and other publicly available information relating to the
businesses of other companies whose operations Smith Barney considered relevant
in evaluating those of the Company. In connection with its engagement, Smith
Barney was requested to approach, and held discussions with, third parties to
solicit indications of interest in a possible acquisition of the Company. In
addition to the foregoing, Smith Barney conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as Smith Barney deemed appropriate in arriving at its opinion. Smith Barney
noted that its opinion was necessarily based upon information available, and
financial, stock market and other conditions and circumstances existing and
disclosed, to Smith Barney as of the date of its opinion.

In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with Smith Barney, the management of the Company advised Smith Barney that such
forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
Smith Barney did not make and was not provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company,
nor did Smith Barney make any physical inspection of the properties or assets of
the Company. Although Smith Barney evaluated, from a financial point of view,
the cash consideration to be received in the Offer and the Merger by holders of
Shares (other than CSX, NSC, Mr. Rich and their respective affiliates), Smith
Barney was not asked to and did not recommend the specific consideration payable
in the Offer and the Merger, which was determined through negotiation between
the Company, CSX, NSC and Mr. Rich. No other limitations were imposed by the
Company on Smith Barney with respect to the investigations made or procedures
followed by Smith Barney in rendering its opinion.

THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY, DATED AUGUST 17,
1997, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS SET FORTH IN ANNEX A HERETO AND IS INCORPORATED
HEREIN BY REFERENCE. HOLDERS OF SHARES ARE URGED TO READ THIS OPINION CAREFULLY
IN

10
<PAGE> 13

ITS ENTIRETY. THE OPINION OF SMITH BARNEY IS DIRECTED TO THE COMPANY BOARD AND
RELATES ONLY TO THE FAIRNESS OF THE CASH CONSIDERATION TO BE RECEIVED IN THE
OFFER AND THE MERGER BY HOLDERS OF SHARES (OTHER THAN CSX, NSC, MR. RICH AND
THEIR RESPECTIVE AFFILIATES) FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS
ANY OTHER ASPECT OF THE OFFER OR THE MERGER OR RELATED TRANSACTIONS, AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER SUCH
SHAREHOLDER SHOULD TENDER SHARES IN THE OFFER. THE SUMMARY OF THE OPINION OF
SMITH BARNEY SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.

In preparing its opinion, Smith Barney performed a variety of financial and
comparative analyses, including those described below, and provided the Company
Board and the Special Committee with a written presentation with respect to such
analyses. A copy of Smith Barney's written presentation has been filed as an
exhibit to the Schedule 13E-3 and will be available for inspection and copying
at the principal executive offices of the Company during regular business hours
by any interested shareholder of the Company or representatives of such
shareholder who has been so designated in writing and may be inspected and
copied, and obtained by mail, from the Commission. The summary of such analyses
does not purport to be a complete description of Smith Barney's analyses
underlying Smith Barney's opinion or presentation to the Company Board and the
Special Committee. The preparation of a fairness opinion is a complex analytic
process involving various determinations as to the most appropriate and relevant
methods of financial analyses and the application of those methods to the
particular circumstances, and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, Smith Barney believes that its
analyses must be considered as a whole, and that selecting portions of its
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the processes underlying such analyses and
opinion. In its analyses, Smith Barney made numerous assumptions with respect to
the Company, industry performance, general business, economic, market and
financial conditions, and other matters, many of which are beyond the control of
the Company. The estimates contained in such analyses and the valuation ranges
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Smith Barney's
opinion and analyses were only one of many factors considered by the Company
Board and the Special Committee in its evaluation of the Offer and the Merger
and should not be viewed as determinative of the views of the Company Board, the
Special Committee or management of the Company with respect to the proposed
Offer or Merger or the cash consideration to be received in the Offer and the
Merger by holders of Shares.

Selected Company Analysis. Using publicly available information,
Smith Barney analyzed, among other things, the market values and trading
multiples of the Company and the following selected publicly traded companies in
the railroad industry: Emons Transportation Group, Inc.; Providence & Worcester
Railroad Company; RailAmerica, Inc.; and Railtex, Inc. (collectively, the
"Selected Companies"). Smith Barney compared market values as multiples of,
among other things, estimated calendar 1997 net income and adjusted market
values (equity value, plus total debt, minority interest and preferred stock,
less cash and cash equivalents) as multiples of, among other things, latest 12
months revenue, earnings before interest, taxes, depreciation and amortization.
All multiples were based on closing stock prices as of August 15, 1997. Given
the Company's lack of net income and operating income, net income and operating
income multiples for the Selected Companies were not utilized. Applying a range
of selected multiples for the Selected Companies of latest 12 months revenue and
EBITDA of 2.0x to 2.4x and 8.8x to 10.8x, respectively, to corresponding
financial data for the Company resulted in an equity reference range for the
Company of approximately $17.27 to $22.50 per Share, as compared to the cash
consideration in the Offer and the Merger of $22.00 per Share.

Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney analyzed the purchase price and implied
transaction value multiples paid in the following selected transactions in the
railroad industry (acquiror/target): NSC and CSX/Conrail Inc.; Union Pacific
Corporation/Southern Pacific Rail Corporation; Union Pacific Corporation/Chicago
and North Western Transportation Company; Burlington Northern Inc./Santa Fe
Pacific Corporation (Rail Operations); Fieldcrest Cannon,

11
<PAGE> 14

Inc./Amoskeag Company; Kansas City Southern Industries, Inc./MidSouth
Corporation; Wisconsin Central/Fox River Valley Railroad; CSX/RF&P Corporation
(Railroad Operations); Canadian Pacific Limited/Soo Line Corporation; CNW
Acquisition Co./CNW Railway; and The Prospect Group, Inc./Illinois Central
Transportation Company (collectively, the "Selected Transactions"). Smith Barney
compared purchase prices as multiples of, among other things, forward net income
and transaction values as multiples of, among other things, latest 12 months
revenue, EBITDA and operating income. All multiples for the Selected
Transactions were based on information available at the time of announcement of
the transaction. Given the Company's lack of net income and operating income,
net income and operating income multiples for the Selected Transactions were not
utilized. Applying a range of selected multiples for the Selected Transactions
of latest 12 months revenue and EBITDA of 1.9x to 2.3x and 8.6x to 10.5x,
respectively, to corresponding financial data for the Company resulted in an
equity reference range for the Company of approximately $16.35 to $21.37 per
Share, as compared to the cash consideration in the Offer and the Merger of
$22.00 per Share.

No company, transaction or business used in the "Selected Company Analysis"
or "Selected Merger and Acquisition Transactions Analysis" as a comparison is
identical to the Company, the Offer or the Merger. Accordingly, an analysis of
the results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the Selected Companies, Selected Transactions
or the business segment, company or transaction to which they are being
compared.

Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (a) indications of interest
received from, and discussions with, third parties other than CSX, NSC and Mr.
Rich; (b) the Company's historical and projected financial results, including,
among other things, the uncertainty of the Company's future revenue base; (c)
the history of trading prices and volume for the Shares, the low and high
trading prices of which were approximately $7.14 per Share and $24.50 per Share,
respectively, over the 52-week period preceding August 15, 1997; and (d) the
implied premiums payable in the Offer over the closing price of the Shares on
July 29, 1997 (the date on which the Company confirmed that it was in merger
discussions), and the one-month, three-month and six-month periods preceding
August 15, 1997, of approximately 6.0%, 18.9%, 31.3% and 137.0%, respectively.

Pursuant to the terms of Smith Barney's engagement, the Company has agreed
to pay Smith Barney for its services in connection with the Offer and the Merger
an aggregate financial advisory fee equal to 1.2% of the total consideration
(including liabilities assumed) payable in connection with the Offer and the
Merger, but not less than $650,000. The fee payable to Smith Barney is currently
estimated to be approximately $875,000. The Company has also agreed to reimburse
Smith Barney for travel and other out-of-pocket expenses incurred by Smith
Barney in performing its services, including the reasonable fees and expenses of
its legal counsel, and to indemnify Smith Barney and related persons against
certain liabilities, including liabilities under the United States federal
securities laws, arising out of Smith Barney's engagement.

Smith Barney has advised the Company that, in the ordinary course of
business, Smith Barney and its affiliates may actively trade or hold the
securities of the Company, CSX and NSC for their own account or for the account
of customers, and, accordingly, may at any time hold a long or short position in
such securities. In addition, Smith Barney and its affiliates (including
Travelers Group Inc. and its affiliates) may maintain relationships with the
Company, CSX, NSC and their respective affiliates.

Smith Barney is an internationally recognized investment banking firm and
was selected by the Company based on Smith Barney's experience and expertise.
Smith Barney regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.

4. POSITION OF PURCHASER, CSX, NSC AND MR. RICH REGARDING FAIRNESS OF THE OFFER
AND THE MERGER.

Each member of the Rich Group believes that the Offer and the Merger are
fair to the Company's shareholders. The members of the Rich Group base this
belief on: (a) the fact that the Special Committee,

12
<PAGE> 15

consisting solely of independent directors, was appointed in connection with the
Merger Agreement to represent the interests of shareholders other than CSX and
Mr. Rich, (b) the fact that the Special Committee was advised by independent
financial and legal advisors, (c) the fact that the Company Board, acting upon
the unanimous recommendation of the Special Committee, and the Special
Committee, based on the factors considered by the Special Committee set forth
above, concluded that the Offer and Merger are fair to and in the best interests
of the Company and the Company's shareholders, (d) the fact that the Rich Group
and the Company Board (through the Special Committee), with their respective
financial and legal advisors, negotiated the terms of the Merger and the Merger
Agreement with the Special Committee on an arm's-length basis over a period of
time and (e) the fact that the consideration to be paid in the Offer and the
Merger represents a significant premium over the historical range of closing
prices for the Shares on The Nasdaq National Market. The members of the Rich
Group have reviewed the factors considered by the Special Committee and the
Company Board in support of their decision described above and had no basis to
question its consideration of or reliance on those factors. The members of the
Rich Group did not find it practicable to, and none of them did, assign relative
weights to the individual factors discussed above in reaching their conclusion
as to fairness.

5. PURPOSE AND EFFECTS OF THE OFFER AND THE MERGER; REASONS FOR THE OFFER AND
THE MERGER.

The Offer and the Merger are being made pursuant to the Merger Agreement.
The purpose of the Offer and the Merger is for Purchaser to acquire the entire
equity interest in the Company. In order to facilitate a prompt and orderly
transfer of ownership to Purchaser of the Shares owned by public shareholders,
the transaction has been structured as a cash tender offer followed by a merger
of Buyer with and into the Company in which the remaining equity interest in the
Company not acquired by Purchaser pursuant to the Offer, the contributions of
CSX and Mr. Rich to Purchaser or otherwise will be converted into the right to
receive cash, as provided in the Merger Agreement, and will, thus, be indirectly
acquired by Purchaser.

Through their respective interests in Purchaser, the interests of CSX, NSC
and Mr. Rich in the Company's net book value and net income will increase to the
extent of the number of Shares acquired under the Offer. If the Merger is
consummated, Purchaser's interest in such items will increase to 100% and
Purchaser will be entitled to all benefits resulting from that interest,
including all income generated by the Company's operations and any future
increase in the Company's value. Similarly, Purchaser will also bear the risk of
any decrease in the earnings or value of the Company after the Merger.

Consummation of the Merger is subject to obtaining the approval and
adoption of the Merger and the Merger Agreement by the requisite vote, if
required by the NYBCL. Under the NYBCL and the Merger Agreement, the approval of
the Company Board and the affirmative vote of the holders of 66 2/3% of the
outstanding Shares is required to approve and adopt the Merger and the Merger
Agreement. The Company Board, by the unanimous vote of all directors present
with one abstention, (a) has determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are fair
to and in the best interest of the Company and the holders of Shares (other than
CSX and Mr. Rich), (b) has approved and adopted the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and (c)
recommends acceptance of the Offer, and, if applicable, approval and adoption of
the Merger Agreement and the Merger, by the holders of the Shares. In the Merger
Agreement, the Company has agreed to take all action necessary to convene a
meeting of shareholders as soon as practicable after the consummation of the
Offer for the purpose of considering and taking action on the Merger Agreement
and the transactions contemplated thereby, if required to do so.

Following the Offer, if the Minimum Condition is satisfied and a meeting of
shareholders of the Company is called, Purchaser will own a sufficient number of
Shares to approve and adopt the Merger and the Merger Agreement without
requiring the vote or proxy of any other shareholder. See "SPECIAL FACTORS --
Purpose and Effects of the Offer and the Merger; Reasons for the Offer and the
Merger". In addition, under the NYBCL, if Purchaser acquires (pursuant to the
Offer, the contributions of CSX and Mr. Rich to Purchaser or otherwise) at least
90% of then outstanding Shares, Purchaser will be able to approve and adopt the
Merger and the Merger Agreement without calling a meeting of the Company's
shareholders and without the approval of any shareholders other than the
Purchaser. Therefore, in accordance with the NYBCL, in the

13
<PAGE> 16

event that Purchaser acquires at least 90% of then outstanding Shares (pursuant
to the Offer, the contributions of CSX and Mr. Rich to Purchaser or otherwise),
all necessary and appropriate action will be taken to cause the Merger to become
effective as soon as reasonably practicable after such acquisition without a
meeting of shareholders. If, however, Purchaser does not acquire at least 90% of
then outstanding Shares pursuant to the Offer or otherwise, and a meeting and
the approval of the Company's shareholders is required under the NYBCL, as
described above, a longer period of time will be required to effect the Merger.
Under the Merger Agreement, even if the Minimum Condition is satisfied, if at
any scheduled expiration date of the Offer all conditions to the Offer shall
have been satisfied but less than a number of Shares that, together with the
number of Shares to be contributed by CSX and Mr. Rich to Purchaser, represents
less than 90% of the outstanding Shares, on a fully-diluted basis, shall have
been tendered into the Offer, Purchaser shall be entitled to extend the Offer
from time to time without the consent of the Company (for not more than 10
business days) in order to permit Purchaser to solicit additional Shares to be
tendered into the Offer. See "SPECIAL FACTORS -- Purpose and Effects of the
Offer and the Merger; Reasons for the Offer and the Merger".

For shareholders of the Company other than Purchaser and its affiliates,
the Merger will result in a termination of their rights as shareholders. They
will not participate in any earnings or growth of the Surviving Corporation
after the Merger and will not have any right to vote on corporate matters. Such
shareholders also will not face the risk of any decline in the earnings or value
of the Company after the Merger.

On August 15, 1997, the last full trading day prior to the announcement of
the execution of the Merger Agreement and of Purchaser's intention to commence
the Offer, the closing price per Share was $22.00. On August 21, 1997, the last
full trading day prior to commencement of the Offer, the closing price per Share
was $21 9/16. See "THE TENDER OFFER -- Price Range of Shares".

Following consummation of the Offer, the Shares may cease to be listed on
The Nasdaq National Market and registration of the Shares under the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), may be terminated. In addition, as a result of
the Offer and the Merger, the Shares may cease to be "margin securities." See
"THE TENDER OFFER -- Effect of the Offer on the Market for the Shares, Exchange
Listing and Exchange Act Registration" for further information concerning the
effect of the de-listing and de-registration of the Shares or of the Shares no
longer being "margin securities".

6. PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER.

Pursuant to the Merger Agreement, promptly following consummation of the
Offer, Purchaser intends to effect the Merger in accordance with the terms
thereof. Following the Merger, the board of directors or equivalent body of
Purchaser (the "Purchaser Board"), which will be the parent of the Surviving
Corporation, will be composed of seven members, of whom one will be Mr. Rich,
four will be designees of Mr. Rich, one will be a designee of CSX and one will
be a designee of NSC. Accordingly, Mr. Rich and his designees will control a
majority of the Purchaser Board and will control the Company, other than with
respect to certain actions which, under the organizational documents of
Purchaser (the "LLC Agreement"), will require the concurrence of the
disinterested directors on the Purchaser Board to be effective. In addition, it
is expected that Mr. Rich will serve as President and Chief Executive Officer of
the Surviving Corporation following the Merger. While the definitive LLC
Agreement has not yet been negotiated, the Term Sheet (as defined herein) that
CSX, NCS and Mr. Rich agreed will be the basis for the LLC Agreement, provides
that, prior to the Merger, CSX, NSC and Mr. Rich will negotiate a mutually
acceptable initial business plan and budget for the management of the Surviving
Corporation's business and that the annual approval of a business plan and
budget for the Surviving Corporation, which business plan and budget will be
proposed by Mr. Rich the Purchaser Board in the first instance, will require the
concurrence of the nominees of the disinterested directors on the Purchaser
Board. CSX, NSC and Mr. Rich have agreed that the business plans and budgets
will be designed with the goals of (a) ensuring repayment of contributions and
(b) maximizing Purchaser's value, which may include the disposition of assets.
Therefore, such business plans and budgets may include the rationalization of
operations, disposition of assets and other significant transactions that may be
advisable in connection with the changing railroad environment in the
northeastern United States.

14
<PAGE> 17

For more information with respect to the Term Sheet, see "SPECIAL
FACTORS -- The Merger Agreement and Related Agreements." For more information
concerning the changing railroad environment in the northeastern United States,
see "SPECIAL FACTORS -- Background of the Offer and the Merger".

7. RIGHTS OF SHAREHOLDERS IN THE MERGER.

No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, shareholders may, if certain statutory procedures are
complied with, have certain rights under the NYBCL to dissent and demand
appraisal and to receive payment in cash for the fair value of their Shares.

The following summary of the applicable provisions of Sections 623 and 910
of the NYBCL is not intended to be a complete statement of such provisions and
is qualified in its entirety by reference to the full text of Sections 623 and
910 of the NYBCL, copies of which Sections 623 and 910 of the NYBCL are attached
as Schedule III hereto. A person having a beneficial interest in the Shares that
are held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.

Section 910 of the NYBCL sets forth the rights of shareholders of the
Company who object to the adoption of the Merger Agreement. Any record holder of
the Shares as of the record date for voting on the Merger who does not vote in
favor of the adoption of the Merger Agreement, or who duly revokes such holder's
vote in favor of the adoption of the Merger Agreement, may, if the Merger is
consummated, obtain payment, in cash, for the fair market value of such holder's
shares by strictly complying with the requirements of Section 623 of the NYBCL.

THIS SUMMARY AND SCHEDULE III SHOULD BE REVIEWED CAREFULLY BY HOLDERS OF
THE SHARES WHO WISH TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISH TO
PRESERVE THE RIGHT TO DO SO, BECAUSE FAILURE TO STRICTLY COMPLY WITH ANY OF THE
PROCEDURAL REQUIREMENTS OF SECTION 623 OR 910 OF THE NYBCL MAY RESULT IN A
TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 623 AND 910 OF THE
NYBCL.

A dissenting shareholder of the Company must file with the Company, before
the taking of the vote on the adoption of the Merger Agreement, a written
objection, including a notice of election to dissent, such holder's name and
residence address, the number and class of Shares as to which such holder
dissents (which number may not be less than all of the Shares as to which such
holder has a right to dissent) and a demand for payment of the fair value of
such Shares if the Merger is consummated. Any such written objection should be
addressed to: Delaware Otsego Corporation, 1 Railroad Avenue, Cooperstown, New
York 13326, Attention: Secretary.

Should the Purchaser acquire at least 90% of then issued and outstanding
Shares pursuant to the Offer, the Merger may be consummated pursuant to Section
905 of the NYBCL without shareholder approval. In order to elect to dissent in
the event of a merger pursuant to Section 905 of the NYBCL, a shareholder must
file a written notice of such election to dissent within 20 days after having
received a copy of the plan of merger or an outline of the material features
thereof.

For purposes of perfecting appraisal rights pursuant to Section 623 of the
NYBCL, the written objection of a holder of Shares which is addressed as
provided above shall be deemed filed with the Company upon receipt of such
objection by the Company. Neither voting against nor failure to vote for the
Merger Agreement will constitute the written objection required to be filed by
an objecting shareholder. Failure to vote against the Merger Agreement, however,
will not constitute a waiver of rights under Sections 623 and 910 of the NYBCL,
provided that a written objection has been properly filed. A shareholder voting
to adopt the Merger Agreement will be deemed to have waived such shareholder's
appraisal rights.

A shareholder of the Company may not dissent as to less than all the Shares
entitled to vote and held of record that such holder beneficially owns. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all the Shares of such beneficial owner, as to which such nominee or
fiduciary has a right

15
<PAGE> 18

to dissent, held of record by such nominee or fiduciary. Furthermore, if the
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, the demand must be made in that capacity, and, if the
Shares are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand must be made by or for all owners of record. An
authorized agent, including one of two or more joint owners, may execute the
demand for appraisal for a holder of record; however, such agent must identify
the record owner or owners and expressly state in such demand that the agent is
acting as agent for the record owner or owners of such Shares. A record holder,
such as a broker or an agent, who holds Shares as a nominee for beneficial
owners, some of whom desire to demand appraisal, must exercise appraisal rights
on behalf of such beneficial owners who desire to demand appraisal with respect
to the Shares entitled to vote and held for such beneficial owners.

Within 10 days after the vote of the Company shareholders authorizing the
adoption of the Merger Agreement, the Company must give written notice of such
authorization to each dissenting shareholder of the Company. At the time of
filing the notice of election to dissent or within one month thereafter, the
dissenting shareholder must submit certificates representing such holder's
Shares (the "Share Certificates") to the Company or their respective transfer
agents for notation thereon of the election to dissent, after which such Share
Certificates will be returned to the shareholder. Any such shareholder who fails
to submit such holder's Share Certificates for notation will, at the option of
the Company, exercised by written notice to the shareholder within 45 days from
the date of filing of the notice of election to dissent, lose such holder's
appraisal rights unless a court, for good cause shown, otherwise directs.

Within 15 days after the expiration of the period within which shareholders
may file their notices of election to dissent or within 15 days after the
Effective Time, whichever is later (but not later than 90 days after the
shareholders' vote authorizing the adoption of the Merger Agreement), the
Company must make a written offer (which, if the Merger has not been
consummated, may be conditioned upon such consummation) to each shareholder who
has filed such notice of election to dissent to pay for such holder's Shares at
a specified price which the Company considers to be their fair value. If the
Company and the dissenting shareholder are unable to agree as to such value,
Section 623(h) of the NYBCL provides for judicial determination of fair value.
In the event of such a disagreement, a court proceeding shall be commenced by
the Company in the Supreme Court of the State of New York, or by the dissenting
shareholder if the Company fails to commence the proceeding within the time
required by Section 623 of the NYBCL. The Company intends to commence such a
proceeding in the event of such a disagreement.

8. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER.

In considering the recommendations of the Company Board and the Special
Committee with respect to the Offer and the Merger and the fairness of the
consideration to be paid under the Offer and in the Merger, shareholders of the
Company should be aware that certain officers and directors of the Company have
interests in the Offer and the Merger, including those referred to below, that
present them with potential conflicts of interest. The Company has informed
Purchaser that the Special Committee and the Company Board were aware of these
potential conflicts prior to the approval and execution of the Merger Agreement.

The Company is party to an employment agreement with Mr. Rich dated June 3,
1995, as amended July 14, 1997 (the "Rich Agreement"). Under the Rich Agreement,
the Company employs Mr. Rich as its President and Chief Executive Officer for a
term of five years ending June 3, 2000 at a minimum annual compensation of
$187,000 (which was reduced with the consent of Mr. Rich in 1996 to $176,906)
and which may be increased during the term of the Rich Agreement at the
discretion of the Company Board. Under the terms of the Rich Agreement, Mr. Rich
is also entitled to insurance coverage under the Company's group life and health
insurance plans. The Rich Agreement may be terminated prior to its expiration at
the election of Mr. Rich or the Company (such election must be evidenced by
written notice), if the Company experiences a Change of Control (as defined
herein). Upon the giving of such termination notice (regardless of which party
gives such notice), the Company must pay Mr. Rich, subject to possible
adjustments for income tax effects, 2.99 times the highest annual cash
compensation (consisting solely of salary and bonus) paid to Mr. Rich during any
calendar year in each of the three calendar years immediately prior to the
Change of Control, and continue to provide to him for a period of 2.99 years
after such termination certain benefits provided to him

16
<PAGE> 19

prior to his termination. "Change of Control" is defined, under the terms of the
Rich Agreement, as (a) any change of control required to be reported to the
Commission in a Form 8-K Report, unless less than 40% of the Company's
outstanding voting securities are acquired, or (b) the sale of all or
substantially all of the Company's assets. The Rich Agreement has been filed as
part of an exhibit to the Schedule 14D-9 and is hereby incorporated herein by
reference. The Offer and Merger would constitute a Change of Control for
purposes of the Rich Agreement. However, Mr. Rich has advised the Company that
he does not expect to give or receive such termination notice, consistent with
the arrangements regarding his continuing employment with the Surviving
Corporation following the Merger. See "SPECIAL FACTORS -- Interests of Certain
Persons in the Merger".

Pursuant to the terms of the Company's 1987 and 1993 stock option plans,
the Company may grant Options to its executive officers and other employees, and
as of the date of the filing of the Offer, Options to purchase an aggregate of
164,049 Shares have been granted. Under the terms of the Merger Agreement, at
the Effective Time each Option, whether or not exercisable, other than Options
held in the treasury of the Company or owned by Purchaser, shall be canceled and
the holder thereof shall be entitled to receive cash in an amount equal to the
difference between the Offer Price and the per share exercise price thereof,
multiplied by the number of Shares subject to such Option. All Options currently
held by Company directors and executive officers of the Company are fully
exercisable.

Mr. Aftoora, a Company director whose term expires in 1999, is employed by
CSXT as Vice President -- Corridor Development. On May 9, 1997, Mr. Aftoora
requested and was granted a leave of absence from the Company Board due to his
assignment by CSX to a team of executives addressing issues related to the
impact of the Conrail acquisition by CSX and NSC on other carriers, including
the Company. Accordingly, Mr. Aftoora did not serve on the Company Board or
otherwise participate in the discussions or determinations made with respect to
the Offer and the Merger.

On January 31, 1996, the Company completed the purchase of a 40% interest
in TP&W. The Company currently owns such 40% interest in, and provides
administrative services to, TP&W. Other shareholders representing 40% of the
outstanding shares of TP&W, including Charles S. Brenner, a director of the
Company, are, upon a change in control of the Company, contractually entitled to
(a) require the Company to purchase those shareholders' shares of TP&W at a
price determined through negotiation, subject to certain agreed upon
limitations; and (b) if the parties fail to agree upon a price within such
limitations or the Company fails to acquire such shares of TP&W, then to cause
the sale of all or a portion of the stock or assets of TP&W in one or a series
of transactions for consideration at least sufficient to repay the TP&W's
commercial debt, and shall be entitled to priority for return of their equity
investment as to any remaining proceeds of such sale or sale(s). These described
contractual rights may also, regardless of a change in control of the Company,
be exercised at any time between November 2 and December 31 in the years 1999,
2000, 2001 and 2002. The Offer and the Merger would constitute a change in
control for purposes of such arrangements.

The Company's purchase of its interest in TP&W was made in connection with
a restructuring of TP&W's outstanding debt. CSX was then a creditor of TP&W,
with a claim asserted against TP&W for $5,200,000. In exchange for releasing its
claim, CSX received a $1,000,000 interest-bearing promissory note from the
Company, 100,000 Shares and 20% of the outstanding common shares of TP&W. CSX
has certain governance rights with respect to TP&W, including the right to
participation on its board of directors and the right to approve certain major
decisions.

The Company's subsidiary, NYS&W, operates over approximately 180 miles of
tracks owned by Conrail pursuant to a trackage rights agreement, which agreement
contains provisions which might be construed as permitting termination of the
agreement upon a change in control of NYS&W and/or the Company.

It is anticipated that at least one of the Company's executive officers
(Mr. Rich) will enter into an employment agreement with Purchaser. Although the
New Employment Agreement (as defined herein) has not yet been finalized, the
Term Sheet (as defined herein) provides that it will be for a term of three
years, renewable automatically for successive one-year terms unless Purchaser
gives written termination notice to Mr. Rich. Under the terms of the proposed
employment agreement, Mr. Rich will be Chairman and Chief

17
<PAGE> 20

Executive Officer of the Surviving Corporation. Mr. Rich's salary and benefits
are anticipated to remain at current levels. The Term Sheet has been filed as an
Exhibit to the Offer. Purchaser anticipates creating a management incentive
bonus program, which will provide cash bonuses to operating management upon
achievement of certain financial targets.

Mr. Rich and other ongoing Company management (which persons are to be
determined by Mr. Rich) will receive commissions on certain asset dispositions,
payable in cash at the rate of 7% of the gross consideration received by
Purchaser. A more detailed description of such commissions can be found under
"SPECIAL FACTORS -- The Merger Agreement and Related Agreements."

Indemnification

The Restated Certificate of Incorporation of the Company provides that the
Company director shall be personally liable to the Company or its shareholders
for damages for any breach of duty in such capacity unless a judgment
establishes that such director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, that such director
personally gained a financial profit or other advantage to which such director
was not legally entitled, or that such director's acts caused him to be liable
to the Company under Section 719 of the NYBCL. The Restated Certificate of
Incorporation of the Company has been filed as an Exhibit to the Schedule 14D-9
and is hereby incorporated herein by reference. In addition, Article XI of the
bylaws of the Company provide in pertinent part that the Company shall indemnify
(a) any person made a party to an action or proceeding by or in the right of the
Company to procure a judgment in its favor, by reason of the fact that such
person, such person's testator or intestate, is or was a director, officer or
employee of the Company, against the reasonable expenses actually and
necessarily incurred by such person in connection with the defense of such
action and/or with an appeal therein, and (b) any person made or threatened to
be made a party to any action or proceeding, other than one by or in the right
of the Company, which any director, officer or employee of the Company service
in any capacity at the request of the Company by reason of the fact that such
person, such person's testator or intestate, is or was a director, officer or
employee of the Company, or served such other corporation in any capacity,
against judgment, fines, amounts paid in settlement and reasonable expenses
actually and necessarily incurred as a result of such action. The Bylaws
incorporate the restrictions on indemnification to or on behalf of a director or
officer set forth in Section 721 of the NYBCL. A copy of the bylaws of the
Company has been filed as an Exhibit to the Schedule 14D-9 and is hereby
incorporated by reference.

Pursuant to the Merger Agreement, all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time existing in favor or the current or former directors or officers
of the Company (and its subsidiaries) will be assumed by the Surviving
Corporation and the Surviving Corporation will, for a period of one year after
the Effective Time, maintain the current policies of directors' and officers'
liability insurance maintained by the Company (or comparable policies with terms
not less advantageous to such directors and officers), but is not required to
expend more than 150% of the current annualized payments paid by the Company for
such insurance.

Beneficial Ownership of Common Stock. The Company has advised Purchaser as
follows: The following table sets forth certain information, as of August 20,
1997, regarding the ownership of the Shares by each person known by the Company
to be the beneficial owner of more than 5% of the outstanding Shares, each
director of the Company, the Chief Executive Officer of the Company, the four
most highly compensated officers of the Company and all executive officers and
directors of the Company as a group. All such persons, other than CSX and Mr.
Rich (to the extent of Mr. Rich's contribution to Purchaser), whose Shares or
Options will be contributed to Purchaser and canceled in the Merger, may receive
cash in the Offer or the Merger as shareholders.

18
<PAGE> 21

<TABLE>
<CAPTION>
Shares Beneficially Approximate
Name Owned(1) Percent Owned
---------------------------------------------- ------------------- --------------
<S> <C> <C>
Albert B. Aftoora............................. 1,846 *
Charles S. Brenner............................ 78,486(2) 4.1%
David B. Common............................... 50,702 2.7%
Niles F. Curtis............................... 5,741(3) *
Gordon R. Fuller.............................. 26,492(4) 1.4%
Paul Garber................................... 0 *
Everett A. Gilmour............................ 26,865 1.4%
Gerald D. Groff............................... 3,932 *
Richard J. Hensel............................. 8,930(5) *
Malcolm C. Hughes............................. 33,458(6) 1.8%
Robert L. Marcalus............................ 34,312 1.8%
Richard T. Nasti.............................. 1,736 *
Harvey J. Polly............................... 6,511 *
Walter G. Rich................................ 274,465(7) 14.5%
C. David Soule................................ 11,808(8) *
Richard A. White.............................. 22,274 1.2%
CSXT.......................................... 110,250 5.8%
All executive officers and directors as a
group (25 individuals)...................... 622,212(9) 32.8%
</TABLE>

- ---------------
* Less than 1%

(1) Includes the following number of Shares issuable to the following
individuals upon exercise of Options granted under the Company's Option
plans: 1,914 Shares to Messrs. Curtis, Gilmour, Hughes, Marcalus, Polly and
White; 1,736 Shares to Messrs. Aftoora, Brenner, Common, Groff and Nasti;
8,698 Shares to Mr. Rich; and 11,506 Shares to Mr. Soule. Also includes the
following number of Shares issuable to the following individuals upon
conversion of the Company's 6.5% convertible subordinated notes due
September 1, 2003 (the "Convertible Notes"): Messrs. Brenner (54,562
Shares), Common (19,841 Shares), Gilmour (2,976 Shares), Groff (992 Shares),
Hughes (2,976 Shares), Marcalus (4,960 Shares), Rich (9,920 Shares) and
White (992 Shares).

(2) Includes 10,387 Shares held by Mr. Brenner as custodian of minor children,
and 1,274 Shares held by Mr. Brenner's wife.

(3) Excludes 132 Shares held by Mr. Curtis' son, as to which Shares Mr. Curtis
disclaims beneficial ownership.

(4) Includes 1,433 Shares issuable upon exercise of Options.

(5) Includes 6,830 Shares issuable upon exercise of Options.

(6) Excludes 1,071 Shares held by Mr. Hughes' daughter, as to which Shares Mr.
Hughes disclaims beneficial ownership.

(7) Includes 8,698 Shares issuable upon exercise of Options and 9,920 Shares
issuable upon conversion of Convertible Notes.

(8) Includes 11,506 Shares issuable upon exercise of Options.

(9) Includes 78,901 Shares issuable upon exercise of Options and 97,219 Shares
issuable upon conversion of the Convertible Notes.

Mr. Rich may be deemed to have an interest in the Offer and the Merger by
virtue of his ownership of Shares, as described above, as well as by virtue of
arrangements with respect to his membership interest in Purchaser, governance
rights with respect to Purchaser and continued employment with the Company
following the Merger. For a description of such arrangements, see "SPECIAL
FACTORS -- The Merger Agreement and Related Agreements". CSX may be deemed to
have an interest as a result of its ownership of

19
<PAGE> 22

TP&W shares. See "THE TENDER OFFER -- Certain Information Concerning Purchaser,
CSX, NSC and Mr. Rich".

The Company has advised Purchaser that, to the best of the Company's
knowledge, all of the Company's executive officers and directors who own Shares
currently intend to tender all of their Shares pursuant to the Offer (other than
Shares held by Mr. Rich, a portion of which will be contributed to the
Purchaser, and other than Shares, if any, held by an executive officer or
director that, if tendered, could cause such person to incur liability under the
provisions of Section 16(b) of the Exchange Act).

9. THE MERGER AGREEMENT AND RELATED AGREEMENTS.

The following is a summary of the material terms of the Merger Agreement, a
copy of which is filed as an exhibit to the Tender Offer Statement on Schedule
14D-1 filed by CSX, NSC, Mr. Rich and Purchaser pursuant to Rule 14d-3 of the
Exchange Act and the Transaction Statement on Schedule 13E-3 filed by Purchaser,
CSX, NSC and Mr. Rich pursuant to Rule 13e-3 of the Exchange Act with the
Commission in connection with the Offer (together with any amendments,
supplements, schedules, annexes and exhibits thereto, the "Schedule 14D-1" and
the "Schedule 13E-3", respectively). Such summary is qualified in its entirety
by reference to the Merger Agreement, which is filed as an Exhibit to the Offer.

The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable after the execution of the Merger
Agreement, but in no event later than five business days following the public
announcement of the terms of the Merger Agreement. The Merger Agreement further
provides that Purchaser shall not be required to accept for payment or pay for
any Shares tendered pursuant to the Offer if the Shares tendered pursuant to the
Offer and not withdrawn, together with the Shares owned by Purchaser or any
subsidiary of Purchaser or to be contributed to Purchaser pursuant to binding
agreements (which Purchaser, in its sole discretion, believes will be
performed), do not satisfy the Minimum Condition, and if certain other
conditions that are described in "THE TENDER OFFER -- Certain Conditions of the
Offer" are not satisfied. The parties to the Merger Agreement have agreed that,
without the consent of the Company, no change in the terms or conditions of the
Offer may be made which is adverse to the holders of Shares, decreases the Offer
Price or the number of Shares sought in the Offer or imposes conditions to the
Offer other than those described in "THE TENDER OFFER -- Certain Conditions of
the Offer". If on any scheduled Expiration Date all conditions to the Offer
shall have been satisfied, but less than a number of Shares that, together with
the number of Shares to be contributed by CSX and Mr. Rich to Purchaser,
represents less than 90% of the outstanding Shares, on a fully diluted basis,
shall have been tendered into the Offer, Purchaser may extend the Offer from
time to time without the consent of the Company (for not more than 10 business
days) in order to permit Purchaser to solicit additional Shares to be tendered
into the Offer. In addition, if on any scheduled expiration date of the Offer
all conditions to the Offer shall not have been satisfied or waived, the Offer
may, but need not, be extended by the Purchaser from time to time without the
consent of the Company for such period of time as is reasonably expected by
Purchaser to be necessary to satisfy the unsatisfied conditions.

The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions set forth in the Merger Agreement, and in accordance with the
NYBCL, at the Effective Time, Buyer will be merged with and into the Company.
The Merger Agreement provides that the Merger will become effective when a
certificate of merger is filed with the Secretary of State of the State of New
York or at such later time, such time not to exceed 30 days from the date of
such filing, as specified in such certificate of merger (the "Effective Time").
As a result of the Merger, the separate corporate existence of Buyer will cease,
and the Company will continue as the Surviving Corporation. At the election of
Purchaser, any direct or indirect wholly owned subsidiary of Purchaser may be
substituted for Buyer as a constituent party of the Merger. In such event, the
parties to the Merger Agreement have agreed to execute an appropriate amendment
to the Merger Agreement to reflect such substitution.

Purchaser or the Depositary shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to the Merger Agreement to any
holder of Shares such amounts that Purchaser or the Depositary is required to
deduct and withhold with respect to the making of such payment under the United

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<PAGE> 23

States Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"), or any provision of United States state or
local, or foreign tax law.

Pursuant to the Merger Agreement, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held by the Company,
its subsidiary or by Purchaser or its subsidiary, which will be canceled and
extinguished without consideration, or Shares as to which appraisal rights are
exercised) shall be converted into the right to receive an amount in cash equal
to the Offer Price, without interest. In addition, each share of common stock of
Buyer issued and outstanding immediately prior to the Effective Time shall be
converted into and become one share of a class of capital stock of the Surviving
Corporation with the same rights, powers and privileges as the share of capital
stock so converted, and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation. Each Share or Option held by the Company or
its subsidiary or by Purchaser or its subsidiary, including each Share or Option
to be contributed to Purchaser by CSX and Mr. Rich, will be cancelled and
extinguished without consideration. Notwithstanding any other provision of the
Merger Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by shareholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall be entitled to and shall
have demanded properly in writing payment for such Shares in accordance with
Sections 910 and 623 of the NYBCL and who shall not have withdrawn such demand
or otherwise have forfeited appraisal rights shall not be converted into or
represent the right to receive cash pursuant to the Merger Agreement.

The Merger Agreement provides that the directors of Buyer at the Effective
Time will be the directors of the Surviving Corporation and that the officers of
the Company at the Effective Time will be the officers of the Surviving
Corporation, in each case, until successors are duly elected or appointed and
qualified in accordance with applicable law. The Merger Agreement also provides
that the certificate of incorporation of Buyer in effect at the Effective Time
will be the certificate of incorporation of the Surviving Corporation, and that
the bylaws of Buyer will be the bylaws of the Surviving Corporation, in each
case, until amended in accordance with applicable law.

At the Effective Time, each holder of an Option, whether or not then
exercisable, other than those to be canceled as provided above, shall become
entitled to receive in full consideration therefor from the Surviving
Corporation, for each such Option, cash in an amount equal to the product of (a)
the difference between the Offer Price and the per Share exercise price thereof
and (b) the number of Shares subject to such Option.

Upon consummation of the Merger, warrants (the "Warrants) to purchase
66,150 Shares, pursuant to the Warrant Agreement, dated as of January 31, 1996,
by and between the Company and Creditanstalt Corporate Finance, Inc., and the
Convertible Notes shall cease to represent any right to purchase or otherwise
obtain any capital stock of the Company or the Surviving Corporation, and all
rights of the holders of such Warrants and Convertible Notes to purchase or
otherwise obtain any capital stock of the Company shall, pursuant to the terms
of such instruments, solely represent the right, upon proper exercise or
conversion of such instruments, to obtain an amount in cash equal to the product
of the Offer Price and the number of Shares for or into which such Warrants or
Convertible Notes were exercisable or convertible immediately prior to the
Effective Time.

Conduct of Business Prior to Consummation of the Merger. The Merger
Agreement provides that the Company shall, if required by applicable law in
order to consummate the Merger, as promptly as practicable following
consummation of the Offer, duly call, give notice of, convene and hold a meeting
of shareholders to consider approval and adoption of the Merger and the Merger
Agreement. At such a meeting, each of Purchaser, CSX, NSC and Mr. Rich shall
vote all Shares then owned by such person in favor of approving the Merger
Agreement and the transactions contemplated thereby. Notwithstanding the
foregoing, in the event that at any time Purchaser acquires at least 90% of the
outstanding Shares, Purchaser and the Company have agreed to take all necessary
and appropriate action to cause the Merger to become effective, in accordance
with Section 905 of the NYBCL, as promptly as practicable after expiration of
the Offer and the satisfaction or waiver of the conditions set forth in Article
VII of the Merger Agreement without a meeting of shareholders.

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<PAGE> 24

The Merger Agreement provides that the Company shall, if required by
applicable law in connection with the Merger, as promptly as practicable after
consummation of the Offer, prepare and file with the Commission a proxy or
information statement relating to the meeting of shareholders, under the
Exchange Act (together with any supplements and amendments thereto, the "Proxy
Statement"), and shall use its reasonable best efforts to have such Proxy
Statement cleared by the Commission. Purchaser, CSX, NSC and Mr. Rich shall
furnish to the Company all information concerning such party as the Company may
reasonably request in connection with the preparation of the Proxy Statement.
The Company is required to include in the Proxy Statement the determination and
recommendation of the Company Board to the effect that the Company Board, having
determined that the Merger Agreement and the transactions contemplated therein,
including the Offer and the Merger, are fair to and in the best interests of the
Company and the holders of Shares (other than CSX and Mr. Rich), has approved
and adopted the Merger Agreement and the transactions contemplated hereby, and,
unless otherwise required due to the applicable fiduciary duties of the Company
Board as determined by the members thereof in good faith based on the advice of
outside counsel, recommends that such holders vote in favor of the approval and
adoption of the Merger Agreement and the Merger.

Pursuant to the Merger Agreement, the Company has agreed that, among other
things and subject to certain exceptions, between the date of the Merger
Agreement and the Effective Time, other than with Purchaser's prior written
consent, the Company and its subsidiaries shall not, voluntarily or
involuntarily, (a) take any action, regulatory or otherwise, inconsistent with
facilitating the transactions contemplated by the Merger Agreement or (b) take
any of the following actions: (i) conduct its business in any manner other than
in the ordinary course of business and in a manner consistent with past practice
and in compliance in all material respects with all applicable laws and
regulations, and, to the extent consistent therewith, shall not fail to use all
reasonable efforts to preserve intact their current business organizations, use
reasonable efforts to keep available the services of their current officers and
other key employees as a group and preserve their relationships with those
persons having business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Time; (ii) adopt,
propose or agree to any amendment of its articles of incorporation, bylaws or
other comparable organizational documents; (iii) issue, deliver, sell, pledge or
otherwise encumber (A) any Shares or shares of capital stock of any of its
subsidiaries, or, subject to certain exceptions, any rights, options or warrants
to acquire any such shares or (B) any material assets or properties; (iv) other
than dividends and distributions by a direct or indirect wholly owned subsidiary
of the Company to its parent, (A) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, in respect
of any capital stock, (B) subdivide, reclassify, recapitalize, split, combine or
exchange any shares of the Company or any of its subsidiaries, (C) issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of the Company or any of its
subsidiaries, or (D) purchase, redeem or otherwise acquire any capital stock of
the Company or any of its subsidiaries or any securities thereof, or any rights,
warrants or options to acquire any such shares or securities; (v) incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to acquire
any debt securities of the Company or its subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice and pursuant to existing agreements, or make any loans,
advances or capital contributions to, or investments in, any other person, other
than to the Company or one of its subsidiaries; (vi) except for expenditures
made under the Company's capital budget, make or agree to make any new capital
expenditure or new capital expenditures which individually is in excess of
$50,000 or in the aggregate is in excess of $100,000; (vii) increase the
compensation payable or to become payable to its executive officers, employees
or consultants or grant any bonus, incentive, severance or termination pay to,
or enter into any commission, bonus, incentive, employment or severance
agreement with, any director, executive officer or consultant of it or any of
its subsidiaries, or establish, adopt, enter into or amend in any material
respect or take action to accelerate any rights or benefits under any collective
bargaining agreement or any Company employee benefit plan, agreement or policy;
(viii) enter into, modify, amend or terminate any material contract or agreement
involving the assets or properties of the Company or to which the Company or

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<PAGE> 25

any of its subsidiaries is a party or waive, release or assign any material
rights or claims thereunder; (ix) make any change to its accounting methods,
principles or practices, except as may be required by general accounting
principles or take any other action, other than reasonable and usual actions in
the ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures (including tax accounting policies and
procedures); (x) make any material tax election or settle or compromise any
material income tax liability; (xi) acquire by merger or consolidation, or by
purchase of assets, or by any other manner, any business; (xii) mortgage or
otherwise encumber or subject to lien any of its properties or assets; (xiii)
pay, discharge, settle or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction of
such claims, liabilities or obligations in the ordinary course of business
consistent with past practice or in accordance with their terms; (xiv) (A) enter
into any agreement containing any provision or covenant limiting in any material
respect the ability to compete with any person which would bind any party to the
Merger Agreement (or its operations) after the Effective Time or (B) except to
the extent required by any existing disclosed contract or agreement, acquire any
interest in any railroad line or terminal facility or dispose of any interest in
any railroad line or terminal facility owned, used or operated by the Company or
its subsidiary (including through a grant of concessions or trackage rights); or
(xv) authorize or commit or agree to take any of the foregoing actions.

Other Covenants. Under the Merger Agreement, the Company is obligated,
until the Effective Time, to allow the officers, employees and agents of each of
the other parties to the Merger Agreement and its respective subsidiaries (the
"Respective Representatives") reasonable access at all reasonable times to its
officers, employees, agents, properties, offices, plants and other facilities,
books and records, and shall furnish to such Respective Representatives all
financial, operating and other data and information as may be reasonably
required. All such information obtained is subject to certain confidentiality
arrangements set forth in the Merger Agreement.

Further Action; Best Efforts. Under the Merger Agreement, each of the
parties to the Merger Agreement has agreed to (i) make promptly its respective
filings, and thereafter make any other required submissions, under any
applicable laws with respect to the transactions contemplated thereby and not
make any filing or submission, and the Company may not take any position, in
connection with regulatory authorities (in respect of the transactions
contemplated hereby or otherwise) without the consent of Mr. Rich, CSX and NSC
and (ii) use its best efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate and
make effective the transactions contemplated thereby. In connection with, and
without limiting the foregoing, each of the parties to the Merger Agreement has
agreed to take all actions necessary to ensure that no state anti-takeover
statute or similar statute or regulation is or becomes operative with respect to
the Merger Agreement, the Offer, the Merger or any other transaction
contemplated by the Merger Agreement and (ii) if any state anti-takeover statute
or similar statute or regulation is or becomes operative with respect to the
Merger Agreement, the Offer, the Merger or any other transaction contemplated by
the Merger Agreement, take all actions necessary to ensure that the Merger
Agreement, the Offer, the Merger and any other transactions contemplated by the
Merger Agreement may be consummated as promptly as practicable on the terms
contemplated by the Merger Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger, the Offer and the other transactions
contemplated by the Merger Agreement.

Publicity. Pursuant to the Merger Agreement, CSX, NSC, Mr. Rich and the
Company have agreed to consult with one another before issuing any press release
or otherwise making any public statements with respect to the Merger Agreement
or the transactions contemplated thereby. CSX, NSC, Mr. Rich and the Company
have further agreed not to issue any such press release or public statement
without the prior consent of the other parties, except as may be required by law
or any listing agreement with a national securities exchange by which such party
is bound, if such party has used reasonable efforts to consult with the other
parties and to obtain such parties' consent but has been unable to do so in a
timely manner.

No Solicitation. In the Merger Agreement, the Company has agreed that it
will not, nor will it permit any subsidiary of the Company, or its or any such
subsidiary's officers, directors, employees, agents or

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<PAGE> 26

representatives (including, without limitation, any investment banker, attorney
or accountant) to initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to an Alternative
Transaction (as defined herein), engage in any discussions or negotiations
concerning, or provide to any other person any information or data relating to
it or any subsidiary of the Company for the purposes of, or otherwise cooperate
in any way with or assist or participate in, facilitate or encourage, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, a proposal to seek or effect an Alternative Transaction, or
agree to or endorse any Alternative Transaction; provided, however, that the
foregoing will not prohibit the Company or the Company Board from taking and
disclosing to its shareholders a position as required by Exchange Act Rule
14e-2; and provided further that, prior to acceptance for payment of any Shares
pursuant to the Offer, the Company Board, on behalf of the Company, may, in
response to an unsolicited, bona fide Superior Proposal (as defined herein),
furnish information or data (including confidential information or data)
relating to the Company and participate in negotiations with a person making
such unsolicited Superior Proposal, but only after such person enters into
arrangements regarding confidentiality on terms at least as favorable to the
Company as the confidentiality arrangements contained in the Merger Agreement
and only in the event that (a) the Company Board determines in good faith, on
the basis of advice of independent counsel furnished prior thereto to Purchaser,
that such action is legally required by the fiduciary obligations of the Company
Board and (b) the Company advises Purchaser of its intention to make such
determination to do so prior thereto. The Company will promptly advise Purchaser
of, and communicate the terms of, any proposal respecting an Alternative
Transaction it may receive, or any inquiries it receives which may reasonably be
expected to lead to a proposal respecting an Alternative Transaction, and the
identity of the person making such proposal. Prior to taking any such action, if
the Company intends to participate in any such discussion or negotiation or
provide any such information or data to any such third party, it will give
reasonable notice to Purchaser and will consult, and thereafter will continue to
consult, with Purchaser. Notwithstanding the foregoing, the foregoing will not
(a) permit the Company to enter into any agreement with respect to or to
facilitate an Alternative Transaction during the term of the Merger Agreement
(it being understood that the Company will not enter into any agreement with any
person that provides for, or in any way facilitates, the development of a
proposal for an Alternative Transaction, other than a confidentiality agreement
in customary form in respect of a Superior Proposal as described above) or (b)
affect any other obligation of the Company under the Merger Agreement.

For purposes of the Merger Agreement, "Alternative Transaction" means a
transaction or series of related transactions resulting in (a) any change of
control of the Company, (b) any merger or consolidation of the Company in which
another person acquires 25% or more of the aggregate voting power of all voting
securities of the Company or the Surviving Corporation, as the case may be, (c)
any tender offer or exchange offer for, or any acquisitions of, any securities
of the Company which, if consummated, would result in another person owning 25%
or more of the aggregate voting power of all voting securities of it or (d) any
sale or other disposition of assets of the Company or any of its subsidiaries if
the Fair Market Value (as defined herein) of such assets exceeds 25% of the
aggregate Fair Market Value of the assets of the Company and all its
subsidiaries taken as a whole before giving effect to such sale or other
disposition. For purposes of the Merger Agreement, the "Fair Market Value" of
any assets or securities means the fair market value of such assets or
securities, as determined by the Company Board in good faith. For purposes of
the Merger Agreement, "Superior Proposal" means a bona fide proposal made by a
third party for an Alternative Transaction on terms which the Company Board
determines in its good faith judgment to be more favorable to the shareholders
than the Offer and the Merger and for which financing, to the extent required,
is then committed or which, in the good faith judgment of the Company Board, is
reasonably capable of being obtained by such third party.

Conditions to the Merger. Under the Merger Agreement, the respective
obligations of the Company and Purchaser to effect the Merger are subject to the
satisfaction or waiver of the following conditions prior to the Effective Time:
(a) if required by the NYBCL, the Merger Agreement and the Merger shall have
been approved and adopted by the requisite vote of the shareholders of the
Company; (b) no United States federal or state, or foreign governmental
authority or other agency or commission (each a "Governmental Entity") or United
States federal or state, or foreign court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which materially delays,
restricts,

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<PAGE> 27

prevents or prohibits consummation of the transactions contemplated by the
Merger Agreement, provided however, that the parties to the Merger Agreement
will use their reasonable efforts to cause any such decree, judgment, injunction
or other order to be vacated or lifted; and (c) subject to certain exceptions,
other than the filing of Merger documents in accordance with the NYBCL, all
material authorizations and other approvals shall have been obtained from, and
made with, all required Governmental Entities.

In addition, prior to consummation of the Offer, the obligations of the
Company to effect the Merger are subject to the satisfaction or waiver of the
following condition prior to the Effective Time: none of Purchaser, Buyer, CSX,
NSC or Mr. Rich shall have breached or failed to observe or perform in any
material respect any of its or his covenants or agreements in favor of the
Company under the Merger Agreement to be performed by it or him at or prior to
the Effective Time, and the representations and warranties of Purchaser, Buyer,
CSX, NSC and Mr. Rich set forth in the Merger Agreement shall be true and
accurate both when made and at and as of the Effective Time, as if made at and
as of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the breach or failure to observe or
perform such covenants and agreements, or the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" or similar language
set forth therein), does not, and is not likely to, individually or in the
aggregate, prevent consummation of the Merger.

In addition, the obligations of Purchaser to effect the Merger are subject
to the satisfaction or waiver of the following conditions prior to the Effective
Time: (a) the Company shall not have breached or failed to observe or perform in
any material respect any of its covenants or agreements under the Merger
Agreement to be performed by it at or prior to the Effective Time, and the
representations and warranties of the Company set forth in the Merger Agreement
shall be true and accurate both when made and at and as of the Effective Time,
as if made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the breach or failure
to observe or perform such covenants and agreements, or the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "materiality" or "material adverse effect" or similar
language set forth therein), does not have, and is not likely to have,
individually or in the aggregate, a material adverse effect with respect to the
Company or Buyer; and (b) at any time after the date of the Merger Agreement,
there shall not have occurred any material adverse effect with respect to the
Company.

Representations and Warranties. The Merger Agreement contains customary
representations and warranties by the Company, Purchaser, Buyer, CSX, NSC and
Mr. Rich.

Indemnification and Insurance. Pursuant to the Merger Agreement,
Purchaser, CSX, NSC and Mr. Rich have agreed that all rights to indemnification
and exculpation from liabilities for acts or omissions occurring at or prior to
the Effective Time now existing in favor of the current or former directors and
officers of the Company and its subsidiaries as provided in their respective
certificates of incorporation or bylaws and any indemnification agreements in
effect as of the Company which do not constitute a breach of the Merger
Agreement will be assumed by the Surviving Corporation in the Merger without
further action as of the Effective Time, and will survive the Merger and will
continue in full force and effect in accordance with their respective terms.

The Merger Agreement provides that the Surviving Corporation will, for a
period of one year after the Effective Time, maintain in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that the Surviving Corporation may substitute policies of at
least the same coverage) with respect to claims arising from facts or events
which occurred before the Effective Time; provided, however, that in no event
will the Surviving Corporation be required to expend more than an amount equal
to 150% of the current annualized premiums paid by the Company for such
insurance.

Termination; Fees and Expenses. The Merger Agreement may be terminated at
any time prior to the Effective Time, in the case of Purchaser, or prior to the
purchase of Shares under the Offer, in the case of the Company, whether before
or after approval of the Merger and the Merger Agreement by the shareholders of
the Company: (a) by mutual consent of Purchaser and the Company; (b)(i) by
Purchaser, upon a material breach of any covenant or agreement on the part of
the Company set forth in the Merger Agreement which

25
<PAGE> 28

has not been cured or is incapable of being cured within 30 days after the
giving of written notice to the Company of such breach or untruth, provided that
such breach or untruth is material and that Purchaser is not then in material
breach of the Merger Agreement or (ii) by the Company, in the event of a
material breach of any representation, warranty, agreement or covenant of
Purchaser set forth in the Merger Agreement that has not been cured within 30
days after the giving of written notice to Purchaser and will prevent
consummation of the Merger, provided that the Company is not then in material
breach of the Merger Agreement; (c) by either Purchaser or the Company, if any
permanent injunction or action by any Governmental Entity preventing the
consummation of the Merger shall have become final and nonappealable; (d) by
either Purchaser or the Company, if the Effective Time shall not have occurred
on or before June 30, 1998, provided, that the right to terminate the Merger
Agreement under such clause shall not be available to any party whose failure to
perform any of its obligations thereunder results in the failure of the Merger
to be consummated by such date; (e) by Purchaser, (i) if the Company Board or
any committee thereof shall withdraw, modify or change its recommendation so
that it is not in favor of the Merger Agreement, the Offer or the Merger (or
make any recommendation in favor of an Alternative Transaction), or shall have
resolved to do any of the foregoing or (ii) if the Company shall take any action
that would be proscribed by the provisions of the Merger Agreement set forth
above under "No Solicitation" but for the exceptions contained in such
provisions; or (f) by Purchaser, if the Company Board or any committee thereof
shall have approved or entered into an agreement respecting a Superior Proposal
or recommended or resolved to recommend to its shareholders a Superior Proposal,
or by the Company in connection with the Company Board or any committee thereof
approving or entering into an agreement respecting a Superior Proposal, provided
that, in the case of any such termination by the Company, the Company complies
with the provisions of the Merger Agreement set forth in the paragraphs
following, and prior thereto has complied with the provisions of the Merger
Agreement set forth above under "No Solicitation," and provided further that the
party seeking to terminate under such clause is not then in material breach of
the Merger Agreement. No party to the Merger Agreement may rely on the failure
of any condition set forth in the Merger Agreement to be satisfied if such
failure was caused by such party's failure to use reasonable efforts to
consummate the transactions contemplated by the Merger Agreement.

In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void and there shall be no liability on the
part of any party thereto, except as otherwise described herein, except nothing
therein shall relieve any party thereto from liability for any willful breach
thereof.

The Merger Agreement provides that, except as otherwise provided therein,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred by the parties thereto
will be borne solely and entirely by the party which has incurred such costs and
expenses (with respect to such party, its "Expenses"); provided that, except in
the event that the payment provided in the following sentence becomes payable,
if the Company breaches any material term of this Agreement or if the Merger is
not consummated, and this Agreement is thereafter terminated, and within one
year of the date of such termination the Company enters into an agreement
respecting an Alternative Transaction, the Company will pay the reasonable fees
and expenses of one firm of legal counsel advising Mr. Rich, up to $50,000, plus
50% of any such fees in excess of $50,000, for the benefit of Mr. Rich in
connection with the transactions contemplated by the Merger Agreement. In
addition, if (i) the Merger Agreement shall be terminated by Purchaser pursuant
to the provisions summarized under clause (e) above or by Purchaser or the
Company pursuant to the provisions summarized under clause (f) above, or (ii)
(A) after the date of the Merger Agreement any person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) shall have publicly made a
proposal with respect to an Alternative Transaction, (B) the Offer shall have
remained open until at least the scheduled expiration date immediately following
the date such proposal is made, (C) the Minimum Condition shall not have been
satisfied at the expiration of the Offer and (D) the Merger Agreement shall
thereafter be terminated pursuant to the provisions summarized under clause (d)
above, then the Company shall pay to Purchaser $3,000,000 plus all Expenses of
Purchaser, CSX, NSC and Mr. Rich as promptly as practicable but not later than
two business days after termination of the Merger Agreement (unless required
simultaneously with termination under the provisions summarized under clause (f)
above) by wire transfer of immediately available funds to an account designated
by Purchaser.

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<PAGE> 29

Amendment; Waiver. The Merger Agreement may be amended by the parties to
the Merger Agreement in writing at any time prior to the Effective Time,
provided, however, that, after the approval of the Merger by the shareholders of
the Company, no amendment, which under applicable law may not be made without
the approval of the shareholders of the Company, may be made without such
approval. According to its terms, the Merger Agreement may not be amended except
by an instrument in writing signed by the parties thereto. At any time prior to
the Effective Time, any of the parties to the Merger Agreement may in writing
extend the time period for the performance of any of the obligations of another
party thereto, waive any inaccuracies in the representations and warranties of
another party thereto, or waive compliance by another party thereto with any of
the agreements or conditions contained in the Merger Agreement. Any such
extension or waiver will be valid only if set forth in writing signed by the
parties to be bound by such extension or waiver.

Guarantee. The obligations in the Merger Agreement with respect to the
transactions contemplated by the Merger Agreement are solely obligations of
Purchaser and Buyer and are guaranteed by each of CSX and NSC on a 50% basis.
The parties to the Merger Agreement agree and understand that, prior to the
consummation of the Offer, all rights of Purchaser and Buyer under the Merger
Agreement will be exercised solely by CSX and NSC acting collectively.

The Term Sheet. On August 17, 1997 CSX, NSC and Mr. Rich entered into a
letter agreement (the "Letter Agreement") to set forth their understanding with
respect to the transaction. The Letter Agreement provides, among other things,
(a) that CSX, NSC and Mr. Rich shall negotiate in good faith towards definitive
documentation in connection with final arrangements with respect to the
transaction along the lines set forth in the Term Sheet attached to their
proposal letter to the Company, dated August 8, 1997, as modified by the Merger
Agreement (as so modified, the "Term Sheet") and (b) that, in the event of the
termination of the Merger Agreement, Mr. Rich shall not participate in any
termination fee under the Merger Agreement other than with respect to any
arrangements which may exist respecting Expenses. The foregoing summary of the
material terms of the Letter Agreement is qualified in its entirety by reference
to the Letter Agreement, a copy of which has been filed with the Commission as
an Exhibit to the Schedule 14D-1 and the Schedule 13E-3. While the parties have
agreed to negotiate definitive final arrangements along the lines set forth in
the Term Sheet, such arrangements have yet to be negotiated and may vary from
the Term Sheet to the favor or disfavor any of CSX, NSC or Mr. Rich.

The following summary of certain provisions of the Term Sheet is qualified
in its entirety by reference to the Term Sheet, a copy of which has been filed
with the Commission as an Exhibit to the Schedule 14D-1 and the Schedule 13E-3.

Capitalization of Purchaser.

The Term Sheet provides that two series of a single class of senior
preferred interests of Purchaser (each, a "Senior Preferred Interest") will be
established, which two series will differ only as to redemption, one class of
junior preferred interests of Purchaser (each, a "Junior Preferred Interest")
and one class of common interests of Purchaser (each, a "Common Interest", and
with the Senior Preferred Interests and the Junior Preferred Interests, the
"Interests"). The Interests will have rights, preferences and privileges as
follows.

The Senior Preferred Interests will have distribution and liquidation
preference over all other Interests. Distributions on Senior Preferred Interests
will cumulate at the rate of 10% compounded annually until the Purchaser Board
determines that sufficient cash is available to pay distributions in cash. The
series of Senior Preferred Interests held by CSX and NSC (but not the series
held by Mr. Rich) will have a redemption preference over all other Interests.
Upon redemption, Senior Preferred Interests will be redeemed at liquidation
preference plus accrued and unpaid distributions. The series of Senior Preferred
Interests held by CSX and NSC will be mandatorily redeemable upon achieving
certain cash levels from cash flow from operations and from dispositions of
assets; the series of Senior Preferred Interests held by Mr. Rich will be
redeemable at Mr. Rich's option at any time at which there is to be a cash
redemption of the series of Senior Preferred Interests held by CSX and NSC or of
Junior Preferred Interests. Senior Preferred Interests will be redeemed ratably
when redeemed for cash.

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<PAGE> 30

The Junior Preferred Interests will have a distribution, liquidation and
redemption preference over all Common Interests, but will be subordinate, with
respect to distributions and liquidation payments, to all Senior Preferred
Interests (and, with respect to all redemption payments, to the series of Senior
Preferred Interests held by CSX and NSC, but not to the series held by Mr.
Rich). Distributions on Junior Preferred Interests will cumulate at the rate of
4% compounded annually until the Purchaser Board determines that sufficient cash
is available to pay distributions in cash, provided that no distributions on
Junior Preferred Interests will be paid until all Senior Preferred Interests,
with cumulative distributions, have been redeemed. Junior Preferred Interests
will be mandatorily redeemable following redemption of the series of Senior
Preferred Interests held by CSX and NSC at liquidation preference plus accrued
and unpaid distributions, upon achieving certain cash levels from cash flow from
operations and from dispositions of assets. Junior Preferred Interests (and, if
applicable, Senior Preferred Interests held by Mr. Rich) will be redeemed
ratably when redeemed for cash.

Common Interests will be the only Interests entitled to vote. No
distributions or liquidation payments shall be made on Common Interests until
all Senior Preferred Interests, with cumulative distributions, and all Junior
Preferred Interests, with cumulative distributions, have been redeemed.

Contributions To Purchaser.

The Term Sheet provides that (a) Mr. Rich will contribute a portion of his
Shares and Options to Purchaser having an aggregate value of approximately
$3,013,247, in exchange for a Senior Preferred Interest and a Common Interest as
set forth below, (b) CSX will contribute to Purchaser its 110,250 Shares (the
"CSX Share Contribution") having an aggregate value of approximately $2,425,500,
together with 50% of the cost to acquire all outstanding Shares in the Offer and
the Merger (other than the Shares to be contributed to Purchaser by Mr. Rich and
CSX) and related Expenses (after taking into account the value, based upon the
Offer Price, of the CSX Share Contribution) in cash in exchange for a Senior
Preferred Interest, a Junior Preferred Interest and a Common Interest as set
forth below, (c) NSC shall contribute 50% of the cost to acquire all outstanding
Shares in the Offer and the Merger (other than the Shares to be contributed to
Purchaser by Mr. Rich and CSX) and related Expenses in cash, in exchange for a
Senior Preferred Interest, a Junior Preferred Interest and a Common Interest as
set forth below.

Interests of Members in Purchaser.

The Term Sheet provides that (a) the Common Interests shall be owned 80% by
Mr. Rich, 10% by CSX and 10% by NSC, (b) Mr. Rich shall receive a Senior
Preferred Interest, and, to the extent that Mr. Rich contributes Options to
Purchaser, an option to purchase a Senior Preferred Interest, with a liquidation
preference equal to the value of the Shares and Options, respectively,
contributed to Purchaser by Mr. Rich, (c) each of CSX and NSC shall receive a
Senior Preferred Interest, each with the same liquidation preference to be equal
to the value of their respective contributions to Purchaser, (d) each of CSX and
NSC shall receive a Junior Preferred Interest with a liquidation preference of
$50 million.

Put and Call Rights.

The Term Sheet provides that, subject to all necessary approvals from
Governmental Entities, Purchaser may call, in whole but, except as provided
below, not in part, and Mr. Rich may put to Purchaser, in whole or, except as
provided below, in part, Mr. Rich's Senior Preferred Interest, options to
purchase a Senior Preferred Interest and Common Interest for a price equal to
the sum of (a) in respect of a Senior Preferred Interest or option to purchase a
Senior Preferred Interest, the liquidation preference of the Senior Preferred
Interest put or called (or underlying the option put or called) plus accrued and
unpaid distributions on such Senior Preferred Interest plus (b) in respect of a
Common Interest, a nominal amount in respect of the Common Interest put or
called. The foregoing put and call rights may be exercised at any time after the
earlier of (a) the termination of Mr. Rich's employment as Chief Executive
Officer by the Company or by reason of Mr. Rich's death or disability and (b)
the third anniversary of the consummation of the Merger. Purchaser may assign
its call right or put obligation to CSX and NSC (or to a voting trust
established by them) in equal proportions, and, in the event that Purchaser has
insufficient cash, Mr. Rich, exercising his put right, may put

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to CSX and NSC (or to a voting trust established by them) in equal proportions.
In addition, CSX and NSC may, upon exercising the call rights or responding to
an exercise of Mr. Rich's put rights, provide that the subject securities be
conveyed to a third party; provided that, the event of any assignment of the put
obligation by CSX or NSC, the payment of the put price shall be guaranteed by
CSX and NSC in equal proportions. Notwithstanding the foregoing, in the event of
a termination of Mr. Rich's employment as Chief Executive Officer by the Company
for cause, until the third anniversary of the Merger, Mr. Rich's put right will
be limited to his Common Interest and will not extend to his Senior Preferred
Interest or option to purchase a Senior Preferred Interest and Purchaser will
have the right to call Mr. Rich's Common Interest without Mr. Rich's Senior
Preferred Interest or option to purchase a Senior Preferred Interest.

Corporate Governance.

The Term Sheet provides that the Purchaser Board will be comprised of seven
individuals: Mr. Rich, four individuals designated by Mr. Rich and one
individual designated by each of NSC and CSX. Major decisions outside the
ordinary course of business (including material asset dispositions and approval
of Purchaser's business plan and budget described below) will require the
concurrence of the designees of CSX and NSC, consistent with regulatory
requirements. Employment and put and call decisions with respect to Mr. Rich
will be made by the disinterested directors on the Purchaser Board. Except with
respect to day-to-day railroad operations, the Company shall follow a mutually
agreed upon business plan and budget which shall be designed prior to the
Effective Time (and updated by the Purchaser Board annually thereafter) with the
goals of ensuring repayment of member contributions and maximizing the Company's
value, which may include the disposition of assets. It is intended that the
definitive documentation will contain customary provisions relating to corporate
governance, put and call rights, and transferability restrictions.

Management.

The Term Sheet provides that Mr. Rich will enter into a three-year
employment agreement to be Chief Executive Officer of the Company (the "New
Employment Agreement"). It is expected that, pursuant to the New Employment
Agreement, (a) after the initial three-year term, Mr. Rich's employment will be
renewed automatically for one-year terms unless the Company delivers written
notice of termination to Mr. Rich during the period from 120 to 90 days prior to
expiration of such term, and (b) Mr. Rich's salary and benefits (including, in
lieu of receiving such benefits in connection with the transaction, severance
benefits) will remain at current levels. It will be a condition of employment
that Mr. Rich retain his Interests (subject to the put and call rights described
herein) and that Mr. Rich live on the grounds of the Company's Edgewater
property in Cooperstown, New York for the convenience and security of the
Company and to ensure Mr. Rich's availability in the event of an emergency. The
Term Sheet provides that Mr. Rich will enter into a customary non-compete and
exclusive service agreement, subject to standard permissible activities, and
that the Company will create a management incentive bonus program, to be
approved with the concurrence of the disinterested directors on the Purchaser
Board, which management incentive bonus program will provide cash bonuses to
operating management upon achievement of certain financial targets following the
transaction, to be determined without giving effect to the financing and
transaction costs of the transaction.

Certain Dispositions.

The Term Sheet provides that Mr. Rich and the other on-going Company
management will receive a commission on asset dispositions as follows: other
than with respect to certain offers with respect to a non-freight transaction
west of Passaic Junction, New Jersey described below, commissions will be
payable only with respect to a transaction (a) consummated during Mr. Rich's
employment as Chief Executive Officer of the Company or (b) arising from an
opportunity identified to the CSX and NSC representatives on the Purchaser Board
and significantly pursued by Mr. Rich (except in the event of a termination of
Mr. Rich's employment by the Company prior to the third anniversary of the
Merger without cause, in which case a lesser standard to be established in the
definitive documentation will apply), the negotiation of which was approved by
the CSX and NSC representatives on the Purchaser Board during such employment,
and consummated within two years of the termination of such employment, in the
case of non-passenger transactions, and four

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<PAGE> 32

years of the termination of such employment, in the case of passenger
transactions. The commissions will be paid in cash at the rate of 7% of the
gross consideration received by the Company (or, in the case of a non-cash
transaction, the fair market value of the asset disposed) in such transaction
and shall be allocated among such Company management (and in such amounts) as is
determined by Mr. Rich. No commission will be payable with respect to any
freight transaction east of or including Passaic Junction, New Jersey. A
commission will be payable with respect to any consummated non-freight
transaction east of or including Passaic Junction that does not, in the
reasonable judgment of both CSX and NSC, interfere with freight rights and
operations if such non-freight transaction is approved by a supermajority of the
Company Board and consummated. A commission will be payable with respect to a
consummated freight transaction west of Passaic Junction, New Jersey and a
commission will be payable with respect to (a) a consummated non-freight
transaction west of Passaic Junction, New Jersey, or (b) a reasonable, bona fide
and firm offer with respect to a non-freight transaction west of Passaic
Junction, New Jersey which is rejected by the Purchaser Board.

The Term Sheet also provides that either CSX or NSC will have a right of
first refusal with respect to any transaction with respect to the Company's
properties and assets west of Passaic Junction, New Jersey and, subject to the
approval of the Purchaser Board with the concurrence of the CSX and NSC
designees, CSX or NSC may use Senior Preferred Interests in connection with a
purchase of any assets of the Company by such party.

Expenses.

The Term Sheet provides that each of CSX, NSC and Mr. Rich will bear its
own Expenses with respect to the transactions, except that CSX and NSC have
agreed to pay the reasonable fees and Expenses of one firm of legal counsel, up
to $50,000 plus 50% of any such fees in excess of $50,000, for the benefit of
Mr. Rich in connection with the transactions.

10. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.

The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes. In general,
a shareholder will recognize gain or loss for United States federal income tax
purposes equal to the difference between the amount of cash received in exchange
for the Shares sold and such shareholder's adjusted tax basis in such Shares.
Such gain or loss will be capital gain or loss if the Shares constitute capital
assets in the hands of the shareholder. Pursuant to recently enacted
legislation, in the case of an individual holder of Shares, any such capital
gain will be subject to a maximum United States federal income tax rate of (a)
20% if the holder's holding period in such shares was more than 18 months at the
Effective Time, and (b) 28% if the holder's holding period was more than one
year but not more than 18 months at the Effective Time. Any such capital loss
will be subject to certain limitations on deductibility for United States
federal income tax purposes.

THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
SHAREHOLDERS, SUCH AS FINANCIAL INSTITUTIONS, BROKER-DEALERS, SHAREHOLDERS WHO
ACQUIRED SHARES PURSUANT TO THE EXERCISE OF OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES, FOREIGN CORPORATIONS AND PERSONS WHO RECEIVED PAYMENTS IN RESPECT OF
OPTIONS OR WARRANTS TO ACQUIRE SHARES.

THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF THE UNITED STATES ALTERNATIVE MINIMUM TAX, STATE AND LOCAL, AND
FOREIGN TAX LAWS.

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11. CERTAIN LITIGATION RELATING TO THE OFFER AND THE MERGER.

On or about August 14, 1997, a complaint respecting a purported class
action, captioned Bernabe v. Walter G. Rich et al., Index No. 97-114690, was
filed in the Supreme Court of the State of New York for the County of New York
(the "Complaint"). The Complaint names as defendants the Company and the members
of the Company Board, including Mr. Rich, as well as CSX and NSC. The Complaint
alleges, among other things, that the proposed acquisition referred to herein is
the product of unfair dealing, that the proposed purchase price therefor is
grossly inadequate, that the individual defendants have breached their fiduciary
duties in failing to disclose material information, and that defendant Mr. Rich
has breached his fiduciary duties by acting in a manner designed to benefit
himself at the expense of the public shareholders. The Complaint further alleges
that CSX and NSC have aided and abetted the alleged breaches of fiduciary duty
by Mr. Rich. The Complaint seeks preliminary and permanent injunctive relief,
rescission in the event a transaction is consummated and rescissory damages.
Purchaser, Mr. Rich, CSX, NSC and the Company believe the claims are meritless.
The foregoing summary is qualified in its entirety by reference to the
Complaint, a copy of which has been filed with the Commission as an exhibit to
the Schedule 14D-1.

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THE TENDER OFFER

1. TERMS OF THE OFFER; EXPIRATION DATE.

Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as defined herein) and not withdrawn, as
described under "THE TENDER OFFER -- Withdrawal Rights". The term "Expiration
Date" means 12:00 Midnight, New York City time, on Friday, September 19, 1997,
unless and until Purchaser, in its reasonable judgment (but subject to the terms
and conditions of the Merger Agreement), shall have extended the period during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by Purchaser, shall
expire. The Offer is subject to the Minimum Condition and to certain other
conditions. See "THE TENDER OFFER -- Certain Conditions of the Offer".

Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time, (a)
to delay acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares in order to comply
with any applicable laws, (b) to terminate the Offer and not accept for payment
any Shares upon the failure of any of the conditions specified in "THE TENDER
OFFER -- Certain Conditions of the Offer" to be satisfied and (c) to waive any
condition or otherwise amend the Offer in any respect, by giving oral or written
notice of such delay, termination, waiver or amendment to the Depositary and by
making a public announcement thereof.

If Purchaser extends the Offer, if Purchaser (whether before or after its
acceptance for payment of the Shares) is delayed in its acceptance for payment
of or payment for any Shares validly tendered and not withdrawn in the Offer or
if Purchaser is unable to accept for payment or pay for such Shares pursuant to
the Offer for any reason, then, without prejudice to Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and
such Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in "THE TENDER OFFER -- Withdrawal
Rights". Purchaser acknowledges that (a) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or to return the Shares
tendered promptly after the termination or withdrawal of the Offer and (b)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (a) above), any Shares upon the occurrence of any of the
conditions specified in "THE TENDER OFFER -- Certain Conditions of the Offer"
without extending the period of time during which the Offer is open.

The Merger Agreement provides that Purchaser shall not, without the prior
written consent of the Company, make any change in the terms or conditions of
the Offer that is adverse to the holders of Shares, decrease the Offer Price or
the number of Shares sought in the Offer or impose conditions to the Offer other
than those set forth in the Merger Agreement (it being agreed that a waiver by
Purchaser of any condition, in its discretion, shall not be deemed to be adverse
to the holders of Shares); provided that, if on any scheduled expiration date of
the Offer all conditions to the Offer shall not have been satisfied or waived,
the Offer may, but need not, be extended from time to time without the consent
of the Company for such period of time as is reasonably expected by Purchaser to
be necessary to satisfy the unsatisfied conditions; provided further that

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<PAGE> 35

the Offer may be extended by Purchaser without the consent of the Company for
any period required by any rule, regulation, interpretation or position of the
Commission or the staff thereof applicable to the Offer; and provided further
that, if at any scheduled expiration date of the Offer all conditions to the
Offer shall have been satisfied but less than a number of Shares that, together
with the number of Shares to be contributed by CSX and Mr. Rich to Purchaser,
represent less than 90% of the outstanding Shares, on a fully-diluted basis,
shall have been tendered into the Offer, Purchaser shall be entitled to extend
the Offer from time to time without the consent of the Company (for not more
than 10 business days) in order to permit Purchaser to solicit additional Shares
to be tendered into the Offer. The conditions to the Offer are solely for the
benefit of Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by Purchaser) or may, but need not, be waived by Purchaser, in whole or
in part at any time and from time to time, in its sole discretion.

Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement, in the case of an extension to be made no later than 9:00 a.m.,
New York City time, on the next business day (as defined herein) after the
previously scheduled Expiration Date. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that material
changes be promptly disseminated to shareholders in a manner reasonably designed
to inform them of such changes) and without limiting the manner in which
Purchaser may choose to make any public announcement, Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release to the Dow Jones News
Service.

If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if Purchaser waives a material condition of
the Offer, Purchaser will extend the Offer to the extent required by Rules
14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which
the Offer must remain open following material changes in the terms of the Offer
or information concerning the Offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the changed terms or information. In the
Commission's view, an offer should generally remain open for a minimum of five
business days from the date a material change is first published, sent or given
to shareholders. With respect to a change in price or a change in percentage of
securities sought (other than an increase in the number of Shares sought not in
excess of 2% of the outstanding Shares), a minimum 10-business-day period is
required to allow for adequate dissemination to shareholders and investor
response. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act. Accordingly, if, prior to the
Expiration Date, Purchaser decreases the number of Shares being sought, or
increases or decreases the consideration offered pursuant to the Offer, and if
the Offer is scheduled to expire at any time earlier than the period ending on
the 10th business day from the date that notice of such increase or decrease is
first published, sent or given to holders of Shares, the Offer will be extended
at least until the expiration of such 10-business-day period.

Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to increase the Offer Price, such increase in the
Offer Price will be applicable to all shareholders whose Shares are accepted for
payment pursuant to the Offer, whether or not such Shares were tendered prior to
the date of such increase, and, if at the time notice of such increase in the
Offer Price is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the
10th business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such 10-business-day period.

The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
shareholder list, and will be furnished, for subsequent transmittal to
beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing.

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<PAGE> 36

2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.

In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (a) the Share Certificates
or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Shares, if such procedure is available, into the Depositary's account at
The Depository Trust Company or the Philadelphia Depository Trust Company (each
a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer
Facilities") pursuant to the procedures set forth in "THE TENDER
OFFER -- Procedures for Accepting the Offer and Tendering Shares", (b) the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, or, in the case of a book-entry transfer, an Agent's Message (as
defined herein) and (c) any other documents required by the Letter of
Transmittal.

The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.

For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment. Payment for
Shares accepted pursuant to the Offer will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payments from Purchaser and
transmitting payments to such tendering shareholders. Under no circumstances
will interest on the purchase price for Shares be paid by Purchaser, regardless
of any delay in making such payment. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering shareholders,
Purchaser's obligation to make such payment shall be satisfied and tendering
shareholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares pursuant
to the Offer. Purchaser will pay any stock transfer taxes incident to the
transfer to it of validly tendered Shares, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, as well as any charges and expenses
of the Depositary and the Information Agent.

If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in "THE TENDER OFFER -- Procedures for Accepting the Offer and
Tendering Shares", such Shares will be credited to an account maintained at such
Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.

Purchaser reserves the right to transfer or assign, in whole at any time,
or in part from time to time, to one or more direct or indirect wholly owned
subsidiaries of Purchaser, the right to purchase all or any portion of the
Shares tendered pursuant to the Offer, provided that any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering shareholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.

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<PAGE> 37

3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.

Valid Tender of Shares. In order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (in the case of any book-entry transfer) and any other
required documents, must be received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, and either (a) the Share Certificates evidencing tendered Shares must be
received by the Depositary at one of such addresses or Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case, prior
to the Expiration Date, or (b) the tendering shareholder must comply with the
guaranteed delivery procedures described below.

THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.

Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in either of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's Message
in connection with a book-entry delivery of Shares, and any other required
documents must, in any case, be transmitted to and received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date or the tendering shareholder must comply with the
guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Signature Guarantee. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (each, an "Eligible Institution"), unless the
Shares tendered thereby are tendered (a) by a registered holder of Shares who
has not completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Payment Instructions" on the Letter of Transmittal or (b)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.

If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.

Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be

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<PAGE> 38

completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:

(a) the tender is made by or through an Eligible Institution;

(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and

(c) in the case of a guaranteed delivery of Shares, the Share
Certificates for all tendered Shares, in proper form for transfer, or a
Book-Entry Confirmation, together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) with
any required signature guarantee (or, in the case of a book-entry transfer,
an Agent's Message) and any other documents required by such Letter of
Transmittal, are received by the Depositary within three trading days on
The Nasdaq National Market after the date of execution of the Notice of
Guaranteed Delivery.

Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.

Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (a) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (b) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) or, in the case of a book-entry transfer, an Agent's Message
and (c) any other documents required by the Letter of Transmittal.

Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser, in its sole discretion, whose determination will be
final and binding on all parties, and which discretion may be delegated to the
Depositary or other persons. In addition, Purchaser's or Purchaser's designees,
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding. None of
CSX, NSC, Mr. Rich, Purchaser, the Company, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or will incur any liability for failure to
give any such notification. Purchaser reserves the absolute right to reject any
or all tenders of any Shares determined by it not to be in proper form or if the
acceptance for payment of, or payment for, such Shares may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right, in
its sole discretion, to waive any of the conditions of the Offer or any defect
or irregularity in any tender with respect to Shares of any particular
shareholder, whether or not similar defects or irregularities are waived in the
case of other shareholders. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.

Appointment as Proxy. By executing a Letter of Transmittal, as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser (and any and all noncash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after August 22, 1997). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment will be effective if, when and only to the extent that
Purchaser accepts such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by such shareholder with respect
to such Shares and other securities will, without further action, be revoked,
and no subsequent proxies may be given. The designees of Purchaser will, with
respect to the Shares and other securities for which the appointment is
effective, be empowered to exercise all voting and other rights of such
shareholder as they, in their sole discretion, may deem proper at any annual,
special, adjourned or postponed meeting of the Company's shareholders, by
written consent or otherwise, and Purchaser reserves the right to require that,
in order for Shares or other

36
<PAGE> 39

securities to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares.

Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and
Purchaser upon the terms and subject to the conditions of the Offer.

4. WITHDRAWAL RIGHTS.

Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date, and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after October 20, 1997. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to accept
Shares for payment pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering shareholders are entitled to
withdrawal rights as described in the paragraph below. Any such delay will be by
an extension of the Offer to the extent required by law.

For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover page of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn, and the name of the registered holder of such Shares if different
from that of the person who tendered such Shares. If Share Certificates
evidencing Shares to be withdrawn have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution, unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in "THE TENDER
OFFER -- Procedures for Accepting the Offer and Tendering Shares", any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares.

Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "THE TENDER OFFER -- Procedures for Accepting the Offer
and Tendering Shares".

5. PRICE RANGE OF SHARES.

The Shares are listed and principally traded on The Nasdaq National Market
under the symbol "DOCP". The following table sets forth, for the quarters
indicated, the high and low sales prices per Share on The Nasdaq National Market
as reported by the Dow Jones News Service.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994:
First Quarter.............................................. $ 8 3/4 $ 8 3/4
Second Quarter............................................. 9 1/4 8
Third Quarter.............................................. 9 1/4 8 1/4
Fourth Quarter............................................. 9 1/2 8 1/4
1995:
First Quarter.............................................. $11 $ 9 3/4
Second Quarter............................................. 10 1/4 9 1/4
Third Quarter.............................................. 10 1/2 9 1/2
Fourth Quarter............................................. 10 9
</TABLE>

37
<PAGE> 40

<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
1996:
First Quarter.............................................. $11 $ 9 1/4
Second Quarter............................................. 11 8 3/4
Third Quarter.............................................. 9 1/4 7 1/2
Fourth Quarter............................................. 11 7 1/2
1997:
First Quarter.............................................. $17 $ 9
Second Quarter............................................. 23 14 3/4
Third Quarter (through August 22, 1997).................... 24 1/2 17 3/4
</TABLE>

On August 15, 1997, the last trading day prior to the announcement of the
proposed transaction, the closing price per Share as reported on The Nasdaq
National Market was $22.00. As of August 21, 1997, no cash dividends were paid
by the Company on the Shares or declared as payable on a future date.

SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.

6. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.

The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of any remaining Shares held by the public. It is expected that, following the
Offer, a large percentage of the outstanding Shares will be owned by Purchaser.

Possible Effects of the Offer on the Market for the Shares. The purchase
of Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. Purchaser cannot predict whether the reduction in the number of Shares
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price therefor.

Stock Quotation. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in
The Nasdaq National Market, which require that an issuer have at least 200,000
publicly held shares, held by at least 400 stockholders or 300 stockholders of
round lots, with a market value of at least $1,000,000, and have net tangible
assets of at least $1,000,000 or $4,000,000, depending on profitability levels
during the issuer's four most recent fiscal years. If these standards are not
met, the Shares might nevertheless continue to be included in The Nasdaq Stock
Market, with quotations published in the NASD Automatic Quotation System
("NASDAQ") "additional list" or in one of the "local lists". However, if the
number of holders of the Shares were to fall below 300, or if the number of
publicly held Shares were to fall below 100,000 or there were not at least two
registered and active market makers for the Shares, the NASD's rules provide
that the Shares would no longer be "qualified" for The Nasdaq Stock Market
reporting, and The Nasdaq Stock Market would cease to provide any quotations.
Shares held directly or indirectly by directors, officers or beneficial owners
of more than 10% of the Shares are not considered as being publicly held for
this purpose. If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for continued
inclusion in The Nasdaq National Market or in any other tier of The Nasdaq Stock
Market and the Shares are no longer included in The Nasdaq National Market or in
any other tier of The Nasdaq Stock Market, as the case may be, the market for
Shares could be adversely affected.

In the event that the Shares no longer meet the requirements of the NASD
for continued inclusion in any tier of The Nasdaq Stock Market, it is possible
that the Shares would continue to trade in the over-the-counter market and that
price quotations would be reported by other sources. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend upon the number of holders of

38
<PAGE> 41

Shares remaining at such time, the interests in maintaining a market in Shares
on the part of securities firms, the possible termination of registration of the
Shares under the Exchange Act, as described below, and other factors.

Margin Regulations. The Shares may currently be "margin securities" under
the regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which would have the effect, among other things, of
allowing brokers to extend credit on the collateral of such Shares for the
purpose of buying, carrying or trading in securities ("Purpose Loans").
Depending upon factors, such as the number of record holders of the Shares and
the number and market value of publicly held Shares, following the purchase of
Shares pursuant to the Offer, the Shares might no longer constitute "margin
securities" for purposes of the Federal Reserve Board's margin regulations and,
therefore, could no longer be used as collateral for Purpose Loans made by
brokers. In addition and in any event, if registration of the Shares under the
Exchange Act were terminated, the Shares would no longer constitute "margin
securities".

Exchange Act Registration. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in the
Shares becoming eligible for de-registration under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission, and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement in connection with meetings of
shareholders meetings pursuant to Section 14(a) of the Exchange Act, and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act").

If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for reporting on The Nasdaq National Market.

7. CERTAIN INFORMATION CONCERNING THE COMPANY.

Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. None of Purchaser, CSX, NSC or Mr. Rich assumes any responsibility for
the accuracy or completeness of the information concerning the Company furnished
by the Company or contained in such documents and records, or for any failure by
the Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Purchaser, CSX, NSC and Mr. Rich.

General. The Company is a New York corporation with its principal
executive offices located at 1 Railroad Avenue, Cooperstown, New York 13326.
According to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "Company's 10-K"). The Company operates in one business
segment -- railroad transportation. The Company's rail system provides rail
service for customers along its routes in Upstate New York and Northern New
Jersey and access to the national rail system through interchange facilities
with two of the major northeastern railroads, Conrail, Inc. and the CP Rail
System. Additionally, pursuant to a Haulage Agreement with CP, the Company has
direct access with the Norfolk Southern rail system and other carriers in
Buffalo, New York. The Company's railroad system is devoted principally to
carrying freight, but also generates revenue through the operation of passenger
excursion trains. The Company seeks to encourage development on and near, and
utilization of, its real estate and rights-of-way by potential shippers and as a
possible source of additional revenue. The Company also generates revenues by
granting to various entities, such as utilities, pipeline and communication
companies and non-industrial

39
<PAGE> 42

tenants, the right to occupy its railroad right-of-way and other real property.
The Company also hires rail equipment to, and repairs rail equipment owned by,
others, provides services related to the transfer of bulk commodities from
railcar to truck, and provides administrative services related to railroad
operations. The Company was founded in 1965.

On January 31, 1996, the Company acquired a 40% interest in The Toledo,
Peoria and Western Railroad Corporation. The investment is accounted for under
the provisions of AFB 18, The Equity Method of Accounting for Investments in
Common Stock. TP&W owns a 284 mile Class III regional railroad which provides
rail service on a generally East-West route from Fort Madison, Iowa through
Central Illinois (approximately 70 miles south of Chicago) to Logansport,
Indiana. TP&W hauls agricultural products, chemicals, coal, fertilizer, food
products, steel and manufactured goods and consumer products, and operates two
intermodal facilities. In addition to its ownership interest, the Company
derives revenue by providing certain administrative services to TP&W.

See also "SPECIAL FACTORS -- Background of the Offer and the Merger" and
"SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the Merger".

Directors and Officers. The name, address, principal occupation or
employment, five-year employment history, and citizenship of each director and
executive officer of the Company is set forth in Schedule II hereto.

Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial statements contained in the
Company's 10-K and the unaudited financial statements contained in the Company's
Quarterly Report on Form 10-Q, as amended, for the quarter ended June 30, 1997
(the "Company's 10-Q"). More comprehensive financial information is included in
the Company's 10-K, the Company's 10-Q and other documents filed by the Company
with the Commission. The financial information that follows is qualified in its
entirety by reference to such reports and other documents, including the
financial statements and related notes contained therein. Such reports and other
documents may be examined and copies may be obtained from the offices of the
Commission in the manner set forth below.

DELAWARE OTSEGO CORPORATION

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(UNITED STATES DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER SIX MONTHS ENDED
31, JUNE 30,
----------------------------- ------------------
1996 1995 1994 1997 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue...................................... $32,282 $34,524 $27,463 $15,362 $15,326
Income (Loss) from Operations................ 789 1,562 2,459 (429) (1,672)
Income (Loss) Before Income Taxes,
Extraordinary Items and Equity Interest in
Income (Loss) of Affiliate................. 1,867 (2,493) 3,348 (1,255) (2,175)
Net Income (Loss)............................ (1,165) 1,615 (2,448) (813) (1,495)
Net Income (Loss) Per Share.................. $ (0.64) $ 0.86 $ 1.44 $ (0.44) $ (0.87)
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1996 1995 AT JUNE 30, 1997
------- ------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current Assets............................................. $10,852 $10,268 $ 10,745
Property and Equipment (Net)............................... 63,934 62,987 63,375
Total Assets............................................... 78,323 74,778 77,695
Current Liabilities........................................ 16,874 15,552 16,578
Long-Term Liabilities...................................... 26,855 26,780 26,055
Total Shareholders' Equity................................. 34,594 32,446 35,062
</TABLE>

40
<PAGE> 43

Ratio of Earnings to Fixed Charges; Book Value per Share. The Company's
ratio of earnings to fixed charges for the fiscal year ended December 31, 1996
was (.46). The ratio of earnings to fixed charges for the fiscal year ended
December 31, 1995 was (1.07). The ratio of earnings to fixed charges for the
fiscal half-year ended June 30, 1997 was (.48). For purposes of this paragraph,
"earnings" is the Company's pre-tax income from continuing operations adjusted
for the profit/loss input of items considered in fixed costs and "fixed costs"
is the Company's (a) interest (whether expensed or capitalized), (b)
amortization of debt expense, discounts, or premiums, (c) such portion of rent
expense representative of interest, and (d) preferred stock dividends due
majority owned interests.

The Company's book value per share and common share equivalent was $18.89
per Share for the year ended December 31, 1996 and $18.65 per Share for the
quarter ended June 30, 1997.

Reference is made to certain financial statements of the Company, which
have been filed as an Exhibit to the Schedule 14D-1, for additional financial
information regarding the Company.

Certain Other Information. The Company does not, as a matter of course,
make public its business plans, forecasts as to future earnings or financial
performance or estimated values or appraisals of its assets. In the course of
its discussions with the Rich Group described under "SPECIAL
FACTORS -- Background of the Offer and the Merger", the Company provided the
Rich Group with certain business and financial information which the Rich Group
believes was not publicly available. Such information included, among other
things, (i) an estimate of certain projected 1997 income statement and balance
sheet data (the "1997 Estimates") and (ii) an estimate of values for certain of
the Company's assets prepared by management of the Company (the "Company
Estimates" and, together with the 1997 Estimates, the "Estimates"). See "SPECIAL
FACTORS -- Background of the Offer and the Merger". The Estimates do not take
into account any of the potential effects of the transactions contemplated by
the Offer and/or the Merger. The Company Estimates contained no adjustment for
or consideration of (i) the income tax consequences of a sale of assets, (ii)
the value that the Company could receive for its facilities from parties other
than another railroad, (iii) the costs that the Company would incur in disposing
of its assets, (iv) the expense, or likelihood of, obtaining regulatory approval
to sell railroad assets, (v) the amount of time that a disposition of assets
would likely take, or (vi) the relatively few number of prospective buyers which
had been identified.

The 1997 Estimates for total operating revenues, total operating expenses,
income from operations and net income (loss) for fiscal year 1997 were
$33,413,000, $32,230,000, $2,142,000 and $2,340,000, respectively. The 1997
Estimates for total assets, total liabilities and total shareholders' equity for
year-end 1997 were $87,676,000, $45,527,000 and $42,149,000, respectively.

In the Company Estimates, the Company's total assets were estimated at
$117,156,000, the Company's net long-term debt was estimated at $8,570,000 and,
therefore, the net value of the Company was estimated at $108,586,000.

The Estimates were not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or the guidelines
established by The American Institute of Certified Public Accountants. The
Estimates are included in this Offer to Purchase only because such information
was provided to the Rich Group. None of CSX, NSC, Mr. Rich, Purchaser or any
party to whom the Estimates were provided assumes any responsibility for the
accuracy of such information. While presented with numerical specificity, the
Estimates are based upon a variety of assumptions relating to the businesses of
the Company and its subsidiaries (including TP&W) and the railroad business
environment, among other things, which may not be realized and are subject to
significant uncertainties and contingencies, many of which are beyond the
control of the Company, Purchaser, NSC, CSX or Mr. Rich. There can be no
assurance that the Estimates could be realized, and actual realized values could
vary materially from those shown. The Estimates have not been examined or
compiled by the Company's independent public accountants. For these reasons, as
well as the bases on which such Estimates were compiled, there can be no
assurance that such Estimates will be realized, or that actual realized values
would not be higher or lower than those estimated. The inclusion of such
Estimates herein should not be regarded as an indication that CSX, NSC, Mr.
Rich, Purchaser or any other party who received such information considers it an
accurate prediction of realizeable values for the relevant assets.

41
<PAGE> 44

The Company is subject to the informational filing requirements of the
Exchange Act, and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, Options granted to them, the principal holders of the Company's
securities and any material interest of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's shareholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and also should be available for
inspection at the Commission's regional offices located at 7 World Trade Center,
Suite 1300, New York, New York 10048 and the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials may
also be obtained by mail, upon payment of the Commission's customary fees, by
writing to its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.

8. CERTAIN INFORMATION CONCERNING PURCHASER, CSX, NSC AND MR. RICH.

Purchaser. Purchaser is a newly formed New York limited liability company
organized in connection with the Offer and the Merger and has not carried on any
activities other than in connection with the Offer and the Merger. The principal
offices of Purchaser are located in the County of Otsego, State of New York. All
interests in Purchaser are or will be owned by CSX (or its subsidiary), NSC (or
its subsidiary) and Mr. Rich as Purchaser's members.

Until immediately prior to the time that Purchaser purchases Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available. Buyer will be organized by Purchaser as a New York
corporation shortly prior to the Merger and will have minimal assets and
capitalization.

CSX. CSX is a Virginia corporation with its principal executive offices
located at One James Center, 901 East Cary Street, Richmond, Virginia 23219.

CSX provides rail, intermodal, ocean container-shipping, barging, trucking,
and contract logistics services worldwide. Through its subsidiary, CSXT, CSX
provides rail freight transportation and distribution services over
approximately 18,500 route miles in 20 states in the United States east, midwest
and south, and in Ontario, Canada. CSXT interchanges freight with western
railroads at key gateways in Chicago, East St. Louis, Memphis and New Orleans.
CSXT's service territory includes 26 port cities for international transport. In
1995, the principal commodities hauled by CSXT were coal, chemicals, automotive
parts, finished vehicles, agricultural products, forest products (including
paper, paper products, and lumber products), minerals, fertilizers, and metals.

CSX also transports freight through subsidiaries that conduct
container-shipping, intermodal and barge operations. CSX's subsidiary, Sea-Land
Service Inc. ("Sea-Land"), is the largest container-shipping line in the United
States and one of the three largest container-shipping companies in the world.
Sea-Land operates more than 100 container ships and nearly 200,000 containers
throughout the world. CSX's subsidiary, American Commercial Lines Inc., is the
largest and most diversified barge transportation firm in both North and South
America. CSXT Intermodal, Inc. provides shippers with nationwide intermodal
service for moving domestic and international freight in trailers, domestic
containers and international steamship containers, often in close alignment with
CSXT and Sea-Land.

NSC. NSC is a Virginia corporation with its principal executive offices
located at Three Commercial Place, Norfolk, Virginia 23510-9421.

NSC is a holding company that owns all the common stock of and controls a
major freight railroad, Norfolk Southern Railway Company; a motor carrier, North
American Van Lines, Inc. ("North American"); and a natural resources company,
Pocahontas Land Corporation ("Pocahontas Land"). Norfolk Southern

42
<PAGE> 45

Railway Company's lines extend over more than 14,300 miles of road in 20 states,
primarily in the United States southeast and midwest, and in the Province of
Ontario, Canada. North American provides household moving and specialized
freight handling services in the United States and Canada, and offers certain
motor carrier services worldwide. Pocahontas Land manages approximately 900,000
acres of coal, natural gas and timber resources in Alabama, Illinois, Kentucky,
Tennessee, Virginia and West Virginia.

Other. Subsidiaries of NSC and CSX, on the one hand, and the Company, on
the other hand, participate in the normal interchange of rail freight traffic
and are parties to agreements relating to the provision of rail transportation
services. In connection with interchange traffic, either or both railroads of
NSC or CSX and the Company may be the party billing the shipper of such
interchange freight, and, in cases where one of the parties bills for the entire
shipment, such party periodically will remit to the other party the net amount
of the proceeds due to such other carrier in accordance with standard industry
practice. NSC's rail subsidiary interchanges traffic to or from the account of
the Company's principal rail subsidiary, the New York, Susquehanna and Western
Railway Company ("NYS&W"), at Buffalo, New York. NYS&W does not itself haul
freight to Buffalo and directly interchange with NSC. Instead, freight traffic
is hauled for the account of NYS&W between Buffalo and Binghamton, New York, by
a subsidiary of Canadian Pacific Railway Company pursuant to a haulage
arrangement between the Canadian Pacific Railway Company subsidiary and NYS&W.
In 1994, 1995 and 1996, the total loads handled by NSC's rail subsidiary that
were interchanged at Buffalo to or from the account of NYS&W were approximately
40,000, 83,000 and 86,000, respectively.

On January 31, 1996, the Company completed the purchase of a 40% interest
in TP&W. That purchase was made in connection with a restructuring of TP&W's
outstanding debt. CSX was then a creditor of TP&W, with a claim asserted against
TP&W for $5,200,000. In exchange for releasing its claim, CSXT received a
$1,000,000 interest-bearing promissory note from the Company, 100,000 Shares and
20% of the outstanding common shares of TP&W. CSXT has certain governance rights
with respect to TP&W, including the right to participation on its board of
directors and the right to approve certain major decisions.

In May 1997, CSX and NSC, through a jointly owned limited liability
company, acquired more than 50% of the voting stock of Conrail Inc. ("Conrail")
and thereafter effected a merger pursuant to which still outstanding Conrail
stock was canceled and converted into the right to receive cash. Conrail owns
the largest freight railroad in the northeastern United States. CSX and NSC have
entered into certain agreements pursuant to which the assets and liabilities of
Conrail will be allocated to CSX and NSC or shared by CSX and NSC following
approval of such transactions by the United States Surface Transportation Board,
which approval is expected to be obtained by July 1998. Until such approval,
Conrail stock will be held by a voting trust established for such purpose.

CSX and NSC are both subject to the information and reporting requirements
of the Exchange Act and are required to file reports and other information with
the Commission relating to their business, financial condition and other
matters. Information, as of particular dates, concerning CSX's and NSC's
directors and officers, their remuneration, stock options granted to them, the
principal holders of CSX's and NSC's securities, any material interests of such
persons in transactions with CSX and NSC and other matters is required to be
disclosed in proxy statements distributed to CSX's and NSC's shareholders and
filed with the Commission. These reports, proxy statements and other information
should be available for inspection and copies may be obtained in the same manner
as set forth for the Company in "THE TENDER OFFER -- Certain Information
Concerning the Company." The shares of both CSX's and NSC's common stock are
listed on the New York Stock Exchange, Inc. (the "NYSE"), and reports, proxy
statements and other information concerning CSX and NSC should also be available
for inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.

The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of CSX, NSC and Purchaser are set forth in Schedule I hereto.

Mr. Rich. Mr. Rich is President and Chief Executive Officer of Purchaser.
He has been President and Chief Executive Officer of the Company since 1971, and
joined the Company in 1966 as General Manager.

43
<PAGE> 46

Mr. Rich also serves as a director of Norwich Aero Products, Inc., New York
State Business Development Corp., Security Mutual Life Insurance Company of New
York, New York State Electric and Gas Company and TP&W. Mr. Rich was appointed
to the New York State Public Transportation Safety Board in 1993.

Except as set forth in this Offer to Purchase, none of CSX, NSC, Mr. Rich
or Purchaser, nor, to the best knowledge of CSX, NSC and Purchaser, any of the
persons listed in Schedule I hereto, or any associate or majority owned
subsidiary of such persons, beneficially owns any equity security of the
Company, and none of CSX, NSC, Mr. Rich nor Purchaser, nor, to the best
knowledge of CSX, NSC, Mr. Rich and Purchaser, any of the other persons referred
to above, or any of the respective directors, executive officers or subsidiaries
of any of the foregoing, has effected any transaction in any equity security of
the Company during the past 60 days.

Except as set forth in this Offer to Purchase, none of CSX, NSC, Mr. Rich
or Purchaser, nor, to the best knowledge of CSX, NSC, Mr. Rich and Purchaser,
any of the persons listed in Schedule I hereto, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, without limitation, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any securities of the Company, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss, or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, none of
CSX, NSC, Mr. Rich or Purchaser, nor, to the best knowledge of CSX, NSC, Mr.
Rich and Purchaser, any of the persons listed in Schedule I hereto has had any
transactions with the Company, or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.

Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between CSX, NSC or Purchaser, or their respective
subsidiaries, or, to the best knowledge of CSX, NSC or Purchaser, any of the
persons listed in Schedule I hereto, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or other transfer of a material
amount of assets.

All per share data for periods prior to December 21, 1995 have been
adjusted for the two-for-one common stock split distributed to shareholders on
that date.

9. SOURCE AND AMOUNT OF FUNDS.

Purchaser estimates that the total amount of funds required to purchase
Shares pursuant to the Offer, if fully subscribed, and to pay all related costs
and expenses will be approximately $50 million. See "THE TENDER OFFER -- Fees
and Expenses".

Purchaser plans to obtain the necessary funds through capital contributions
or advances made by CSX and NSC. Each of CSX and NSC plan to obtain the funds
for such capital contributions or advances from its available cash and working
capital.

10. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.

The purpose of the Offer is for Purchaser to obtain sufficient equity
interest in the Company to consummate a business combination between Buyer and
the Company. Upon consummation of the Merger, Purchaser intends to continue to
review the combined company and its assets, businesses, operations, properties,
policies, corporate structure, capitalization and management, and consider if
any changes would be desirable in light of the circumstances then existing. See
"SPECIAL FACTORS -- Purpose and Effects of the Offer and the Merger; Reasons for
the Offer and the Merger".

Except as noted in this Offer to Purchase, none of CSX, NSC, Mr. Rich nor
Purchaser has any present plans or proposals that relate to or would result in
(a) an extraordinary corporate transaction, such as a merger, reorganization,
liquidation, or sale or transfer of a material amount of assets, involving the
Company or any of its subsidiaries, (b) any changes in the Company Board or
management, (c) any material change in the Company's present capitalization,
corporate structure or business, (d) causing a class of the Company's

44
<PAGE> 47

securities to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association, or (e) a class of the Company's securities
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Exchange Act.

11. DIVIDENDS AND DISTRIBUTIONS.

As of the date hereof, the Company has not declared or paid any cash
dividends or made any cash distributions, and does not intend to declare or pay,
prior to the Merger, any dividends or make any distributions.

Payment of dividends and distributions by the Company is subject to certain
restrictions contained in agreements in respect of the Company's credit
arrangements.

On February 20, 1997, the Company declared a 5% stock dividend payable to
shareholders of record on February 28, 1997. Such dividend was paid on March 31,
1997, resulting in the issuance of 86,703 Shares. On January 30, 1996, the
Company declared a 5% stock dividend payable to shareholders of record on
February 14, 1996. Such dividend was paid on March 20, 1996, resulting in the
issuance of 82,297 Shares.

12. CERTAIN CONDITIONS OF THE OFFER.

Notwithstanding any other provision of the Offer, and in addition to and
not in limitation of Purchaser's rights to extend or amend the Offer at any
time, in its sole discretion (subject to the Merger Agreement), Purchaser shall
not be required to accept for payment of, or, subject to any applicable rules or
regulations of the Commission, pay for any Shares, and may delay the acceptance
of payment of, or, subject to any restriction referred to above, the payment
for, and may terminate the Offer, if (a) the number of Shares tendered pursuant
to the Offer prior to the expiration of the Offer and not withdrawn, together
with the Shares owned by Mr. Rich, Purchaser or any subsidiary of Purchaser or
to be contributed to Purchaser pursuant to binding agreements (which Purchaser,
in its reasonable judgment, believes will be performed) represents, on a fully
diluted basis, less than 66 2/3% of the outstanding Shares, (b) the waiting
periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act")
applicable to the transactions contemplated by the Merger Agreement shall not
have expired or been terminated, if the HSR Act is applicable, or any other
regulatory approvals required under applicable law for consummation of the Offer
shall not have been obtained; or (c) at any time prior to the acceptance for
payment of Shares, any of the following conditions exist:

(i) there shall be instituted, pending or threatened any action,
investigation or proceeding by any domestic or foreign government or
Governmental Entity, or there shall be instituted, pending or threatened
any action or proceeding by any other person, domestic or foreign, before
any domestic or foreign court or Governmental Entity (other than
shareholder litigation by shareholders of the Company acting in their
capacity as shareholders of the Company and other than actions or
proceedings by any person before a Governmental Entity to the extent that
such person seeks the imposition of conditions in proceedings pending as of
the date of the Merger Agreement), (A) challenging or seeking to make
illegal, to delay materially or otherwise, directly or indirectly, to
restrain or prohibit the making of the Offer, the acceptance for payment of
or payment for some of or all the Shares by Purchaser or the consummation
of the Merger, seeking to obtain material damages or imposing any material
adverse conditions in connection therewith or otherwise, directly or
indirectly, relating to the transactions contemplated by the Offer or the
Merger, (B) seeking to restrain, prohibit or delay the exercise of full
rights of ownership or operation by Purchaser or its affiliates of all or
any portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or of Purchaser or any of its affiliates, or to compel
Purchaser or any of its affiliates to dispose of or hold separate all or
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or of Purchaser or any of its affiliates,
(C) seeking to impose or confirm limitations on the ability of Purchaser or
any of its affiliates effectively to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote any Shares
acquired or owned by Purchaser or any of its affiliates on all matters
properly presented to the

45
<PAGE> 48

Company's shareholders or (D) seeking to require divestiture by Purchaser
or any of its affiliates of any Shares; or

(ii) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to, or any consent or approval
withheld with respect to the Offer, the acceptance for payment of or
payment for any Shares or the Merger, by any domestic or foreign court or
government or Governmental Entity that, in the reasonable judgment of
Purchaser, might, directly or indirectly, result in any of the consequences
referred to in sub-clauses (A) through (D) of clause (i) above; or

(iii) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under the Merger
Agreement, which breach or failure to perform shall not have been cured, or
any of the representations and warranties of the Company set forth in the
Merger Agreement shall not be true in any material respect when made or at
any time prior to consummation of the Offer as if made at and as of such
time and shall continue to be untrue; or

(iv) the Merger Agreement shall have been terminated in accordance
with its terms or all conditions (other than the condition pertaining to
shareholder approval) to the consummation of the Merger shall not have been
satisfied;

which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payment.

The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (including any action or omission by Purchaser) or may be waived by
Purchaser, in whole or in part, at any time and from time to time, in its
reasonable discretion. The failure by Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.

13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.

Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to the Merger and other such "going private" transactions in
which a purchaser seeks to acquire the remaining Shares not held by it. Rule
13e-3 under the Exchange Act requires, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the proposed transaction and the consideration offered to
minority shareholders in such transaction, be filed with the Commission and
disclosed to shareholders prior to consummation of the transaction.

General. Except as otherwise disclosed herein, based on representations
and warranties made by the Company in the Merger Agreement and a review of
publicly available information filed by the Company with the Commission, neither
Purchaser nor CSX, NSC or Mr. Rich is aware of (a) any license or regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or the Merger,
respectively, or (b) any approval or other action by any Governmental Entity,
that would be required for the acquisition or ownership of Shares by Purchaser
as contemplated herein. Should any such approval or other action be required,
Purchaser currently contemplates that such approval or action would be sought.
While Purchaser does not currently intend to delay the acceptance for payment of
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or action, if needed, would be
obtained or would be obtained without substantial conditions or that adverse
consequences might not result to the business of the Company or Purchaser or
that certain parts of the businesses of the Company might not have to be
disposed of in the event that any such approvals were not obtained or any other
actions were not taken. Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See "THE TENDER
OFFER -- Certain Conditions of the Offer."

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<PAGE> 49

Antitrust. Under the HSR Act, certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the United States Federal Trade Commission (the "FTC") and certain waiting
period requirements have been satisfied. Purchaser does not believe that the HSR
Act is applicable to the Offer or the Merger.

Notwithstanding the inapplicability of the HSR Act, the FTC and the
Antitrust Division frequently scrutinize the legality under the antitrust laws
of transactions such as the proposed acquisition of Shares by Purchaser pursuant
to the Offer. At any time before or after the purchase by Purchaser of Shares
pursuant to the Offer, the FTC or the Antitrust Division could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or seeking the divestiture of Shares purchased by Purchaser. Private
parties and state governments may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made, or if such a challenge is made,
of the result. See "THE TENDER OFFER -- Certain Conditions Of the Offer" for the
certain conditions to the Offer, including conditions with respect to litigation
and certain government actions.

Surface Transportation Board. Purchaser does not believe that the Offer or
the Merger will require the approval of, or exemption from, the United States
Surface Transportation Board.

State Takeover Statutes. A number of states throughout the United States
have enacted takeover statutes that purport, in varying degrees, to be
applicable to attempts to acquire securities of corporations that are
incorporated or have assets, shareholders, executive offices or places of
business in such states. In Edgar v. Mite Corp., the Supreme Court of the United
States held that the Illinois Business Takeover Act, which involved state
securities laws that made the takeover of certain corporations more difficult,
imposed a substantial burden on interstate commerce and therefore was
unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without prior approval of the remaining shareholders,
provided that such laws were applicable only under certain conditions.

The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which states have enacted
takeover laws. Purchaser does not know whether any of these laws will, by their
terms, apply to the Offer and has not complied with any such laws. Should any
person seek to apply any state takeover law, Purchaser will take such action as
then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws are applicable to the
transactions, and an appropriate court does not determine that such law is, or
such laws are inapplicable or invalid as applied to the Offer, Purchaser might
be required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, Purchaser might be unable
to accept for payment any Shares tendered pursuant to the Offer, or be delayed
in continuing or consummating the Offer. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See "THE TENDER OFFER --
Miscellaneous".

In general, Section 912 of the NYBCL (the "New York Takeover Statute")
prevents an "interested shareholder" (defined in the New York Takeover Statute
generally as a person that is the "beneficial owner" (as defined in the New York
Takeover Statute)) of 20% or more of a domestic New York corporation's
outstanding voting stock from engaging in a "business combination" (defined in
the New York Takeover Statute as a variety of transactions, including mergers,
as set forth in the second following paragraph) with such corporation for five
years following the date such person became an interested shareholder unless the
board of directors approved such business combination or stock acquisition prior
to the date the shareholder became an interested shareholder. In addition, no
domestic New York corporation may engage in a business combination at any time
other than as follows: (a) the board of directors of the corporation approved
the business combination before the interested shareholder party to such
business combination became an interested shareholder, (b) not earlier than five
years after the shareholder became an interested shareholder,

47
<PAGE> 50

a majority of the outstanding voting stock not beneficially owned by the
interested shareholder approved the business combination; or (c) the business
combination meets certain conditions, including minimum per share and aggregate
prices (determined in accordance with the statutory rules contained in the New
York State Takeover Statute), the form of consideration used in such business
combination, the application of such rules to all shareholders (other than the
interested shareholder), and certain restrictions on the acquisition of
additional shares by the interested shareholder after the date such shareholder
became an interested shareholder and prior to the consummation of such business
combination.

Under the New York Takeover Statute, the restrictions described above do
not apply if, among other things: (a) a corporation does not have a class of
voting securities registered with the Commission pursuant to the Exchange Act,
unless the corporation's certificate of incorporation provides otherwise; (b) a
corporation has amended its certificate of incorporation to subject the
corporation to the provisions of the New York Takeover Statute and, at the time
of such amendment, (i) the corporation did not have any class of voting
securities registered with the Commission pursuant to the Exchange Act and (ii)
the business combination in question is with an interested shareholder whose
stock acquisition date is prior to the effective date of such amendment; (c) the
corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by the New York Takeover Statute; (d) the
corporation, by action of its board of directors, adopts an amendment to its
bylaws prior to March 31, 1986 expressly electing not to be governed by the New
York Takeover Statute; (e) the corporation, by action of a majority of its
shareholders (other than interested shareholders and their affiliates and
associates), adopts an amendment to its bylaws expressly electing not to be
governed by the New York Takeover Statute, which amendment (i) does not take
effect until 18 months after the adoption of such amendment and (ii) does not
apply to any business combination with any person who became an interested
shareholder of the corporation on or prior to the effective date of such
amendment; (f) a shareholder becomes an interested shareholder "inadvertently"
and (i) as soon as practicable thereafter divests itself of a sufficient number
of shares so that such shareholder ceases to be an interested shareholder and
(ii) but for the inadvertent acquisition, would not have been an interested
shareholder at any time during the last five years; and (g) an interested
shareholder was the beneficial owner of 5% or more of the outstanding voting
stock of such corporation on October 30, 1985 and remained such through the time
such shareholder became an interested shareholder.

The New York Takeover Statute provides that, during the five-year period
following the date a person becomes an interested shareholder, the corporation
may not merge or consolidate with an interested shareholder or any affiliate or
associate thereof, and also may not engage in certain other transactions with an
interested shareholder or any affiliate or associate thereof, including, without
limitation, the following: (a) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets having an aggregate market value equal
to 10% or more of (i) the aggregate market value of either (A) all of the
corporation's assets or (B) all of the corporation's outstanding stock or (ii)
the corporation's earning power or net income (determined on a consolidated
basis); (b) any transaction which results in the issuance or transfer by the
corporation (or any of its subsidiaries) of any stock of the corporation (or any
of its subsidiaries) having an aggregate market value equal to 5% or more of the
aggregate market value of all the outstanding stock of such corporation (or
subsidiary) to the interested shareholder, subject to certain pro rata
distributions; (c) a plan or proposal to liquidate or dissolve the corporation
proposed by an interested shareholder; (d) any transaction involving the
corporation or any majority owned subsidiary thereof which has the effect of
increasing the proportionate shares of any class or series, or securities
convertible into the shares of any class or series, of voting stock of the
corporation or any such subsidiary which is owned by the interested shareholder
(except as a result of immaterial changes due to fractional share adjustments);
or (e) the receipt by an interested shareholder of the benefit (other than
proportionately as a shareholder of such corporation) of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation.

14. FEES AND EXPENSES.

Except as set forth below, Purchaser will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer.

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<PAGE> 51

The Merger Agreement provides, except in certain cases in which the Merger
is not consummated, as summarized under "SPECIAL FACTORS -- The Merger Agreement
and Related Agreements", that all fees, costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such fees, costs and expenses, whether or
not the transactions contemplated by the Merger Agreement are consummated; and
it is expected that such fees, other than printing fees and certain legal fees
incurred by Mr. Rich, which are expected to be paid by the Company following the
Merger, will be paid by such parties.

Purchaser, Mr. Rich, CSX and NSC have retained MacKenzie Partners, Inc., as
the Information Agent, and Citibank, N.A., as the Depositary, in connection with
the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telex, telecopy, telegraph and personal interview, and may request
banks, brokers, dealers and other nominee shareholders to forward materials
relating to the Offer to beneficial owners.

As compensation for acting as Information Agent, Purchaser will pay
MacKenzie Partners, Inc. a reasonable and customary fee and will also be
reimbursed for certain out-of-pocket expenses and may be indemnified against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the United States federal securities laws. Purchaser will pay
the Depositary reasonable and customary compensation for its services, plus
reimbursement for out-of-pocket expenses, and will indemnify the Depositary
against certain liabilities and expenses in connection therewith, including
under United States federal securities laws. Brokers, dealers, commercial banks
and trust companies will be reimbursed by Purchaser for customary handling and
mailing expenses incurred by them in forwarding material to their customers.

The following is an estimate of expenses to be incurred in connection with
the Offer and the Merger:

<TABLE>
<S> <C>
EXPENSES TO BE PAID BY PURCHASER AND ITS AFFILIATES:
Legal Fees............................................................. $ 750,000
Printing and Mailing................................................... 100,000
Advertising............................................................ 70,000
Filing Fees............................................................ 10,000
Depositary Fees........................................................ 2,500
Information Agent Fees................................................. 15,000
Miscellaneous.......................................................... 5,000
----------
Total.......................................................... $ 952,500
==========
EXPENSES TO BE PAID BY THE COMPANY:
Financial Advisor...................................................... $ 875,000
Legal Fees............................................................. 150,000
Miscellaneous.......................................................... 5,000
----------
Total.......................................................... $1,030,000
==========
</TABLE>

15. MISCELLANEOUS.

Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid United
States state statute. If Purchaser becomes aware of any such valid United States
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such United States state statute. If, after such good faith effort, Purchaser
cannot comply with any such United States state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker

49
<PAGE> 52

or dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

CSX, NSC, Mr. Rich and Purchaser have filed the Schedule 14D-1 and the
Schedule 13E-3, and the Company has filed the Schedule 14D-9. The Company's
recommendation with respect to the Offer and other information required to be
disseminated to shareholders of the Company pursuant to Rule 14d-9 under the
Exchange Act is contained in this Offer to Purchase. Such statements, which
furnish certain additional information with respect to the Offer, may be
examined and copies may be obtained at the same places and in the same manner
set forth in "THE TENDER OFFER -- Certain Information Concerning the Company"
(except that they will not be available at regional offices of the Commission).
The Schedule 14D-1 and the Schedule 13E-3, including exhibits, may be inspected
at, and copies may be obtained from, the same places and in the same manner as
set forth in "THE TENDER OFFER -- Certain Information Concerning the Company"
(except that they will not be available at the regional offices of the
Commission).

DOCP ACQUISITION LLC

August 22, 1997

50
<PAGE> 53

SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER, CSX AND NSC

1. Directors and Executive Officers of Purchaser. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments, and business addresses thereof for the past five years of each
person currently expected to be a director or executive officer of Purchaser.
Each such individual is a citizen of the United States and has held the
positions as set forth below for the past five years. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Purchaser. As stated under "SPECIAL FACTORS -- The Merger
Agreement and Related Agreements," Purchaser's Board will consist of Mr. Rich,
four designees of Mr. Rich and one designee of each of CSX and NSC. It is
currently not known who will be Mr. Rich's, NSC's or CSX's designees or who will
serve as executive officers other than Mr. Rich. Directors are indicated by an
asterisk.

<TABLE>
<CAPTION>
NAME AND CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- --------------------------------- ----------------------------------------------------------
<S> <C>
Walter G. Rich*.................. President & Chief Executive Officer, the Company and all
wholly
1 Railroad Avenue owned subsidiaries, since 1971. Director of Norwich Aero
Cooperstown, New York 13326 Products, Inc., New York State Business Development Corp.,
Security Mutual Life Insurance Company of New York, New
York State Electric and Gas Company and The Toledo, Peoria
and Western Railroad Corporation. Member, New York Public
Transportation Safety Board (since 1993). Director of the
Company since 1968.
</TABLE>

2. Directors and Executive Officers of CSX. The following table sets forth
the name, current business address, citizenship and present principal occupation
or employment, and material occupations, positions, offices or employments, and
business addresses thereof for the past five years of each director and
executive officer of CSX. Unless otherwise indicated, the current business
address of each individual is One James Center, 901 East Cary Street, Richmond,
VA 23219. Unless otherwise indicated, each such individual is a citizen of the
United States and has held his or her present position as set forth below for
the past five years. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with CSX. Where no date is
given for the commencement of the indicated office or position, such office or
position was assumed prior to December 6, 1991. Directors are indicated by an
asterisk.

Mark G. Aron..................... Executive Vice President -- Law and Public Affairs, CSX,
since April 1995. Prior thereto, Senior Vice
President -- Law and Public Affairs, CSX.
Elizabeth E. John C. Hower Professor of Public Policy and Management,
Bailey*.......................... The Wharton School of the University of Pennsylvania.
3620 Spruce Street Director of College Retirement Equities Fund, Honeywell,
Philadelphia, PA 19104 Inc. and Philip Morris Companies, Inc. Director of CSX
since November 1989.
</TABLE>

I-1
<PAGE> 54

<TABLE>
<CAPTION>
NAME AND CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- --------------------------------- ----------------------------------------------------------
<S> <C>
Robert L. Burrus, Partner in and Chairman of McGuire, Woods, Battle &
Jr.*............................. Boothe, a Virginia law firm. Director of Concepts Direct,
One James Center Inc., Heilig-Meyers Company; O'Sullivan Corporation, S&K
901 East Cary Street Famous Brands, Inc. and Smithfield Foods, Inc., Director
Richmond, VA 23219 of CSX since April 1993.

Alvin R. Carpenter............... President and Chief Executive Officer, CSXT, since January
1992.

John P. Clancey.................. President and Chief Executive Officer, Sea-Land, since
August 1991.

Donald D. Davis.................. Senior Vice President -- Employee Relations, CSXT, since
April 1992.

Andrew B. Fogarty................ Senior Vice President -- Corporate Services, CSX, since
August 1997. Prior thereto, Senior Vice
President -- Finance & Planning, Sea-Land, beginning June
1996, Vice President -- Audit and Advisory Services, CSX,
from February 1995 to June 1996, and Vice
President -- Executive Department, CSX.

Paul R. Goodwin.................. Executive Vice President -- Finance and Chief Financial
Officer, CSX, since April 1995, Executive Vice
President -- Finance and Administration, CSXT, from
February 1995 to April 1995. Prior thereto, Senior Vice
President -- Finance, CSXT.

Bruce C. Chairman and Chief Executive Officer of Ethyl Corporation,
Gottwald*........................ a worldwide producer of petroleum additives. Director of
330 South Fourth Street James River Corporation and Tredegar Industries, Inc.
P.O. Box 2189 Director of CSX since April 1988.
Richmond, VA 23219

Robert J. Grassi................. Senior Vice President -- Finance and Planning and Chief
Financial Officer, Sea-Land, since August 1997. Prior
thereto, Senior Vice President -- Atlantic, AME Services,
Sea-Land, beginning June 1996 and, Senior Vice
President -- Finance and Planning, Sea-Land.

Michael C. Hagan................. President and Chief Executive Officer, American Commercial
Lines, Inc., since May 1992.

John R. Retired Chairman of Ashland Inc., a diversified energy
Hall*............................ company with operations in petroleum refining and
100 Ashland Dr. marketing, chemicals, highway construction, oil and gas
Russell, KY 41169 applications and coal. Director of Banc One Corporation,
The Canada Life Assurance Company, Humana Inc., LaRoche
Industries Inc., Reynolds Metals Company and UCAR
International Inc. Director of CSX since May 1994.

Robert D. Vice Chairman of HFS, Inc. and Chairman, President and
Kunisch*......................... Chief Executive Officer, PHH Corporation, provider of
11333 McCormick Rd. value added business services, including vehicle
Hunt Valley, MD 21031 management services, real estate and mortgage banking
services. Director of Mercantile Bankshares Corporation
and GenCorp. Director of CSX since October 1990.
</TABLE>

I-2
<PAGE> 55

<TABLE>
<CAPTION>
NAME AND CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- --------------------------------- ----------------------------------------------------------
<S> <C>
Hugh L. McColl Chief Executive Officer, NationsBank Corporation, a bank
Jr.*............................. holding company. Prior thereto, Chairman and Chief
NationsBank Corporate Center Executive Officer, NCNB Corporation, a predecessor of
Charlotte, NC 28255 NationsBank Corporation. Director of Jefferson-Pilot
Corporation, Jefferson-Pilot Life Insurance Company,
Ruddick Corporation and Sonoco Products Co. Director of
CSX since February 1992.

James W. Chairman and Chief Executive Officer of The United
McGlothlin*...................... Company, a diversified energy company. Director of Basset
P.O. Box 1280 Furniture Industries, Inc. Director of CSX since November
Bristol, VA 24203 1989.

Southwood J. Chairman and Chief Executive Officer of Dana Corporation,
Morcott*......................... a manufacturer of automotive and truck parts and provider
4500 Dorr Street of commercial credit. Previously, Chairman, President and
Toledo, OH 43615 Chief Executive Officer of Dana Corporation. Director of
Johnson Controls, Inc. and Phelps Dodge Corporation.
Director of CSX since July 1990.

Jesse R. Mohorovic............... Vice President -- Executive Department, CSX, since
February 1995. From April 1994 to February 1995, Vice
President -- Corporate Communications, CSXT. Prior
thereto, Vice President -- Corporate Communications,
Sea-Land.

Richard E. Murphy................ Senior Vice President -- Corporate Marketing, Sea-Land,
since June 1996. Prior thereto, Senior Vice
President -- Atlantic AME Services, Sea-Land, from June
1995 to June 1996; Vice President -- Pacific Services,
Sea-Land, from 1993 to 1995, and Vice President -- Pacific
Services, Sea-Land.

Gerald L. Nichols................ Executive Vice President and Chief Operating Officer,
CSXT, since February 1995. Prior thereto, Senior Vice
President -- Administration, CSXT.

Charles G. Raymond............... Senior Vice President and Chief Transportation Officer,
Sea-Land, since May 1995. Prior thereto, Senior Vice
President -- Operations and Inland Transportation,
Sea-Land.

Charles E. Chairman and Chief Executive Officer, Barnett Banks, Inc.,
Rice*............................ a bank holding company. Director of Sprin Corporation.
50 North Laura Street Director of CSX since April 1990.
Jacksonville, FL 32202

William C. President and Chief Executive Officer, W.K. Kellogg
Richardson*...................... Foundation, a major philanthropic institution, since 1995.
1 Michigan Avenue Prior thereto, President, The Johns Hopkins University.
Battle Creek, MI 49017 Director of The Kellogg Company, Mercantile Bankshares
Corporation and Mercantile Safe Deposit & Trust Company.
Director of CSX since December 1992.

James L. Ross.................... Vice President and Controller, CSX, since May 1996. Prior
thereto, President -- Special Projects, CSX, from October
1995 to May 1996, and Audit Partner, Ernst Young, LLP.

Frank S. Physician. Director of Columbia/HCA Healthcare
Royal*........................... Corporation, Crestar Financial Corporation, Chesapeake
1122 North 25th Street Corporation and Dominion Resources, Inc. Director of CSX
Richmond, VA 23223 since January 1994.
</TABLE>

I-3
<PAGE> 56

Ronald T. Sorrow................. Chairman, President and Chief Executive Officer, CSX
Intermodal, Inc., since January 1997. Prior thereto,
President and Chief Executive Officer, CSX Intermodal,
Inc., from January 1996 to January 1997, and Vice
President -- Sales and Marketing, CSX Intermodel, Inc.

William H. Sparrow............... Vice President -- Financial Planning, CSX, since February
1996. Vice President -- Capital Budgeting, CSX, from May
1994 to February 1996. Prior thereto, Vice President and
Treasurer, CSX.

Michael J. Ward.................. Executive Vice President, CSXT, since June 1996. Senior
Vice President -- Finance, CSXT, from April 1995 to June
1996. Prior thereto, General Manager -- C&O Business Unit,
from 1994 to April 1995, and Vice President -- Coal, CSXT.

Gregory W. Weber................. Vice President and Treasurer, CSX, since May 1996. Prior
thereto, Vice President and Controller, CSX, and
Treasurer, CSX, from May 1994 to May 1996.
</TABLE>

3. Directors and Executive Officers of NSC. The following table sets forth
the name, current business address, citizenship and present principal occupation
or employment, and material occupations, positions, offices or employments and
business addresses thereof for the past five years of each director and
executive officer of NSC. Unless otherwise indicated, the current business
address of each individual is Three Commercial Place, Norfolk, Virginia 23510.
Unless otherwise indicated, each such individual is a citizen of the United
States and has held his or her present position as set forth below for the past
five years. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with NSC. Directors are indicated by an
asterisk.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
<S> <C>
David R. Goode*.................. Chairman, President and Chief Executive Officer, NSC,
since September 1992. Prior thereto, President, NSC.
Director of Caterpillar, Inc., since June 1993,
Georgia-Pacific Corporation, since July 1992,
Aeroquip-Vickers, Inc. (formerly TRINOVA Corporation),
since January, 1993, and Texas Instruments Incorporated,
since February 1996.
James C. Bishop, Jr.............. Executive Vice President -- Law, NSC, since March 1996.
Prior thereto, Vice President -- Law, NSC.

R. Alan Executive Vice President -- Transportation Logistics, NSC,
Brogan........................... and President, North American, since December 1992. Prior
P.O. Box 988 thereto, Vice President -- Quality Management, NSC.
Fort Wayne, IN 46801-0988

L.I. Prillaman................... Executive Vice President -- Marketing, NSC, since October
1995. Prior thereto, Vice President -- Properties, NSC,
from December 1992 to October 1995, and Vice President and
Controller, NSC.
</TABLE>

I-4
<PAGE> 57

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
<S> <C>
Stephen C. Tobias................ Executive Vice President -- Operations, NSC, since July
1994. Prior thereto, Senior Vice President -- Operations,
NSC, from October 1993 to July 1994, Vice
President -- Strategic Planning, NSC, from December 1992
to October 1993, and Vice President -- Transportation,
NSC.

Henry C. Wolf.................... Executive Vice President -- Finance, NSC, since June 1993.
Prior thereto, Vice President -- Taxation, NSC.

John F. Senior Vice President -- Public Affairs, NSC, since August
Corcoran......................... 1997. Prior thereto, Vice President -- Public Affairs,
1500 K Street, N.W., NSC.
Suite 375
Washington, DC 20005

Paul N. Austin................... Vice President -- Personnel, NSC, since June 1994,
Assistant Vice President -- Personnel, NSC from February
1993 to June 1994. Prior thereto,
Director -- Compensation, NSC.

David A. Cox..................... Vice President -- Properties, NSC, since December 1995.
Prior thereto, Assistant Vice President -- Industrial
Development, NSC.

Thomas L. Finkbiner.............. Vice President -- Intermodal, NSC, since August 1993.
Prior thereto, Senior Assistant Vice
President -- International and Intermodal, NSC, from April
to August 1993, and Assistant Vice
President -- International and Intermodal, NSC.

Nancy S. Fleischman.............. Vice President, NSC, since August 1997. Prior thereto,
Assistant Vice President -- Strategic Planning, NSC, from
November 1993 to August 1997, and Senior General Attorney,
NSC.

Robert C. Fort................... Vice President -- Public Relations, NSC, since December
1996. Prior thereto, Assistant Vice President -- Public
Relations, NSC.

John W. Fox, Vice President -- Coal Marketing, NSC, since October 1995.
Jr............................... Prior thereto, Assistant Vice President -- Coal Marketing,
110 Franklin Rd., S.E. NSC, from August 1993 to October 1995, and General Manager
Roanoke, VA 24042 Eastern Region, NSC.

Thomas J. Golian................. Vice President, NSC, since October 1995. Prior thereto,
Executive Assistant to the Chairman, President and Chief
Executive Officer, NSC, from April 1993 to October 1995,
and Special Assistant to the President, NSC.

James L. Vice President -- Public Affairs, NSC, since March 1992.
Granum...........................
1500 K Street, N.W.
Suite 375
Washington, DC 20005

James A. Hixon................... Vice President -- Taxation, NSC, since June 1993. Prior
thereto, Assistant Vice President -- Tax Counsel, NSC.
</TABLE>

I-5
<PAGE> 58

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
<S> <C>
Jon L. Manetta................... Vice President -- Transportation & Mechanical, NSC, since
December 1995. Prior thereto, Vice
President -- Transportation, NSC, from June 1994 to
December 1995, Assistant Vice President -- Transportation,
NSC from October 1993 to June 1994, Assistant Vice
President -- Strategic Planning, NSC, from January 1993 to
October 1993, and Director Joint Facilities and Budget,
NSC.

Harold C. Mauney, Jr............. Vice President -- Public Affairs, NSC, since August 1997.
Prior thereto, Vice President -- Operations Planning and
Budget, NSC, from December 1996 to August 1997, and Vice
President -- Quality Management, NSC.

Donald W. Vice President -- Research and Tests, NSC since December
Mayberry......................... 1995. Prior thereto, Vice President -- Mechanical, NSC.
110 Franklin Rd., S.E.
Roanoke, VA 24042

James W. McClellan............... Vice President -- Strategic Planning, NSC since October
1993. Prior thereto, Assistant Vice President -- Corporate
Planning, NSC.

Kathryn B. Vice President -- Internal Audit, NSC since December 1992.
McQuade.......................... Prior thereto, Director -- Income Tax Administration, NSC.
110 Franklin Rd., S.E.
Roanoke, VA 24042

Charles W. Moorman............... Vice President -- Information Technology, NSC since
October 1993. Prior thereto, Vice President -- Employee
Relations, NSC, from December 1992 to October 1993, and
Vice President -- Personnel and Labor Relations, NSC.

Phillip R. Vice President -- Engineering, NSC, since December 1992.
Ogden............................ Prior thereto, Assistant Vice President -- Maintenance,
99 Spring Street, S.W. NSC. Director of Norfolk and Portsmouth Belt Line Railroad
Atlanta, GA 30303 Company, since December 1993.

John P. Rathbone................. Vice President and Controller, NSC, since December 1992.
Prior thereto, Assistant Vice President -- Internal Audit,
NSC.

William J. Romig................. Vice President and Treasurer, NSC, since April 1992.

Donald W. Seale.................. Vice President -- Merchandise Marketing, NSC, since August
1993. Prior thereto, Assistant Vice President -- Sales and
Service, NSC, from May 1992 to August 1993, and
Director -- Metals, Waste and Construction, NSC.

Robert S. Spenski................ Vice President -- Labor Relations, NSC, since June 1994.
Prior thereto, Senior Assistant Vice President -- Labor
Relations, NSC.

Rashe W. Stephens, Jr............ Vice President -- Quality Management, NSC, since December
1996. Prior thereto, Assistant Vice President -- Public
Affairs, NSC, from February 1993 to December 1996, and
Director, Equal Employment Officer and Manpower Planning,
NSC.

William C. Wooldridge............ Vice President -- Law, NSC, since March 1996. Prior
thereto, General Counsel -- Corporate, NSC.

Dezora M. Martin................. Corporate Secretary, NSC, since April 1995. Prior thereto,
Assistant Corporate Secretary, NSC, from October 1993 to
April 1995, and Assistant Corporate Secretary -- Planning,
NSC.
</TABLE>

I-6
<PAGE> 59

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
<S> <C>
Gerald L. Partner, Hunton & Williams, since 1990. Director of
Baliles*......................... Dibrell Brothers, Inc., from March 1992 to March 1995, and
Hunton & Williams Newport News Shipbuilding Inc. (since 1997). Director of
951 E. Byrd St. NSC since 1990.
Riverfront Plaza, East Tower
Richmond, VA 23219-4074

Carroll A. Campbell, President and Chief Executive Officer, American Council of
Jr.*............................. Life Insurance, since January 1995. Prior thereto,
American Council of Governor of South Carolina, from January 1987 to January
Life Insurance 1995. Director of AVX Corporation, since July 1995, FLUOR
1001 Pennsylvania Ave., N.W. Corporation (since January 1995 and Wackenhut Corporation,
Washington, DC 20004 since April 1997. Director of NSC, since July 1996.

Gene R. Executive Director, Association for Supervision and
Carter*.......................... Curriculum Development (since July 1992), Superintendent
Association for Supervision of Schools, Norfolk, Virginia (from July 1983 to June
and Curriculum Development 1992). Director of NSC, since 1992.
1250 N. Pitt Street
Alexandria, VA 22314-1403

L.E. Chairman, The Lubrizol Corporation, from January 1996 to
Coleman*......................... March 1996. Prior thereto, Chairman of the Board and Chief
7 Trillium Lane, Eastman Executive Officer, from April 1982 to December 1995.
Grantham, NH 03753 Director of The Lubrizol Corporation, since 1982, and
Harris Corporation, since January 1985. Director of NSC,
since 1982.

T. Marshall Hahn, Honorary Chairman of the Board, Georgia-Pacific
Jr.*............................. Corporation, since December 1993. Prior thereto, Chairman
Georgia-Pacific Corporation of the Board, NSC, from May 1993 to December 1993, and
P.O. Box 105605 Chairman of the Board and Chief Executive Officer, NSC,
Atlanta, GA 30348-5605 from February 1985 to May 1993. Director of SunTrust
Banks, Inc., from 1984 to April 1997, Trust Company Bank
of Georgia from 1987 to April 1997, and Coca-Cola
Enterprises, from 1987 to April 1997. Director of NSC,
since 1985.

Landon Partner, Brown Brothers Harriman & Co., since January
Hilliard*........................ 1979. Director of Owens-Corning Corporation, since April
Brown Brothers Harriman & Co. 1989. Director of NSC, since 1992.
59 Wall Street
New York, NY 10005

E.B. Leisenring, Chairman, The Philadelphia Contributionship, since January
Jr.*............................. 1996. Prior thereto, Chairman, Penn Virginia Corporation,
The Philadelphia from December [1933] to April 1992 and Chief Executive
Contributionship Officer, from January 1978 to December 1988. Director of
One Tower Bridge, Suite 501 Penn Virginia Corporation, from September 1952 to October
West Conshohocken, PA 19428 1992, Westmoreland Coal Company, from September 1952 to
June 1996, Fidelity Bank, N.A. a wholly owned subsidiary
of First Fidelity Bancorporation, from 1960 to January
1994, PICO Products, Inc., since November 1994 and SKF USA
Inc., a controlled subsidiary of Aktiebolaget SKF, a
Swedish corporation, from January 1966 to March 1996.
Director of NSC, since 1992.

Arnold B. McKinnon*.............. Chairman and Chief Executive Officer, NSC (from September
1991 to August 1992). Prior thereto, Chairman, President
and Chief Executive Officer, NSC, from March 1987 to
September 1991. Director of NSC, since 1988.
</TABLE>

I-7
<PAGE> 60

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
<S> <C>
Jane Margaret President, St. Mary's College of Maryland, since July
O'Brien*......................... 1996. Prior thereto, President Hollins College, from July
St. Mary's College of Maryland 1991 to June 1996. Director, Landmark Communications, Inc.
St. Mary's City, MD 20686 (since 1994). Director of NSC, since 1994.

Harold W. Partner, The Beacon Group, since April 1993, and
Pote*............................ President, PBS Properties, Inc., since November 1990.
The Beacon Group Director of Turecamo Maritime, Inc., from June 1990 to
399 Park Avenue, 17th Floor June 1996. Director of NSC, since 1988.
New York, NY 10022
</TABLE>

I-8
<PAGE> 61

SCHEDULE II

DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY

Directors and Executive Officers of the Company. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
director and executive officer of the Company. Unless otherwise indicated, the
current business address of each person is 1 Railroad Avenue, Cooperstown, New
York 13326. Unless otherwise indicated, each such person is a citizen of the
United States and has held his or her present position as set forth below for
the past five years. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with the Company. Directors
are indicated by an asterisk.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- --------------------------------- --------------------------------------------------------
<S> <C>
Walter G. Rich*.................. President & Chief Executive Officer, the Company and all
wholly owned subsidiaries, since 1971. Director of
Norwich Aero Products, Inc., New York State Business
Development Corp., Security Mutual Life Insurance
Company of New York, New York State Electric and Gas
Company and The Toledo, Peoria and Western Railroad
Corporation. Member, New York Public Transportation
Safety Board (since 1993). Director of the Company since
1968.
C. David Soule*.................. Executive Vice President and Chief Operating Officer,
the Company and all wholly owned subsidiaries, since
1983. Director of the Company since 1984.
Gordon R. Fuller*................ Executive Vice President, NYS&W, since 1996. Prior
thereto, President, The Toledo, Peoria and Western
Railroad Corporation, prior to 1996. Director of the
Company since January 1996.
Paul Garber...................... Vice President -- Marketing & Sales, NYS&W, since 1990.
Richard J. Hensel................ Vice President -- Engineering, NYS&W, since 1987.
Albert B. Aftoora*............... Vice President -- Corridor Development, CSXT, since
1995. Prior thereto, Assistant Vice President and
Treasurer, CSXT. Director of First American Railways,
Inc. and The Toledo, Peoria and Western Railroad
Corporation. Director of the Company since 1995.
William B. Blatter............... Senior Vice President and Chief Financial Officer, the
Company, since 1990. Prior thereto, Vice
President -- Finance and Chief Financial Officer, the
Company, beginning April 1988.
David Boyd....................... Vice President -- Mechanical and Chief Mechanical
Officer, the Company, since 1996. Prior thereto, Vice
President -- Operations, TP&W.
Charles S. Brenner*.............. President, J.L. Schiffman & Co., Inc., since 1981. Prior
thereto, Chairman of the Board, RWC Inc. Director of The
Toledo, Peoria and Western Railroad Corporation.
Director of the Company since 1993.
David B. Common*................. Vice President, JP Morgan & Co., Inc., since 1993. Prior
thereto, Director -- Corporate Accounts, The
Toronto-Dominion Bank. Director of the Company since
1993.
</TABLE>

II-1
<PAGE> 62

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- --------------------------------- --------------------------------------------------------
<S> <C>
Niles F. Curtis*................. President and Owner, Cooperstown Agway, Cooperstown, New
York, for over five years. Director of the Company since
1971.
Nathan R. Fenno.................. Vice President -- Law, the Company, since September
1991, and General Counsel and Secretary, the Company,
since July 1988.
Everett A. Gilmour*.............. Chairman of the Board, The National Bank & Trust Co.,
Norwich, NY, and NBT Bancorp, Inc. Director of New York
State Electric & Gas, Inc., Preferred Mutual Insurance
Co. and Norwich Aero Products Inc. Director of the
Company since 1980.
Gerald D. Groff*................. Senior Attending Physician, Department of Medicine, Mary
Imogene Bassett Hospital, Cooperstown, New York, since
1987, Assistant Professor of Clinical Medicine at
Columbia Presbyterian Medical School, and Medical
Director of the Community Health Plan of Bassett
Hospital, Director of the Company since 1993.
Malcolm C. Hughes*............... Attorney, Margaretville, New York. Director of the
Company since 1970.
Robert A. Kurdock................ Vice President, NYS&W, since 1985. Prior thereto,
employed by the Company, since September 1980.
Robert L. Marcalus*.............. Chairman, Marcal Paper Mills, Inc. for over five years.
Director of the Company since 1980. .
Harvey J. Polly*................. President and Chief Executive Officer, H/R Industries,
Inc., for over five years. President, Chief Executive
Officer and Director, Banyan Hotel Investment Trust.
Director of the Company since 1988.
William H. Matteson.............. Vice President-Administration, the Company, since
January 1991. Prior thereto, employed by the Company,
since October, 1987.
Richard T. Nasti*................ Senior Vice President and Chief Financial Officer of
H.J. Kalikow & Co., LLC. Trustee of Iona College.
Director of the Company since 1997.
Frank Quattrocchi................ Vice President & Treasurer, the Company, since April
1993. Prior thereto, employed by NYS&W beginning June
1983.
Joseph G. Senchyshyn............. Vice President-Operations, NYS&W, since 1985.
Richard A. White*................ Retired Business Executive. Director of Northeast
Treaters, Inc. Director of the Company since 1970.
</TABLE>

II-2
<PAGE> 63

SCHEDULE III

EXCERPTS OF

NEW YORK BUSINESS CORPORATION LAW

CHAPTER 4 OF THE CONSOLIDATED LAWS

sec.623. PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT FOR SHARES

(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.

(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.

(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.

(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.

(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof,

III-1
<PAGE> 64

at the election of the corporation, the fair value thereof in cash as determined
by the board as of the time of such expiration or completion, but without
prejudice otherwise to any corporate proceedings that may have been taken in the
interim.

(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of the transfer.

(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.

III-2
<PAGE> 65

(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:

(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new corporation is a
foreign corporation without an office in this state, such proceeding shall
be brought in the county where the office of the domestic corporation,
whose shares are to be valued, was located.

(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.

(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall
have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in such proceeding upon each
dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons, and upon each nonresident
dissenting shareholder either by registered mail and publication, or in
such other manner as is permitted by law. The jurisdiction of the court
shall be plenary and exclusive.

(4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the
shares, which, for the purposes of this section, shall be the fair value as
of the close of business on the day prior to the shareholders'
authorization date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving rise to the shareholder's
right to receive payment for shares and its effects on the corporation and
its shareholders, the concepts and methods then customary in the relevant
securities and financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the
fair value of the shares without a jury and without referral to an
appraiser or referee. Upon application by the corporation or by any
shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of the shares
whether or not intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil practice law
and rules.

(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.

(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate action
was consummated to the date of payment. In determining the rate of
interest, the court shall consider all relevant factors, including the rate
of interest which the corporation would have had to pay to borrow money
during the pendency of the proceeding. If the court finds that the refusal
of any shareholder to accept the corporate offer of payment for his shares
was arbitrary, vexatious or otherwise not in good faith, no interest shall
be allowed to him.

(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any experts
employed by it. Notwithstanding the foregoing, the court may, in its
discretion, apportion and assess all or any part of the costs, expenses and
fees incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including

III-3
<PAGE> 66

any who have withdrawn their notices of election as provided in paragraph
(e), if the court finds that their refusal to accept the corporate offer
was arbitrary, vexatious or otherwise not in good faith. The court may, in
its discretion, apportion and assess all or any part of the costs, expenses
and fees incurred by any or all of the dissenting shareholders who are
parties to the proceeding against the corporation if the court finds any of
the following: (A) that the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay; (B)
that no offer or required advance payment was made by the corporation; (C)
that the corporation failed to institute the special proceeding within the
period specified therefor; or (D) that the action of the corporation in
complying with its obligations as provided in this section was arbitrary,
vexatious or otherwise not in good faith. In making any determination as
provided in clause (A), the court may consider the dollar amount or the
percentage, or both, by which the fair value of the shares as determined
exceeds the corporate offer.

(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificates for any such shares represented
by certificates.

(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.

(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:

(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or

(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the
corporation, but have rights superior to the non-dissenting shareholders,
and if it is not liquidated, retain his right to be paid for his shares,
which right the corporation shall be obliged to satisfy when the
restrictions of this paragraph do not apply.

(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this
paragraph. If the dissenting shareholder fails to exercise such option as
provided, the corporation shall exercise the option by written notice given
to him within twenty days after the expiration of such period of thirty
days.

(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.

(l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).

(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations).

sec.910. RIGHT OF SHAREHOLDER TO RECEIVE PAYMENT FOR SHARES UPON MERGER OR
CONSOLIDATION, OR SALE, LEASE, EXCHANGE OR OTHER DISPOSITION OF
ASSETS, OR SHARE EXCHANGE

III-4
<PAGE> 67

(a) A shareholder of a domestic corporation shall, subject to and by
complying with section 623 (Procedure to enforce shareholder's right to receive
payment for shares), have the right to receive payment of the fair value of his
shares and the other rights and benefits provided by such section, in the
following cases:

(1) Any shareholder entitled to vote who does not assent to the taking
of an action specified in subparagraphs (A), (B) and (C). (A) Any plan of
merger or consolidation to which the corporation is a party; except that
the right to receive payment of the fair value of his shares shall not be
available: (i) To a shareholder of the parent corporation in a merger
authorized by section 905 (Merger of parent and subsidiary corporations),
or paragraph (c) of section 907 (Merger or consolidation of domestic and
foreign corporations); and (ii) To a shareholder of the surviving
corporation in a merger authorized by this article, other than a merger
specified in subparagraph (i), unless such merger effects one or more of
the changes specified in subparagraph (b)(6) of section 806 (Provisions as
to certain proceedings) in the rights of the shares held by such
shareholder. (B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires shareholder
approval under section 909 (Sale, lease, exchange or other disposition of
assets) other than a transaction wholly for cash where the shareholders'
approval thereof is conditioned upon the dissolution of the corporation and
the distribution of substantially all of its net assets to the shareholders
in accordance with their respective interests within one year after the
date of such transaction. (C) Any share exchange authorized by section 913
in which the corporation is participating as a subject corporation; except
that the right to receive payment of the fair value of his shares shall not
be available to a shareholder whose shares have not been acquired in the
exchange.

(2) Any shareholder of the subsidiary corporation in a merger
authorized by section 905 or paragraph (c) of section 907, or in a share
exchange authorized by paragraph (g) of section 913, who files with the
corporation a written notice of election to dissent as provided in
paragraph (c) of section 623.

III-5
<PAGE> 68

[SMITH BARNEY LETTERHEAD]

Annex A

August 17, 1997

The Board of Directors
Delaware Otsego Corporation
1 Railroad Avenue
Cooperstown, NY 13326

Members of the Board:

You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Delaware Otsego Corporation ("DOC")
of the consideration to be received by such holders pursuant to the terms and
subject to the conditions set forth in the Agreement and Plan of Merger, dated
as of August 17, 1997 (the "Merger Agreement"), by and among CSX Corporation
("CSX"), Norfolk Southern Corporation ("NSC"), Walter G. Rich ("Management
Investor"), DOC Acquisition LLC, an entity to be jointly owned by CSX, NSC and
the Management Investor ("DOC Acquisition" and, together with CSX, NSC and the
Management Investor, "Buyer"), and DOC. As more fully described in the Merger
Agreement, (i) DOC Acquisition will commence a tender offer to purchase all
outstanding shares of the common stock, par value $0.125 per share, of DOC (the
"DOC Common Stock"), other than shares of DOC Common Stock beneficially
owned by the Buyer, at a purchase price of $22.00 per share, net to the seller
in cash (the "Tender Offer") and (ii) subsequent to the Tender Offer, a
subsidiary of DOC Acquisition will be merged with and into DOC (the "Merger"
and, together with the Tender Offer, the "Transaction") and each outstanding
share of DOC Common Stock not previously tendered will be converted into the
right to receive $22.00 in cash.

In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of DOC and certain senior officers and other representatives of
Buyer concerning the business, operations and prospects of DOC. We examined
certain publicly available business and financial information relating to DOC as
well as certain financial forecasts and other information and data for DOC which
were provided to or otherwise discussed with us by the management of DOC. We
reviewed the financial terms of the Transaction as set forth in the Merger
Agreement in relation to, among other things: current and historical market
prices and trading volumes of DOC Common Stock; the historical and projected
earnings and other operating data of DOC; and the capitalization and financial
condition of DOC. We considered, to the extent publicly available, the financial
terms of certain other similar transactions recently effected which we
considered relevant in evaluating the Transaction and analyzed certain
financial, stock market and other publicly available information relating to the
businesses of other companies whose operations we considered relevant in
evaluating those of DOC. In addition to the foregoing, we conducted such other
analyses and examinations and considered such other financial, economic and
market criteria as we deemed appropriate in arriving at our opinion.

In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with us,
we have been

A-1
<PAGE> 69
The Board of Directors
Delaware Otsego Corporation
August 17, 1997
Page 2

advised by the management of DOC that such forecasts and other information and
data were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of DOC as to the future financial
performance of DOC. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of DOC nor have we made any physical inspection of the properties or assets of
DOC. In connection with our engagement, we were requested to approach, and held
discussions with, third parties to solicit indications of interest in a
possible acquisition of DOC. Our opinion is necessarily based upon information
available to us, and financial, stock market and other conditions and
circumstances existing and disclosed to us, as of the date hereof.

Smith Barney has been engaged to render financial advisory services to DOC in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We also will receive a fee upon the delivery of this opinion.
In the ordinary course of our business, we and our affiliates may actively
trade or hold the securities of DOC, CSX and NSC for our own account or for the
account of our customers and, accordingly, may at any time hold a long or short
position in such securities. In addition, we and our affiliates (including
Travelers Group Inc. and its affiliates) may maintain relationships with DOC,
CSX, NSC and their respective affiliates.

Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of DOC in its evaluation of the proposed
Transaction, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to whether or not such stockholder should
tender shares of DOC Common Stock in the Tender Offer or how such stockholder
should vote on the proposed Merger. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Smith Barney
be made, without our prior written consent; provided, that this opinion letter
may be included in its entirety in the Solicitation/Recommendation Statement of
DOC relating to the proposed Transaction.

Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the cash consideration to be received in
the Transaction by the holders of DOC Common Stock (other than Buyer and its
affiliates) is fair, from a financial point of view, to such holders.

Very truly yours,

/s/ Smith Barney Inc.
- ---------------------
SMITH BARNEY INC.

A-2
<PAGE> 70

Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each shareholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.

The Depositary for the Offer is:

CITIBANK, N.A.

<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Courier:

Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data c/o Citicorp Data
111 Wall Street, 5th Floor Distribution, Inc. Distribution, Inc.
New York, New York 10043 P.O. Box 7072 404 Setle Drive
Paramus, New Jersey 07653 Paramus, New Jersey 07652
</TABLE>

Facsimile for Eligible Institutions:

(201) 262-3240

To confirm fax only:

(800) 422-2077

Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A shareholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.

The Information Agent for the Offer is:

[MacKenzie Partners, Inc. Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE: (800) 322-2885

<PAGE> 1

LETTER OF TRANSMITTAL
TO TENDER SHARES OF
COMMON STOCK

DELAWARE OTSEGO CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 22, 1997

DOCP ACQUISITION LLC
A NEW YORK LIMITED LIABILITY COMPANY

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.

The Depositary for the Offer is:

CITIBANK, N.A.

<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Delivery:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, c/o Citicorp Data Distribution,
Inc. Inc.
111 Wall Street, 5th Floor P.O. Box 7072 404 Sette Drive
New York, New York 10043 Paramus, New Jersey 07653 Paramus, New Jersey 07652
</TABLE>

Facsimile for Eligible Institutions:
(201) 262-3240

To confirm fax only:
(800) 422-2077

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 PROVIDED BELOW.

THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2

This Letter of Transmittal is to be completed by shareholders of Delaware
Otsego Corporation either if certificates ("Share Certificates") evidencing
shares of common stock, par value $0.125 per share (the "Shares"), are to be
forwarded herewith or if delivery of Shares is to be made by book-entry transfer
to an account maintained by Citibank, N.A. (the "Depositary") at The Depository
Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry
Transfer Facility" and collectively, the "Book-Entry Transfer Facilities")
pursuant to the book-entry transfer procedure described in "The Tender Offer --
Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Purchaser (as defined in the Offer to Purchase) reserves the right to
require that it receive such certificates prior to accepting Shares for payment.
Payment for Shares tendered and purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of, among other things, such
certificates, if such certificates have been distributed to holders of Shares.

Shareholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in "The Tender
Offer -- Terms of the Offer; Expiration Date" of the Offer to Purchase) or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis and who wish to tender their Shares must do so pursuant to the guaranteed
delivery procedure described in "The Tender Offer -- Procedures for Accepting
the Offer and Tendering Shares" of the Offer to Purchase. See Instruction below.

[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:

Name of Tendering Institution:
- ----------------------------------------------------------------------------

Check Box of Applicable Book-Entry Transfer Facility and provide Account
Number and Transaction Code Number:

[ ] The Depository Trust Company

[ ] Philadelphia Depository Trust Company

Account Number
- --------------------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------------------

[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY (PLEASE INCLUDE A
PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY) AND COMPLETE THE FOLLOWING:

Name(s) of Registered Holder(s):
- ------------------------------------------------------------------------

Window Ticket Number (if any):
--------------------------------------------------

Date of Execution of Notice of Guaranteed Delivery:

Name of Institution which Guaranteed Delivery:

If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer Facility
and provide Account Number and Transaction Code Number:

[ ] The Depository Trust Company

[ ] Philadelphia Depository Trust Company

Account Number
- ---------------------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------------------
<PAGE> 3

<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
------------------------------------------------

------------------------------------------------

------------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares being delivered to the
Depositary are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------
</TABLE>

NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH
IN THIS LETTER OF TRANSMITTAL CAREFULLY.
<PAGE> 4

LADIES AND GENTLEMEN:

The undersigned hereby tenders to DOCP Acquisition LLC, a New York limited
liability company ("Purchaser") formed by CSX Corporation, a Virginia
corporation ("CSX"), Norfolk Southern Corporation, a Virginia corporation
("NSC"), and Walter G. Rich, the above-described shares of common stock, par
value $0.125 per share (the "Shares"), of Delaware Otsego Corporation, a New
York corporation (the "Company"), pursuant to Purchaser's offer to purchase all
outstanding Shares, other than Shares owned beneficially by or of record by the
Company, CSX, NSC, Mr. Rich or any of their respective subsidiaries, at a price
of $22.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated August 22, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase, each as
amended or supplemented from time to time, together constitute the "Offer").

The undersigned understands that Purchaser reserves the right to transfer
or assign, in whole at any time, or in part from time to time, to a subsidiary
of Purchaser, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering shareholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.

Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all the Shares that
are being tendered hereby (and any and all non-cash dividends, distributions,
rights, other Shares or other securities issued or issuable in respect of such
Shares or declared, paid or distributed in respect of such Shares on or after
August 22, 1997 (collectively, "Distributions")), and irrevocably appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares and all Distributions, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares
(individually, a "Share Certificate") and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by a Book-Entry Transfer Facility, together, in either case, with all
accompanying evidence of transfer and authenticity to, or upon the order of
Purchaser, (b) present such Shares and all Distributions for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.

If, on or after August 22, 1997, the Company should declare or pay any cash
or stock dividend, other than regular quarterly cash dividends, or make any
distribution with respect to the Shares that is payable or distributable to
shareholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares accepted for payment pursuant to the Offer, then (a) the purchase price
per Share payable by Purchaser pursuant to the Offer will be reduced by the
amount of any such cash dividend or cash distribution and (b) any such non-cash
dividend, distribution or right to be received by the tendering shareholder will
be received and held by such tendering shareholder for the account of Purchaser
and will be required to be promptly remitted and transferred by each such
tendering shareholder to the Depositary for the account of Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance,
Purchaser will be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount of value thereof, as
determined by Purchaser in its sole discretion.

By executing this Letter of Transmittal, the undersigned irrevocably
appoints Mark G. Aron and William J. Romig as proxies of the undersigned, each
with full power of substitution, to the full extent of the undersigned's rights
with respect to the Shares tendered by the undersigned and accepted for payment
by Purchaser (and any and all Distributions). All such proxies shall be
considered coupled with an interest in the tendered Shares. This appointment
will be effective if, when, and only to the extent that, Purchaser accepts such
Shares for payment pursuant to the Offer. Upon such acceptance for payment, all
prior proxies given by the undersigned with respect to such Shares,
Distributions and other securities will, without further action, be
<PAGE> 5

revoked, and no subsequent proxies may be given. The individuals named above as
proxies will, with respect to the Shares, Distributions and other securities for
which the appointment is effective, be empowered to exercise all voting and
other rights of the undersigned as they in their sole discretion may deem proper
at any annual, special, adjourned or postponed meeting of the Company's
shareholders, by written consent or otherwise, and Purchaser reserves the right
to require that, in order for Shares, Distributions or other securities to be
deemed validly tendered, immediately upon Purchaser's acceptance for payment of
such Shares Purchaser must be able to exercise full voting rights with respect
to such Shares.

The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the undersigned own(s) the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that such
tender of Shares complies with Rule 14e-4 under the Exchange Act, and that when
such Shares are accepted for payment by Purchaser, Purchaser will acquire good,
marketable and unencumbered title thereto and to all Distributions, free and
clear of all liens, restrictions, charges and encumbrances, and that none of
such Shares and Distributions will be subject to any adverse claim. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby and all
Distributions. In addition, the undersigned shall remit and transfer promptly to
the Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and, pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.

No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.

The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "The Tender Offer -- Procedures for Accepting the
Offer and Tendering Shares" of the Offer to Purchase and in the Instructions
hereto will constitute the undersigned's acceptance of the terms and conditions
of the Offer. Purchaser's acceptance for payment of Shares tendered pursuant to
the Offer will constitute a binding agreement between the undersigned and
Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, Purchaser may not be required to accept for payment any of the
Shares tendered hereby.

Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions", please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased, by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not accept for payment any of the Shares tendered
hereby.
<PAGE> 6

------------------------------------------------------------

SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS
LETTER OF TRANSMITTAL)

To be completed ONLY if Shares Certificates not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be issued in the name of someone other than the undersigned, or if
Shares delivered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at a Book-Entry Transfer
Facility other than that designated above.

Issue check and/or certificates to:

Name
--------------------------------------------------------------------
(PLEASE PRINT)

Address
-------------------------------------------------------------------

-------------------------------------------------------------------
(ZIP CODE)

-------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)

(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)

[ ] Credit unpurchased Shares delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:

Check appropriate Box:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company

-------------------------------------------------------------------
(ACCOUNT NUMBER)
===================================================================

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS
LETTER OF TRANSMITTAL)

To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that shown above.

Mail check and/or certificates to:

Name
------------------------------------------------------------
(PLEASE PRINT)

Address
------------------------------------------------------------

------------------------------------------------------------
(ZIP CODE)

------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)

------------------------------------------------------------
<PAGE> 7

SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S))

Dated:
- --------------------------- , 1997

(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. See
Instruction 5 of this Letter of Transmittal.)

Name(s) ------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(PLEASE PRINT)

Capacity (Full Title)
----------------------------------------------------------------

Address-------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(ZIP CODE)

Daytime Area Code and Telephone Number ( )
------------------------------------------

Tax Identification or Social Security Number
----------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)

GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTIONS 1 AND 5 OF THIS LETTER OF TRANSMITTAL)

Authorized Signature
----------------------------------------------------------------

Name --------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(PLEASE PRINT)

Title---------------------------------------------------------------------------

Name of Firm
---------------------------------------------------------------------

Address-------------------------------------------------------------------------
(ZIP CODE)

Area Code and Telephone Number ( )
------------------------------------------------

Dated:
- --------------------------- , 1997
<PAGE> 8

INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is a
bank, broker, dealer, credit union, savings association, or other entity that is
a member in good standing of the Securities Transfer Agent's Medallion Program
(each, an "Eligible Institution"). No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of Shares tendered herewith,
unless such holder(s) has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the reverse
hereof, or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instruction 5. If a Share Certificate is registered in the name
of a person other than the signer of this Letter of Transmittal, or if payment
is to be made, or a Share Certificate not accepted for payment or not tendered
is to be returned, to a person other than the registered holder(s), then the
Share Certificate must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the Share Certificate, with the signature(s) on such Share
Certificate or stock powers guaranteed as described above. See Instruction 5.

2. Delivery of Letter of Transmittal and Share Certificates. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "The Tender Offer -- Procedures for Accepting the Offer
and Tendering Shares" in the Offer to Purchase. Share Certificates evidencing
all tendered Shares, or confirmation of a book-entry transfer of such Shares, if
such procedure is available, into the Depositary's account at one of the
Book-Entry Transfer Facilities pursuant to the procedures set forth in "The
Tender Offer -- Procedures for Accepting the Offer and Tendering Shares" in the
Offer to Purchase, together with a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message, as defined below)
and any other documents required by this Letter of Transmittal, must be received
by the Depositary at one of its addresses set forth on the reverse hereof prior
to the Expiration Date (as defined in "The Tender Offer -- Terms of the Offer;
Expiration Date" of the Offer to Purchase). If Share Certificates are forwarded
to the Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery. Shareholders whose
Share Certificates are not immediately available, who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis may tender their Shares pursuant to the guaranteed
delivery procedure described in "The Tender Offer -- Procedures for Accepting
the Offer and Tendering Shares" in the Offer to Purchase. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser herewith, must be received by
the Depositary prior to the Expiration Date; and (iii) in the case of a
guarantee of Shares, the Share Certificates, in proper form for transfer, or a
confirmation of a book-entry transfer of such Shares, if such procedure is
available, into the Depositary's account at one of the Book-Entry Transfer
Facilities, together with a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message), and
any other documents required by this Letter of Transmittal, must be received by
the Depositary within three New York Stock Exchange, Inc. trading days after the
date of execution of the Notice of Guaranteed Delivery, all as described in "The
Tender Offer -- Procedures for Accepting the Offer and Tendering Shares" in the
Offer to Purchase. The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility to, and received by the Depositary and forming a
part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of this Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
<PAGE> 9

THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.

No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.

3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.

4. Partial Tenders. (Not applicable to shareholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions," as soon as practicable after the expiration or termination of the
Offer. All Shares evidenced by Share Certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.

5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.

If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.

If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
certificates.

If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.

If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.

If this Letter of Transmittal or any Share Certificate(s) or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.

6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the
<PAGE> 10

registered holder(s), the amount of any stock transfer taxes (whether imposed on
the registered holder(s), such other person or otherwise) payable on account of
the transfer to such other person will be deducted from the purchase price of
such Shares purchased, unless evidence satisfactory to Purchaser of the payment
of such taxes, or exemption therefrom, is submitted.

EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATE(S) EVIDENCING THE
SHARES TENDERED HEREBY.

7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered," the appropriate boxes on this Letter
of Transmittal must be completed. Shares tendered hereby by book-entry transfer
may request that Shares not purchased be credited to such account maintained at
a Book-Entry Transfer Facility as such shareholder may designate in the box
entitled "Special Payment Instructions" on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.

8. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to the Information Agent at their respective addresses or
telephone numbers set forth below. Additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.

9. Substitute Form W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such shareholder is not subject to backup withholding of federal income tax. If
a tendering shareholder has been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding, such shareholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
shareholder has since been notified by the Internal Revenue Service that such
shareholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering shareholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such shareholder. If the tendering shareholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such shareholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such shareholder until a TIN is provided to
the Depositary.

10. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. The shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES, OR AN
AGENT'S MESSAGE (TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY
EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR
TO THE EXPIRATION DATE.
<PAGE> 11

IMPORTANT TAX INFORMATION

Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.

Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.

If backup withholding applies with respect to a shareholder, the Depositary
is required to withhold 31% of any payments made to such shareholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN), and (b) that
(i) such shareholder has not been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such shareholder that such shareholder is no longer subject to backup
withholding.

WHAT NUMBER TO GIVE THE DEPOSITARY

The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.
<PAGE> 12

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PAYER'S NAME: CITIBANK, N.A., AS DEPOSITARY
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE Part I-PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number OR
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING ---------/ ---------/
DEPARTMENT OF THE TREASURY BELOW. ---------
INTERNAL REVENUE SERVICE Employee Identification
Number
(if awaiting TIN write
"Applied For")
------------------------------------------------------------------------
Part II-For Payees Exempt From Backup Withholding, see the enclosed
Guidelines and complete as instructed therein. CERTIFICATION-Under
PAYER'S REQUEST FOR TAXPAYER penalties of perjury, I certify that:
IDENTIFICATION NUMBER ("TIN") (1) The number shown on this form is my correct Taxpayer Identification
Number (or a Taxpayer Identification Number has not been issued to me
and either (a) I have mailed or delivered an application to receive
a Taxpayer Identification Number to the appropriate Internal Revenue
Service ("IRS") or Social Security Administration office or (b) I
intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number
within sixty (60) days, 31% of all reportable payments made to me
thereafter will be withheld until I provide a number), and
(2) I am not subject to backup withholding either because I have not
been notified by the IRS that I am subject to backup withholding as a
result of failure to report all interest or dividends, or the IRS
has notified me that I am no longer subject to backup withholding.
------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS-You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out item
(2). (Also see instructions in the enclosed Guidelines.)
SIGNATURE DATE , 1997
- ---------------------------------------------------------------------------------------------------------
</TABLE>

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

Questions and requests for assistance or additional copies
of the Offer to Purchase, Letter of Transmittal and
other tender offer materials may be directed to the
Information Agent as set forth below:

The Information Agent for the Offer is:

LOGO
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free (800) 322-2885

<PAGE> 1

NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF
COMMON STOCK

DELAWARE OTSEGO CORPORATION
TO

DOCP ACQUISITION LLC
A NEW YORK LIMITED LIABILITY COMPANY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)

This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if (i) certificates
("Share Certificates") evidencing shares of common stock, par value $0.125 per
share (the "Shares") of Delaware Otsego Corporation, a New York corporation (the
"Company") are not immediately available, (ii) time will not permit all required
documents to reach Citibank, N.A., as Depositary (the "Depositary"), prior to
the Expiration Date (as defined in "The Tender Offer -- Terms of the Offer;
Expiration Date" in the Offer to Purchase (as defined below)) or (iii) the
procedure for book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary. See "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer
to Purchase.

The Depositary for the Offer is:

CITIBANK, N.A.

<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Delivery:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, c/o Citicorp Data Distribution,
111 Wall Street, 5th Floor Inc. Inc.
New York, New York 10043 P.O. Box 7072 404 Sette Drive
Paramus, New Jersey 07653 Paramus, New Jersey 07652
</TABLE>

Facsimile for Eligible Institutions:
(201) 262-3240

To confirm fax only:
(800)422-2077

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2

Ladies and Gentlemen:

The undersigned hereby tenders to DOCP Acquisition LLC, a New York limited
liability company formed by CSX Corporation, a Virginia corporation, Norfolk
Southern Corporation, a Virginia corporation, and Walter G. Rich, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated August
22, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer"), receipt
of each of which is hereby acknowledged, the number of Shares specified below
pursuant to the guaranteed delivery procedures described in "The Tender Offer --
Procedures for Accepting the Offer and Tendering Shares" in the Offer to
Purchase.

Number of Shares:

- --------------------------------------------------------------------------------
Certificate Nos. (if available):

- --------------------------------------------------------------------------------

Check ONE box if Shares will be tendered by book-entry transfer:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company

Account Number:
- ----------------------------------------------------------------------------

Dated: , 1996

Name(s) of Record Holder(s):

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PLEASE PRINT

Address(es)
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ZIP CODE

Area Code and Tel. No.:

- --------------------------------------------------------------------------------
<PAGE> 3

GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, hereby (a) represents that the tender of Shares effected hereby complies
with Rule 14e-4 of the Securities Exchange Act of 1934, as amended, and (b)
guarantees delivery to the Depositary, at one of its addresses set forth above,
of certificates evidencing the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company or the Philadelphia
Depository Trust Company, in each case with delivery of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees, or an Agent's Message (as defined in "The Tender
Offer -- Acceptance for Payment and Payment for Shares" in the Offer to
Purchase), and any other documents required by the Letter of Transmittal, (a) in
the case of Shares, within three trading days of The Nasdaq National Market
after the date of execution of this Notice of Guaranteed Delivery, or (b) in the
case of Rights, a period ending the latter of (i) three New York Stock Exchange,
Inc. trading days after the date of execution of this Notice of Guaranteed
Delivery or (ii) three business days after the date Right Certificates are
distributed to shareholders.

The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in financial loss to such Eligible Institution.

<TABLE>
<S> <C>
Name of Firm:
-------------------------------------- -----------------------------------------------
AUTHORIZED SIGNATURE

- ----------------------------------------------- -----------------------------------------------
ADDRESS TITLE

Name:
- ----------------------------------------------- -----------------------------------------------
ZIP CODE PLEASE PRINT

Area Code and Tel. No.:
------------------------------- Date:
--------------------------------------------- , 1996
</TABLE>

NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.

<PAGE> 1

OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES

COMMON STOCK

DELAWARE OTSEGO CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 22, 1997

$22.00 NET PER SHARE

DOCP ACQUISITION LLC
A NEW YORK LIMITED LIABILITY COMPANY

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.

August 22, 1997

To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:

We have been appointed by DOCP Acquisition LLC, a New York limited
liability company ("Purchaser") formed by CSX Corporation, a Virginia
corporation ("CSX"), Norfolk Southern Corporation, a Virginia corporation (NSC),
and Walter G. Rich, to act as Information Agent in connection with the
Purchaser's offer to purchase all outstanding shares of common stock, par value
$0.125 per share (the "Shares") of Delaware Otsego Corporation, a New York
corporation (the "Company"), other than Shares owned beneficially by or of
record by the Company, CSX, NSC, Mr. Rich or any of their respective
subsidiaries, at a price of $22.00 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
August 22, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer") enclosed
herewith.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES, WHICH, TOGETHER WITH THE SHARES OWNED BY MR. RICH, PURCHASER OR ANY
SUBSIDIARY OF PURCHASER OR TO BE CONTRIBUTED TO PURCHASER PURSUANT TO BINDING
AGREEMENTS (WHICH PURCHASER, IN ITS REASONABLE JUDGMENT, BELIEVES WILL BE
PERFORMED), REPRESENTS, ON A FULLY DILUTED BASIS, AT LEAST 66 2/3% OF
OUTSTANDING SHARES.
<PAGE> 2

For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:

1. Offer to Purchase, dated August 22, 1997;

2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;

3. Notice of Guaranteed Delivery to be used to accept the Offer if the
certificates evidencing such Shares (the "Share Certificates") are not
immediately available or time will not permit all required documents to reach
Citibank, N.A. (the "Depositary") prior to the Expiration Date (as defined in
the Offer to Purchase) or the procedure for book-entry transfer cannot be
completed on a timely basis;

4. A letter to shareholders of the Company from Mr. Everett A. Gilmour,
Chairman of the Board of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;

5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominees, with space
provided for obtaining such clients' instructions with regard to the Offer;

6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and

7. A return envelope addressed to the Depositary.

Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will purchase, by accepting for payment, and will pay
for, all outstanding Shares validly tendered prior to the Expiration Date
promptly after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions set forth in "THE TENDER
OFFER -- Certain Conditions of the Offer" in the Offer to Purchase. For purposes
of the Offer, Purchaser will be deemed to have accepted for payment, and thereby
purchased, tendered Shares if, as and when Purchaser gives oral or written
notice to the Depositary of Purchaser's acceptance of such Shares for payment.
In all cases, payment for Shares purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) the Share Certificates or
timely confirmation of a book-entry transfer of such Shares, if such procedure
is available, into the Depositary's account at The Depository Trust Company or
the Philadelphia Depository Trust Company pursuant to the procedures set forth
in "THE TENDER OFFER -- Procedures for Accepting the Offer and Tendering Shares"
in the Offer to Purchase, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, or an Agent's Message (as defined in "THE
TENDER OFFER -- Acceptance for Payment and Payment for Shares" of the Offer to
Purchase) and (iii) any other documents required by the Letter of Transmittal.

Purchaser will not pay any fees or commissions to any broker or dealer or
any other person (other than the Information Agent as described in "THE TENDER
OFFER -- Fees and Expenses" in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Purchaser will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients.

Purchaser will pay any stock transfer taxes incident to the transfer to it
of validly tendered Shares, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.

YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.

In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Depositary, and certificates evidencing the tendered Shares should be delivered
or such Shares should
<PAGE> 3

be tendered by book-entry transfer, all in accordance with the Instructions set
forth in the Letter of Transmittal and the Offer to Purchase.

If holders of Shares wish to tender Shares, but it is impracticable for
them to forward their certificates or other required documents prior to the
Expiration Date, a tender may be effected by following the guaranteed delivery
procedures specified in "The Tender Offer -- Procedures for Accepting Offer and
Tendering Shares" in the Offer to Purchase.

Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent at one of its addresses and telephone numbers set forth on
the back cover page of the Offer to Purchase.

Additional copies of the enclosed materials may be obtained by calling the
Information Agent, MacKenzie Partners, Inc., telephone 1-800-322-2885 (Toll
Free), or from brokers, dealers, commercial banks or trust companies.

Very truly yours,

LOGO

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PURCHASER, THE DEPOSITARY OR THE INFORMATION
AGENT, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS
CONTAINED THEREIN.

<PAGE> 1

OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES

COMMON STOCK

DELAWARE OTSEGO CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 22, 1997

$22.00 NET PER SHARE

DOCP ACQUISITION LLC
A NEW YORK LIMITED LIABILITY COMPANY

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.

August 22, 1997

To Our Clients:

Enclosed for your consideration is an Offer to Purchase, dated August 22,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") in connection with
the Offer by DOCP Acquisition LLC, a New York limited liability company
("Purchaser") formed by CSX Corporation, a Virginia corporation ("CSX"), Norfolk
Southern Corporation, a Virginia corporation ("NSC"), and Mr. Walter G. Rich, to
purchase all outstanding shares of common stock, par value $0.125 per share (the
"Shares") of Delaware Otsego Corporation, a New York corporation (the
"Company"), other than Shares owned beneficially by or of record by the Company,
CSX, NSC, Mr. Rich or any of their respective subsidiaries, at a price of $22.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer.

Shareholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other documents required by the Letter of Transmittal to the Depositary
prior to the Expiration Date (as defined in "Terms of the Offer; Expiration
Date" in the Offer to Purchase) or who cannot complete the procedure for
delivery by book-entry transfer to the Depositary's account at a Book-Entry
Transfer Facility (as defined in "The Tender Offer -- Procedures for Accepting
the Offer and Tendering Shares" in the Offer to Purchase) on a timely basis and
who wish to tender their Shares must do so pursuant to the guaranteed delivery
procedure described in "The Tender Offer -- Procedures for Accepting the Offer
and Tendering Shares" in the Offer to Purchase. See Instruction 2 of the Letter
of Transmittal. Delivery of documents to a Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
<PAGE> 2

THE MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF SHARES HELD BY
US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER OF RECORD
OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY
BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.

We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.

Your attention is invited to the following:

1. The tender price is $22.00 per Share, net to the seller in cash,
without interest.

2. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, September 19, 1997, unless the Offer is
extended.

3. The Offer is being made for all outstanding Shares, other than
Shares owned beneficially or of record by the Company, Purchaser, CSX, NSC,
Mr. Rich or any of their respective subsidiaries.

4. The Board of Directors of the Company, acting on the unanimous
recommendation of a special committee of independent directors, by the
unanimous vote of all directors present with one abstention, (a) has
determined that the Merger Agreement and the transactions contemplated
thereby (including the Offer and the Merger) are fair to and in the best
interests of the Company and the shareholders of the Company (other than
CSX and Mr. Rich), (b) has approved and adopted the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger,
and (c) recommends the acceptance of the Offer by shareholders of the
Company.

5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer, a
number of Shares, which, together with Shares owned by Mr. Rich, Purchaser
or any subsidiary of Purchaser and Shares to be contributed to Purchaser
pursuant to binding agreements (which Purchaser, in its reasonable
judgment, believes will be performed), represents, on a fully diluted
basis, at least 66 2/3% of the outstanding Shares.

6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer.

The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If Purchaser becomes aware
of any valid state statute prohibiting the making of the Offer or the acceptance
of Shares pursuant thereto, Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.

If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified on the instruction form set forth in this
letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE> 3

INSTRUCTIONS
WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK OF DELAWARE OTSEGO CORPORATION

The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated August 22, 1997, and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer"), in
connection with the offer by DOCP Acquisition LLC, a New York limited liability
company ("Purchaser") formed by CSX Corporation, a Virginia corporation ("CSX"),
Norfolk Southern Corporation, a Virginia corporation ("NSC"), and Walter G.
Rich, is offering to purchase all outstanding shares of common stock, par value
$0.125 per share (the "Shares"), of Delaware Otsego Corporation, a New York
corporation (the "Company"), other than Shares owned beneficially or of record
by the Company, Purchaser, CSX, NSC, Mr. Rich or any of their respective
subsidiaries.

This will instruct you to tender to Purchaser the number of Shares
indicated below (or, if no number is indicated in either appropriate space
below, all Shares) held by you for the account of the undersigned, upon the
terms and subject to the conditions set forth in the Offer.

SIGN HERE

Number of Shares to be Tendered*: Shares

- --------------------------------------------------------------------------------

Account Number:

- --------------------------------------------------------------------------------
SIGNATURE(S)

Dated: , 1997

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT NAME(S) HERE

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT ADDRESS(ES) HERE

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER

- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER

- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.

<PAGE> 1

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>
1. An individual's account The individual

2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)

3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)

4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)

5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)

6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person

7. a. The usual revocable savings trust The grantor-
account (grantor is also trustee) trustee(1)

b. So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law

8. Sole proprietorship account The owner(4)

<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>

9. A valid trust, estate or pension trust The Legal entity (Do
not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(5)

10. Corporate account The corporation

11. Religious, charitable, or educational The organization
organization account

12. Partnership account held in the name The partnership
of the business

13. Association, club, or other tax-exempt The organization
organization

14. A broker or registered nominee The broker or nominee

15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>

============================================================

(1) List first and circle the name of the person whose number you furnish.

(2) Circle the minor's name and furnish the minor's social security number.

(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.

(4) Show the name of the owner.

(5) List first and circle the name of the legal trust, estate, or pension trust.

NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2

OBTAINING A NUMBER

If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.

PAYEES EXEMPT FROM BACKUP WITHHOLDING

Payees specifically exempted from backup withholding on ALL payments include the
following:

- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.

Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:

- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.

Payments of interest generally subject to backup withholding include the
following:

- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.

Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.

Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.

PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.

PENALTIES

(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.

(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.

(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- if you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.

(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE

<PAGE> 1
Exhibit (a) (7)

This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase of Purchaser dated August 22, 1997 ("Offer to
Purchase") and the related Letter of Transmittal and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. Purchaser (as defined below) may, in its discretion,
however, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In
any jurisdiction where the securities, blue sky or other laws require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.

NOTICE OF OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

DELAWARE OTSEGO CORPORATION

$22.00 NET PER SHARE

DOCP ACQUISITION LLC

A NEW YORK LIMITED LIABILITY COMPANY

DOCP Acquisition LLC, a New York limited liability company
("Purchaser") formed by CSX Corporation, a Virginia corporation ("CSX"), Norfolk
Southern Corporation, a Virginia corporation ("NSC"), and Walter G. Rich ("Mr.
Rich"), is offering to purchase all outstanding shares of common stock, par
value $0.125 per share (the "Shares"), of Delaware Otsego Corporation, a New
York corporation (the "Company"), other than Shares owned beneficially by or of
record by the Company, Purchaser, CSX, NSC, Mr. Rich or any of their respective
subsidiaries, at a price of $22.00 per Share, net to the seller in cash (the
"Offer Price"), without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase and in the related Letter of Transmittal
(which together constitute the "Offer"). The purpose of the Offer is to enable
Purchaser to acquire the entire equity interest in the Company. Following
consummation of the Offer, Purchaser intends to effect the Merger (as defined
below) described below.

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 19, 1997, UNLESS THE OFFER IS EXTENDED.

The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which, together with Shares owned by Purchaser or any subsidiary of
Purchaser or Shares to be contributed to Purchaser pursuant to binding
agreements (which Purchaser, in its sole discretion, believes will be
performed), represents, on a fully diluted basis, at least 66 2/3% of the
outstanding Shares (the "Minimum Condition").

THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), ACTING ON THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS (THE
"SPECIAL COMMITTEE"), BY THE UNANIMOUS VOTE OF ALL DIRECTORS PRESENT WITH ONE
ABSTENTION, (A) HAS DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED BELOW) AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE
FAIR TO AND IN THE BEST INTEREST OF THE COMPANY AND THE SHAREHOLDERS OF THE
COMPANY (OTHER THAN CSX AND MR. RICH), (B) HAS APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, AND (C) RECOMMENDS ACCEPTANCE OF THE OFFER BY SHAREHOLDERS OF THE
COMPANY.

The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of August 17, 1997, by and among CSX, NSC, Mr. Rich and the Company
(the "Merger Agreement"). The Merger Agreement provides that, among other
things, as promptly as practicable after the purchase of Shares pursuant to the
Offer and the satisfaction of the other conditions set forth in the Merger
Agreement, and in accordance with the relevant provisions of the New York
Business Corporation Law (the "NYBCL"), a corporate subsidiary of Purchaser to
be organized by Purchaser prior to the Merger ("Buyer") will be merged with and
into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will be a wholly owned subsidiary of Purchaser. At the effective time of the
Merger, each Share outstanding immediately prior thereto (other than Shares held
by the Company or owned by Purchaser, or any direct or indirect wholly owned
subsidiary of Purchaser or of the Company which will be canceled and
extinguished without consideration, and other than Shares held by shareholders
who shall have demanded and perfected appraisal rights under the NYBCL) will be
canceled and converted automatically into the right to receive the Offer Price,
without interest. The Merger Agreement is more fully described in the Offer to
Purchase.

Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of such extension
or amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as defined herein) and not withdrawn, as
described in the Offer to Purchase. The term "Expiration Date" means 12:00
Midnight, New York City time, on September 19, 1997, unless and until Purchaser,
in its sole discretion (but subject to the terms and conditions of the Merger
Agreement), shall have extended the period during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, shall expire. The Offer is subject
to the Minimum Condition and to certain other conditions. See the Offer to
Purchase.

For purposes of the Offer, Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not properly
withdrawn if, as and when Purchaser gives oral or written notice to Citibank,
N.A., as Depositary (the "Depositary"), of Purchaser's acceptance of such Shares
for payment. In all cases, upon the terms and subject to the conditions of the
Offer, payment for Shares accepted pursuant to the Offer will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting payments to such tendering shareholders. Under no circumstances
will interest on the purchase price for Shares be paid by Purchaser, regardless
of any extension of the Offer or delay in making such payment. Upon the deposit
of funds with the Depositary for the purpose of making payments to tendering
shareholders, Purchaser's obligation to make such payment shall be satisfied and
tendering shareholders must thereafter look solely to the Depositary for
payments of amounts owed to them by reason of the acceptance for payment of
Shares pursuant to the Offer. Purchaser will pay any stock transfer taxes
incident to the transfer to it of validly tendered Shares, except as otherwise
provided in Instruction 6 of the Letter of Transmittal, as well as any charges
and expenses of the Depositary and MacKenzie Partners, Inc., as Information
Agent.

Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), at any time and
from time to time, to extend for any reason the period of time during which the
Offer is open, including the failure of any of the conditions specified in the
Offer to Purchase to be satisfied by giving oral or written notice of such
extension to the Depositary. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
rights of a tendering shareholder to withdraw such shareholder's Shares. See the
Offer to Purchase. Under the Merger Agreement, if on any scheduled expiration
date of the Offer all conditions to the Offer shall have been satisfied, but
less than a number of Shares that, together with the number of Shares to be
contributed by CSX and Mr. Rich to Purchaser, represents 90% of the outstanding
Shares, on a fully diluted basis, shall have been tendered into the Offer,
Purchaser may extend the Offer from time to time without the consent of the
Company (for not more than 10 business days) in order to permit Purchaser to
solicit additional Shares to be tendered into the Offer. In addition, under the
Merger Agreement, if on any scheduled expiration date of the Offer all
conditions to the Offer shall not have been satisfied or waived, the Offer may,
but need not, be extended from time to time without the consent of the Company
for such period of time as is reasonably expected by Purchaser to be necessary
to satisfy the unsatisfied conditions.

<PAGE> 2

In addition, subject to the applicable regulations of the Securities
and Exchange Commission, Purchaser also expressly reserves the right, in its
sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time and from time to time, (a) to delay acceptance for
payment of, or, regardless of whether such Shares were theretofore accepted for
payment, payment for, any Shares subject to the terms set forth in the Offer to
Purchase, (b) to terminate the Offer and not accept for payment any Shares upon
the failure of any of the conditions specified in the Offer to Purchase to be
satisfied and (c) to waive any condition or otherwise amend the Offer in any
respect, by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof. Any
such extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement thereof, such announcement, in
the case of an extension, to be made no later than 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Securities Exchange Act of 1934, as amended, which require that material changes
be promptly disseminated to shareholders in a manner reasonably designed to
inform them of such changes) and, without limiting the manner in which Purchaser
may choose to make any public announcement, Purchaser shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release to the Dow Jones News Service. During any
such extension, all Shares previously tendered and not properly withdrawn will
remain subject to the Offer, such to the right of a tendering shareholder to
withdraw such shareholder's Shares.

In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i) the
certificates representing such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility (as defined in the Offer to Purchase) pursuant to the procedures set
forth in the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase) and (iii) any other documents required
pursuant to the Letter of Transmittal. If, for any reason whatsoever, acceptance
for payment of any Shares tendered pursuant to the Offer is delayed, or if
Purchaser is unable to accept for payment or pay for Shares tendered pursuant to
the Offer, then, without prejudice to Purchaser's rights set forth in the Offer
to Purchase, the Depositary may, nevertheless, on behalf of Purchaser, retain
tendered Shares and such Shares may not be withdrawn except to the extent that
the tendering shareholder is entitled to and duly exercises withdrawal rights as
described in the Offer to Purchase. Any such delay will be followed by an
extension of the Offer to the extent required by law.

If any tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if Share certificates are
submitted evidencing more Shares than are tendered, Share certificates
evidencing unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in the Offer to Purchase, such Shares will be credited to an account
maintained at such Book-Entry Facility), as promptly as practicable following
the expiration or termination of the Offer.

Except as otherwise provided in the Offer to Purchase, tenders of
Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to
the Offer may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on Friday, September 19, 1997 (or if Purchaser shall have extended the
period of time for which the Offer is open, at the latest time and date at which
the Offer, as so extended by Purchaser, shall expire) and unless theretofore
accepted for payment and paid for by Purchaser pursuant to the Offer, may also
be withdrawn at any time after October 20, 1997. In order for a withdrawal to be
effective, a written, telegraphic or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of the Offer to Purchase. Any notice of withdrawal must specify
the name of the person who tendered the Shares to be withdrawn, the number of
Shares to be withdrawn, and, if certificates for Shares have been tendered, the
name of the registered holder of the Shares as set forth in the tendered
certificate, if different from that of the person who tendered such Shares. If
certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the serial numbers shown on such certificates evidencing the
Shares to be withdrawn must be submitted to the Depositary and the signature on
the notice of withdrawal must be guaranteed by a firm which is a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of the Securities Transfer Agent's Medallion Program (an "Eligible
Institution"), unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 3 of the section of the Offer to
Purchase entitled "THE TENDER OFFER", any notice of withdrawal must also specify
the name and number of the account at the appropriate Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with such
Book-Entry Transfer Facility's procedures. Withdrawal of tenders of Shares may
not be rescinded, and any Shares properly withdrawn will be deemed not to be
validly tendered for purposes of the Offer. Withdrawn Shares may, however, be
retendered by repeating one of the procedures set forth in Section 3 of the
section of the Offer to Purchase entitled "THE TENDER OFFER" at any time before
the Expiration Date. Purchaser, in its sole judgment, will determine all
questions as to the form and validity (including time of receipt) of notices of
withdrawal, and such determination will be final and binding.

The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.

The Company has provided Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
list, or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.

THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.

Questions and requests for assistance or for additional copies of the
Offer to Purchase, the Letter of Transmittal or other tender offer materials may
be directed to the Information Agent at the address and telephone number as set
forth below, and copies will be furnished promptly at Purchaser's expense. No
fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent) for soliciting tenders of Shares pursuant to the
Offer.

The Information Agent for the Offer is:

MACKENZIE PARTNERS, INC.

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885

August 22, 1997

<PAGE> 1
Exhibit (a)(8)

DELAWARE OTSEGO CORPORATION SIGNS MERGER AGREEMENT
PROVIDING $22 PER COMMON SHARE IN CASH

COOPERSTOWN, NY; Aug. 17, 1997 -- Delaware Otsego Corporation,
(NASDAQ:DOCP), parent of The New York Susquehanna and Western Railway,
announced today that it has agreed to an acquisition by a new company to be
formed by Walter G. Rich, DOCP's President and Chief Executive Officer. The
merger agreement calls for DOCP shareholders to receive $22 per share in cash
for each DOCP common share, totaling approximately $55 million. The transaction
has been structured as a tender offer followed by a short-form merger and is
expected to close in September 1997.

Following the acquisition, DOCP will continue to be headquartered in
Cooperstown, New York and Mr. Rich will control the Company and continue as
President and Chief Executive Officer. In addition, following the acquisition,
Mr. Rich will be entitled to designate a majority of DOCP's Board of
Directors. Financing for the transaction will be provided by CSX Corporation
and Norfolk Southern Corporation.

Delaware Otsego's main operating subsidiary operates a 500-mile
regional railroad through New York, New Jersey and Pennsylvania.

Mr. Rich, President and Chief Executive Officer of DOCP, said, "This is
a very exciting transaction. This merger is the culmination of a long journey
DOCP has taken form its founding some thirty years ago. The merger will provide
strong value to our shareholders and assist the Company as it continues to
adjust to the changing railroad map in the Northeast."

The transaction grew out of discussions between Mr. Rich, CSX, NSC and
DOCP, which negotiated through a special committee of its Board of Directors
composed solely of independent directors. The Chairman of the Board, Mr.
Everett Gilmore, said, "This merger culminates three decades of work that
Walter Rich and his team have put into building the company from the ground up
into a respected regional railroad in the Northeast. This transaction will
provide great value and liquidity to our shareholders, many of whom have been
investors with us from the beginning."

The transaction has been unanimously approved by DOCP's Board of
Directors, upon the recommendation of the Special Committee, which has received
an opinion as to fairness from Smith Barney Inc.

SOURCE: Delaware Otsego Corporation

CONTACT: Phil Pepe of Delaware Otsego Corporation: (914) 968-6303.