June 23, 1995


Mr. G. L. Nichols
EVP and Chief Operating Officer
CSX Transportation, Inc.

Mr. Nichols:

This  will  confirm  our  understanding  of the  terms  of a  special  incentive
opportunity which has been established for you.

Accomplishment of part or all of the following by December 31, 1997 will qualify
you for an award of up to 5,000  shares of CSX  stock,  payable in  February  of
1988:

1.  Achievement of a Safety  Frequency  Index of 1.0 or better for the Operating
    Department for the 1997 calendar year,

2.  Achievement of a 75 percent Operating Ratio for the 1997 calendar year,

3.  Reduction in customer complaints by 20% over the January- June 1995 average,

4.  PIT savings of $412 million during the 1995-1997 period,

5.  Substantial improvements in customer service  measures,   e.g., dock-to-dock
    performance,  Intermodal service, and Q train performance, and,

6.  Accomplishment of your key MICP goals during the 1995-1997 plan years.

Payment  of this  special  incentive  will be  contingent  upon your  continuous
employment through December 1997 and approval by John W. Snow, Chairman and CEO,
and the CSX Board of Directors.  Dividends  will not be paid on the 5,000 shares
until they are awarded.

Please  indicate  your  concurrence  with these terms by signing  below.  I look
forward to working with you to accomplish these challenging objectives.




A. R. Carpenter



Accepted:  G. L. Nichols, EVP and Chief Operating Officer
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