UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
NORFOLK SOUTHERN RAILWAY COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
Notice and Proxy Statement
Annual Meeting of Stockholders
NORFOLK SOUTHERN RAILWAY COMPANY
Three Commercial Place, Norfolk, Virginia 23510-2191
Notice of Annual Meeting
of Stockholders to be Held
on Tuesday, May 28, 2002
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The Annual Meeting of Stockholders of Norfolk Southern Railway Company will
be held on the 19th Floor of the Norfolk Southern Tower, Three Commercial
Place, Norfolk, Virginia, on Tuesday, May 28, 2002, at 11 o'clock A.M., Eastern
Daylight Time, for the following purposes:
1. Election of one director to the class whose term will expire in 2005.
2. Transaction of such other business as properly may come before the
meeting.
Stockholders of record at the close of business on March 28, 2002, will be
entitled to vote at such meeting.
By order of the Board of Directors,
REGINALD J. CHANEY,
Corporate Secretary.
Dated: April 8, 2002
If you do not expect to attend the meeting, you are urged to mark, date and
sign the enclosed proxy card and return it in the accompanying envelope.
NORFOLK SOUTHERN RAILWAY COMPANY
THREE COMMERCIAL PLACE
NORFOLK, VIRGINIA 23510-2191
April 8, 2002
PROXY STATEMENT
On March 8, 2002, we began mailing to you and other stockholders the
Company's Annual Report for 2001, which contains important financial and
narrative information. On April 8, 2002, we expect to begin mailing to you and
other stockholders this Proxy Statement and the accompanying proxy card, both
of which relate to the Board of Directors' solicitation of your proxy for use
at the Annual Meeting of Stockholders to be held May 28, 2002 ("2002 Annual
Meeting"). Only stockholders of record on March 28, 2002, are entitled to vote
at the 2002 Annual Meeting. As of January 31, 2002, the Company had issued and
outstanding 1,197,027 shares of $2.60 Cumulative Preferred Stock, Series A
("Preferred Stock"), and 16,668,997 shares of Common Stock. Of these shares,
1,096,907 shares of Preferred Stock (this total excludes 100,120 shares held by
Company subsidiaries and/or in a fiduciary capacity) and all shares of Common
Stock are entitled to one vote per share. All the Common Stock is owned
directly by Norfolk Southern Corporation ("NS").
If you properly sign the enclosed proxy card and timely return it to The
Bank of New York, the shares represented by that proxy card will be voted in
accordance with its terms.
Any stockholder of record may revoke a signed and returned proxy card at any
time before the proxy is voted by: (a) giving prior notice of revocation in
any manner to the Company; (b) executing and delivering a subsequent proxy;
or (c) attending the 2002 Annual Meeting and voting in person.
The cost of soliciting these proxies will be paid by the Company, including
the reimbursement, upon request, of brokerage firms, banks and other
institutions, nominees and trustees for the reasonable expenses they incur to
forward proxy materials to beneficial owners. Officers and other regular
employees of the Company may solicit proxies by telephone, telegram, facsimile,
electronic mail or personal interview; they receive no additional compensation
for doing so.
In accordance with Rule 14a-3(e)(1) promulgated by the Securities and
Exchange Commission ("SEC"), multiple beneficial stockholders sharing an
address may receive a single annual report or proxy statement, unless the
intermediary or the Company has received contrary instructions from one or more
of the stockholders. Upon oral or written request, the Company will promptly
deliver a separate copy of the annual report or proxy statement to a
stockholder at a shared address to which
a single copy of the document was delivered. If you would like a separate copy
of this Proxy Statement or the Annual Report for 2001, or if you wish to
receive a separate annual report or proxy statement in the future, you may
contact: Reginald J. Chaney, Corporate Secretary, Norfolk Southern Railway
Company, Three Commercial Place, 13th Floor, Norfolk, Virginia 23510 (telephone
757-629-2682).
The Company does not currently plan to deliver a single annual report or
proxy statement to multiple record stockholders sharing an address. However, if
that procedure were to be used in the future for stockholders of record at a
shared address, you would use the above contact to request delivery of a single
document.
CONFIDENTIALITY
We have put policies in place to safeguard the confidentiality of proxies
and ballots. The Bank of New York, New York, N.Y., which has been retained at
an estimated cost of $2,200 to assist in soliciting proxies, directly or
through others, and to tabulate all proxies and ballots cast at the 2002 Annual
Meeting, is bound contractually to maintain the confidentiality of the voting
process. In addition, each Inspector of Election will have taken the oath
required by Virginia law to execute duties faithfully and impartially.
Members of the Board of Directors and employees of the Company do not have
access to proxies or ballots and therefore do not know how individual
stockholders vote on any matter. However, when a stockholder writes a question
or comment on a proxy card or ballot, or when there is need to determine the
validity of a proxy or ballot, Management and/or its representatives may be
involved in providing the answer to the question or in determining such
validity.
BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING
FOR WHICH YOUR PROXY IS SOUGHT
1. ELECTION OF DIRECTOR
The term of one director, Henry C. Wolf, will expire at the 2002 Annual
Meeting.
Unless you instruct otherwise when you give us your proxy, it will be voted
in favor of the reelection of Mr. Henry C. Wolf as a director for a
three-year term that expires in 2005.
If the nominee becomes unable to serve--something we have no reason to
believe will occur--your proxy will be voted for a substitute nominee to be
designated by the Board of Directors, or the Board of Directors will reduce the
number of directors.
So that you have information concerning the independence of the process by
which nominees and directors whose terms will continue after the 2002 Annual
Meeting were selected, we confirm, as required by the SEC, that (1) there are
no family relationships among any of the nominees or directors or among any of
the nominees or directors and any officer and (2) that there is no arrangement
or understanding between any nominee or director and any other person pursuant
to which the nominee or director was selected.
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Vote Required to Elect a Director: Under Virginia law and under the
Company's Restated Articles of Incorporation and Bylaws, directors are elected
at a meeting, so long as a quorum exists, by a plurality of the votes cast by
the shares entitled to vote in the election. Abstentions or shares that are not
voted, such as those held by a broker or other nominee who does not vote in
person or return a proxy card, are not "cast" for this purpose.
The following information relates to the nominee and the directors whose
terms of office will continue after the 2002 Annual Meeting.
Nominee (for the class whose term expires in 2005)
HENRY C. WOLF, 59, Norfolk, Va.; Vice Chairman and Chief Financial Officer of
Norfolk Southern Corporation since August 1, 1998, and Vice President of
Norfolk Southern Railway Company since May 30, 2000, having served prior
thereto as Executive Vice President-Finance of Norfolk Southern Corporation
and Vice President and Chief Financial Officer of Norfolk Southern Railway
Company. Director of Conrail Inc., Consolidated Rail Corporation and several
Norfolk Southern Corporation and Norfolk Southern Railway Company
subsidiaries. Mr. Wolf has been a director since 1994.
Continuing Directors
L. I. PRILLAMAN, 58, Norfolk, Va.; Vice Chairman and Chief Marketing Officer of
Norfolk Southern Corporation since August 1, 1998, and Vice President of
Norfolk Southern Railway Company since May 30, 2000, having served prior
thereto as Executive Vice President-Marketing of Norfolk Southern Corporation
and Vice President and Chief Marketing Officer of Norfolk Southern Railway
Company. Director of several Norfolk Southern Corporation and Norfolk
Southern Railway Company subsidiaries. Mr. Prillaman has been a director
since 1996 and his term expires in 2003.
DAVID R. GOODE, 61, Norfolk, Va.; Chairman, President and Chief Executive
Officer of Norfolk Southern Corporation and President and Chief Executive
Officer of Norfolk Southern Railway Company since September 1, 1992. Director
of Norfolk Southern Corporation, Conrail Inc., Consolidated Rail Corporation
and several Norfolk Southern Corporation and Norfolk Southern Railway Company
subsidiaries. Also a director of Caterpillar, Inc., Delta Air Lines, Inc.,
Georgia-Pacific Corporation and Texas Instruments Incorporated. Mr. Goode has
been a director since 1992 and his term expires in 2004.
STEPHEN C. TOBIAS, 57, Norfolk, Va.; Vice Chairman and Chief Operating Officer
of Norfolk Southern Corporation since August 1, 1998, and Vice President of
Norfolk Southern Railway Company since May 30, 2000, having served prior
thereto as Executive Vice President-Operations of Norfolk Southern
Corporation and Vice President and Chief Operating Officer of Norfolk
Southern Railway Company. Director of Conrail Inc., Consolidated Rail
Corporation and several Norfolk Southern Corporation and Norfolk Southern
Railway Company subsidiaries. Also a director of Plum Creek Timber Company.
Mr. Tobias has been a director since 1994 and his term expires in 2004.
2. OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
2002 Annual Meeting other than as noted elsewhere in this Proxy Statement. If
any other matters properly come before the meeting, the proxies received
pursuant to this solicitation will be voted thereon in accordance with the
judgment of the holders of such proxies.
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SUPPLEMENTAL INFORMATION
Applicable rules of the SEC require that we furnish you the following
information relating to the oversight and management of your Company and of
Norfolk Southern Corporation and to certain matters concerning the Board of
Directors and the officers.
BENEFICIAL OWNERSHIP OF NS AND COMPANY STOCK
As of January 31, 2002, 100,120 shares, or approximately 8.4%, of the
Company's Preferred Stock were held by Company subsidiaries and/or in a
fiduciary capacity, and such Company subsidiaries did not have sole voting
power with respect to any of such shares. NS held 246,355 shares, or
approximately 20.5%, of the Company's Preferred Stock, and had sole voting
power with respect to all of such shares.
To the knowledge of the Company, no other person beneficially owns more than
5% of the Company's Preferred Stock. NS held 16,668,997 shares, or 100%, of the
Company's Common Stock on January 31, 2002.
The following table sets forth as of January 31, 2002, the beneficial
ownership of Norfolk Southern Corporation Common Stock for:
(1) each director and each nominee (including the Chief Executive Officer);
(2) each of the other four most highly compensated officers, based on the
sum of 2001 salary and incentive pay for 2001, (three of whom are also
directors or nominees), from the group of officers designated by the
Board of Directors as executive officers for purposes of Section 16 of
the Securities Exchange Act of 1934 ("Executive Officers"); and
(3) all directors and Executive Officers of the Company as a group.
Unless otherwise indicated by footnote to the data in the table, all such
shares are held with sole voting and investment powers, and no director or
Executive Officer beneficially owns any equity securities of NS or its
subsidiaries other than Norfolk Southern Corporation Common Stock. No one
director or Executive Officer owns as much as 1% of the total outstanding
shares of Norfolk Southern Corporation Common Stock. All of the Company's
directors and Executive Officers as a group own 2.3% of the total outstanding
shares of Norfolk Southern Corporation Common Stock. No director or Executive
Officer owns any shares of the Company's Preferred Stock.
Shares of Norfolk Southern
Corporation Common Stock
Beneficially Owned as of
Name January 31, 2002/1/
- ---- --------------------------
David R. Goode 3,324,388
L. I. Prillaman 896,456
Stephen C. Tobias 904,936
Henry C. Wolf 926,255
James A. Hixon 376,436
15 Directors and Executive Officers as a group (including the persons
named above) 9,489,608/2/
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- --------
/1/Includes shares credited to individual accounts under the NS Thrift and
Investment Plan and shares held by NS under share retention agreements pursuant
to the NS Long-Term Incentive Plan (for Mr. Goode, this amounts, respectively,
to 11,745 and 221,117 shares; for Mr. Tobias, 15,196 and 57,265 shares; for Mr.
Wolf, 11,691 and 65,034 shares; for Mr. Prillaman, 23,581 and 55,189 shares;
and for Mr. Hixon, 5,669 and 21,147 shares). The individual possesses voting
power over shares held under share retention agreements but has no investment
power until the shares are distributed. Also includes shares subject to stock
options granted pursuant to the NS Long-Term Incentive Plan and with respect to
which the optionee has the right to acquire beneficial ownership within 60 days
(for Mr. Goode, this amounts to 2,945,000 shares; for Mr. Tobias, 789,500
shares; for Mr. Wolf, 812,000 shares; for Mr. Prillaman, 767,000 shares; and
for Mr. Hixon, 342,500 shares); includes 26,520 Restricted Shares awarded to
Mr. Goode pursuant to the NS Long-Term Incentive Plan and over which Mr. Goode
possesses voting power but has no investment power until January 29, 2004; and
includes shares over which Executive Officers share voting and investment power
(for Mr. Goode, this amounts to 942 shares and for Mr. Tobias, 10,326 shares).
/2/The NS Common Stock figure includes, as of January 31, 2002: 133,765
shares credited to individual accounts under the NS Thrift and Investment Plan;
544,010 shares held by NS under share retention agreements pursuant to the NS
Long-Term Incentive Plan over which the individual possesses voting power but
has no investment power until the shares are distributed; 8,491,500 shares
subject to stock options granted pursuant to the NS Long-Term Incentive Plan
with respect to which optionees have the right to acquire beneficial ownership
within 60 days; 26,520 Restricted Shares awarded to one Executive Officer
pursuant to the NS Long-Term Incentive Plan and over which he possesses voting
power but no investment power until January 29, 2004; and 11,418 shares over
which Executive Officers share voting and investment power. Also includes 1,006
shares in which one Executive Officer disclaims beneficial ownership.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires the Company's
directors and Executive Officers and any persons beneficially owning more than
10 percent of a class of the Company's stock to file certain reports of
beneficial ownership and changes in beneficial ownership (Forms 3, 4 and 5)
with the SEC and the New York Stock Exchange. Based solely on its review of
copies of Forms 3, 4 and 5 available to it, or written representations that no
Forms 5 were required, the Company believes that all required Forms concerning
2001 beneficial ownership were filed on time by all directors and Executive
Officers.
BOARD OF DIRECTORS AND COMMITTEES
On December 31, 2001, the Board of Directors of the Company consisted of
four members. The Board is divided into three classes; the members of each
class are elected for a term of three years, and each class contains as nearly
as possible one third of the total number of directors. The Board of Directors
has no audit, nominating or compensation committees. In 2001, the Board of
Directors acted by unanimous written consent on nineteen separate occasions.
The Executive Committee took no action in 2001; its members were David R.
Goode, Chair, and Henry C. Wolf. This committee is empowered to exercise, to
the extent permitted by Virginia law, all
5
the authority of the Board of Directors when the Board is not in session. All
actions taken by the Committee are to be reported to the Board at its meeting
next succeeding such action and are subject to revision or alteration by the
Board.
COMPENSATION OF DIRECTORS
Each of the directors was also an officer of the Company and an officer of
NS and, as such, their compensation was determined in accordance with the NS
Joint Committee Report Concerning the 2001 Compensation of Certain Executive
Officers on page 13. No such director is paid a retainer, meeting fees or other
compensation for service as a director.
NS COMPENSATION COMMITTEES INTERLOCKS AND INSIDER PARTICIPATION
The members of the NS Compensation and Nominating Committee during 2001 were
Mr. Carter, Chair, Mr. Hilliard, Mr. Leer (served until May 2001), Ms. O'Brien
(elected in May 2001), and Mr. Pote. The members of the NS Performance-Based
Compensation Committee during 2001 were Mr. Carter, Chair, Mr. Leer (served
until May 2001), Ms. O'Brien (elected in May 2001), and Mr. Pote. Other than
Mr. Hilliard's relationship with Brown Brothers Harriman & Co. and Mr. Leer's
relationship with Arch Coal, Inc., which are reported in the Proxy Statement
for the 2002 Annual Meeting of the Stockholders of Norfolk Southern
Corporation, there were no reportable business relationships between NS and
such individuals.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth the cash compensation paid, as well as
certain other compensation accrued or paid, to the Chief Executive Officer and
to each of the other four most highly compensated executive officers of NS in
2001 (together, the "Named Executive Officers"), for service in all capacities
to both NS and its subsidiaries, including the Company, by the Named Executive
Officers in the fiscal years ending December 31, 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------- --------------------
Awards Payouts
---------- ---------
Other Securities
Annual Underlying LTIP All Other
Name and Principal Salary/1/ Bonus/1/ Compensation/2/ Options/3/ Payouts/4 Compensation/5/
Position at NS Year ($) ($) ($) (#) ($)/ ($)
-------------- ---- -------- ------- -------------- ---------- --------- --------------
David R. Goode 2001 950,000 959,025 526,034/7/ 525,000 426,410 49,545
Chairman, President and 2000 950,000 410,400/6/ 530,535/7/ 525,000 167,130 62,343
Chief Executive Officer 1999 950,000 0 337,490/7/ 365,000 597,047 88,315
L. I. Prillaman 2001 406,250 273,406 66,163 150,000 106,603 17,413
Vice Chairman and Chief 2000 375,000 108,000 86,799 150,000 55,710 21,824
Marketing Officer 1999 375,000 0 265,636 90,000 191,055 29,722
Stephen C. Tobias 2001 510,417 343,510 150,400 150,000 106,603 28,049
Vice Chairman and Chief 2000 500,000 144,000 164,377 150,000 55,710 33,821
Operating Officer 1999 500,000 0 247,075 90,000 191,055 44,448
Henry C. Wolf 2001 510,417 343,510 156,140 150,000 106,603 30,785
Vice Chairman and Chief 2000 500,000 144,000 176,612 150,000 55,710 37,804
Financial Officer 1999 500,000 0 109,030 90,000 191,055 50,359
James A. Hixon 2001 270,000 154,454 33,768 60,000 35,534 12,307
Senior Vice President-- 2000 235,000 63,450 38,854 60,000 16,713 12,582
Administration 1999 216,667 0 10,043 30,000 59,705 17,441
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/1/Includes portion of any salary or bonus award elected to be received on a
deferred basis.
/2/Includes amounts reimbursed for the payment of taxes on personal
benefits. Also includes the amount by which the interest accrued on salary and
bonuses deferred under the NS Officers' Deferred Compensation Plan exceeds 120%
of the applicable Federal long-term rate provided under Section 1274(d) of the
Code; for 2001, these amounts were: for Mr. Goode, $142,363; Mr. Prillaman,
$21,708; Mr. Tobias, $100,319; Mr. Wolf, $114,822; and Mr. Hixon, $3,393.
Includes tax absorption payments in 1999, 2000 and 2001 for gains realized upon
exercise of certain stock options (in 1999 for Messrs. Prillaman and Tobias, in
2000 for Messrs. Goode, Prillaman, Tobias, Wolf, and Hixon, and in 2001 for
Messrs. Goode, Prillaman, Tobias, Wolf, and Hixon).
/3/Options were granted without tandem SARs.
/4/Represents the value of the "earn out" pursuant to the performance share
feature of the NS Long-Term Incentive Plan for periods ended December 31, 2001,
2000 and 1999 (for 2001, performance shares were earned for achievements in the
three-year period 1999-2001; for 2000, for achievements in the three-year
period 1998-2000; and for 1999, for achievements in the three-year period
1997-1999).
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/5/Includes for 2001 (i) contributions of $5,100 to NS' 401(k) plan on
behalf of each of the Named Executive Officers; and (ii) total premium payments
(out-of-pocket cash cost) on "split dollar" life insurance policies for Mr.
Goode, $44,445; Mr. Prillaman, $12,313; Mr. Tobias, $22,949; Mr. Wolf, $25,685;
and Mr. Hixon, $7,207.
/6/Represents the value of 26,520 Restricted Shares awarded to Mr. Goode
effective January 29, 2001, pursuant to the terms of the NS Long-Term Incentive
Plan, in lieu of the cash bonus Mr. Goode earned in 2000 pursuant to the NS
Executive Management Incentive Plan. These Restricted Shares vest immediately,
however Mr. Goode will not have investment power over the shares during a
36-month Restriction Period ending on January 29, 2004. Dividends will be paid
on the Restricted Shares during the Restriction Period. Other than this grant,
there were no restricted stock holdings outstanding at the end of the last
fiscal year.
/7/Includes personal use, as directed by resolution of the NS Board of
Directors, of NS aircraft valued at $164,683 for 2001; $173,789 for 2000 and
$152,865 for 1999--calculated on the basis of the aggregate incremental cost of
such use to NS.
Long-Term Incentive Plan
The NS Long-Term Incentive Plan, as last approved by stockholders in 2001,
provides for the award of Incentive Stock Options, Non-qualified Stock Options,
Stock Appreciation Rights, Restricted Shares and Performance Share Units to
officers and other key employees of both NS and certain of its subsidiaries
(including the Company). The Performance-Based Compensation Committee of the NS
Board of Directors ("Committee") administers the Plan and has the sole
discretion, subject to certain limitations, to interpret the Plan; to select
Plan participants; to determine the type, size, terms and conditions of awards
under the Plan; to authorize the grant of such awards; and to adopt, amend and
rescind rules relating to the Plan.
Stock Options
The following table sets forth certain information concerning the grant in
2001 of stock options under the NS Long-Term Incentive Plan to each Named
Executive Officer:
Option/SAR* Grants in Last Fiscal Year
Grant Date
Individual Grants Value
---------------------------------------------------------------- ----------
Number of
Securities % of Total
Underlying Options Grant Date
Options Granted to Exercise or Present
Granted/1/ Employees in Base Price/2/ Expiration Value/3/
Name (#) Fiscal Year ($ Per Share) Date ($)
---- ---------- ------------ ------------- ---------- ----------
D. R. Goode 525,000 7.52% 15.475 01/28/2011 4,189,500
L. I. Prillaman 150,000 2.15% 15.475 01/28/2011 1,197,000
S. C. Tobias 150,000 2.15% 15.475 01/28/2011 1,197,000
H. C. Wolf 150,000 2.15% 15.475 01/28/2011 1,197,000
J. A. Hixon 60,000 0.86% 15.475 01/28/2011 478,800
*No SARs were granted in 2001.
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/1/These options (of which the first 6,462 granted to each Named Executive
Officer are Incentive Stock Options and the remainder are Non-qualified Stock
Options) were granted as of January 28,
8
2001, and are exercisable one year after the date of grant. Dividend
equivalents are paid in cash on these options in an amount equal to, and
commensurate with, dividends as paid on the NS Common Stock.
/2/The exercise price (Fair Market Value on the date of grant) may be paid
in cash or in shares of NS Common Stock (previously owned by the optionee for
at least one year next preceding the date of exercise) valued at Fair Market
Value on the date of exercise.
/3/In accordance with regulations of the SEC, the present value of the
option grant on the date of grant was determined using the Black-Scholes
statistical model. The actual amount, if any, a Named Executive Officer may
realize upon exercise depends on the stock price on the exercise date;
consequently, there is no assurance the amount realized by a Named Executive
Officer will be at or near the monetary value determined by using this
statistical model.
In the case of NS Common Stock, the Black-Scholes model used the following
measures and assumptions:
(a) a stock volatility factor of 0.3976: volatility was determined by an
independent compensation consultant using monthly data averaged over the
60-month period January 1, 1996, through December 31, 2000;
(b) a dividend yield of 1.16%: yield was determined monthly and averaged
over the 60-month period January 1, 1996, through December 31, 2000;
(c) a 2000 risk-free rate of return of 5.47%: this represents the monthly
average 10-year Treasury strip rate during 2000, the year prior to the
issuance of these options; and
(d) that the option will be exercised during its 10-year term.
The foregoing produces a Black-Scholes factor of 0.5160 and a resulting
present value of $7.98 for each share of NS Common Stock subject to the 2001
option grant; the factor and resulting present value have not been adjusted to
reflect (i) that options cannot be exercised during the first year of their
10-year term or (ii) the payment of dividend equivalents on unexercised options.
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The following table sets forth certain information concerning the exercise
of options by each Named Executive Officer during 2001 and the number of
unexercised options held by each as of December 31, 2001:
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Value of Unexercised
Number of Securities Underlying In-the-Money Options/SARs
Unexercised Options/SARs at ------------
Shares FY-End at FY-End/1/
Acquired on Value (#) ($)
Exercise Realized ------------------------------- ---------------------------
Name (#) ($) Exercisable* Unexercisable Exercisable/7/ Unexercisable
- ---- ----------- -------- ------------ ------------- -------------- -------------
D. R. Goode 60,000/2/ 171,144/2/ 1,770,000 525,000 836,062 1,603,875
L. I. Prillaman 15,000/3/ 42,786/3/ 417,000 150,000 238,875 458,250
S. C. Tobias 15,000/4/ 54,036/4/ 439,500 150,000 238,875 458,250
H. C. Wolf 15,000/5/ 26,286/5/ 462,000 150,000 238,875 458,250
J. A. Hixon 7,500/6/ 27,018/6/ 182,500 60,000 95,550 183,300
*Reports, for each Named Executive Officer, the total number of unexercised
options that have passed the first anniversary of their grant date.
- --------
/1/Equal to the mean ($18.53) of the high and low trading prices on the New
York Stock Exchange-Composite Transactions of the NS Common Stock on December
31, 2001, less the exercise prices of in-the-money options, multiplied by the
number of such options.
/2/Mr. Goode surrendered 52,101 shares of stock already owned in full
satisfaction of the exercise price of options on 60,000 shares.
/3/Mr. Prillaman surrendered 13,026 shares of stock already owned in full
satisfaction of the exercise price of options on 15,000 shares.
/4/Mr. Tobias surrendered 12,590 shares of stock already owned in full
satisfaction of the exercise price of options on 15,000 shares.
/5/Mr. Wolf surrendered 13,722 shares of stock already owned in full
satisfaction of the exercise price of options on 15,000 shares.
/6/Mr. Hixon surrendered 6,295 shares of stock already owned in full
satisfaction of the exercise price of options on 7,500 shares.
/7/Because the market price of the NS Common Stock on December 31, 2001,
($18.53) was below the exercise price of options granted in 1999 and for all
earlier years, they are "out-of-the-money" and have no reportable value. The
numbers shown are for the options granted in 2000, which are in-the-money.
Performance Share Units ("PSUs")
The following table sets forth certain information concerning the grant in
2001 of PSUs under the NS Long-Term Incentive Plan to each Named Executive
Officer. These PSU grants entitle a recipient to "earn out" or receive
performance compensation at the end of a three-year performance cycle
(2001-2003) based on the performance of NS during that three-year period. Under
the 2001 award, corporate performance will be measured using three
predetermined and equally weighted standards;
10
that is, each of the following performance areas will serve as the basis for
"earning out" up to one third of the total number of PSUs granted: (1)
three-year average NS return on average capital invested ("ROACI"), (2)
three-year average NS operating ratio and (3) three-year total return to NS
stockholders. A more detailed discussion of these performance criteria can be
found in the Joint Committee Report Concerning the 2001 Compensation of Certain
Executive Officers under the caption, "Long-Term Incentive Plan," beginning on
page 16.
Long-Term Incentive Plan--Awards in Last Fiscal Year
(Performance Share Units)
Performance or
Number of Shares, Units Other Period Until
Name or Other rights/1/ (#) Maturation or Payout
- ---- ----------------------- --------------------
D. R. Goode 120,000 01/01/01-
12/31/03
L. I. Prillaman 30,000 01/01/01-
12/31/03
S. C. Tobias 30,000 01/01/01-
12/31/03
H. C. Wolf 30,000 01/01/01-
12/31/03
J. A. Hixon 15,000 01/01/01-
12/31/03
Estimated Future Payouts under
Non-Stock Price-Based Plans
-------------------------------------------------------
Name Threshold (#) Target/2/ (#) Maximum (#)
- ---- ------------- ------------- -----------
D. R. Goode 0 17,280 120,000
L. I. Prillaman 0 4,320 30,000
S. C. Tobias 0 4,320 30,000
H. C. Wolf 0 4,320 30,000
J. A. Hixon 0 2,160 15,000
- --------
/1/"Earn outs" may be satisfied in cash or in shares of NS Common Stock (or
in some combination of the two).
/2/The NS Long-Term Incentive Plan does not provide a performance target for
an "earn out" under this feature of the Plan; consequently, this column
represents 14.4% of the maximum potential "earn out," which, in accordance with
applicable rules of the SEC, is the percentage actually "earned out" under the
Plan at the end of the performance cycle which ended on December 31, 2000.
Pension Plans
The following table sets forth the estimated annual retirement benefits
payable on a qualified joint-and-survivor-annuity basis in specified
remuneration and years of creditable service classifications under NS'
qualified defined benefit pension plans, as well as nonqualified supplemental
pension plans that provide benefits otherwise denied participants because of
certain Internal Revenue Code limitations on qualified plan benefits. It is
assumed, for purposes of the table, that an individual retired in 2001 at age
65 (normal retirement age) with the maximum allowable Railroad Retirement Act
annuity. The benefits shown are in addition to amounts payable under the
Railroad Retirement Act.
11
PENSION PLAN TABLE
Estimated Annual Retirement Benefits
For Years of Service Indicated
Years of Creditable Service
-----------------------------------------------------------
Remuneration 15 20 25 30 35 40
------------ -------- -------- -------- ---------- ---------- ----------
$ 300,000 $ 50,681 $ 71,901 $ 93,120 $ 114,340 $ 135,559 $ 157,779
400,000 73,181 101,901 130,620 159,340 188,059 216,779
500,000 95,681 131,901 168,120 204,340 240,559 276,779
600,000 118,181 161,901 205,620 249,340 293,059 336,779
700,000 140,681 191,901 243,120 294,340 345,559 396,779
800,000 163,181 221,901 280,620 339,340 398,059 456,779
900,000 185,681 251,901 318,120 384,340 450,559 516,779
1,000,000 208,181 281,901 355,620 429,340 503,059 576,779
1,100,000 230,681 311,901 393,120 474,340 555,559 636,779
1,200,000 253,181 341,901 430,620 519,340 608,059 696,779
1,300,000 275,681 371,901 468,120 564,340 660,559 756,779
1,400,000 298,181 401,901 505,620 609,340 735,000 816,779
1,500,000 320,681 431,901 543,120 654,340 765,559 876,779
1,600,000 343,181 461,901 580,620 699,340 818,059 936,779
1,700,000 365,681 491,901 618,120 744,340 870,559 996,779
1,800,000 388,181 521,901 655,620 789,340 923,059 1,056,779
1,900,000 410,681 551,901 693,120 834,340 975,559 1,116,779
2,000,000 433,181 581,901 730,620 879,340 1,028,059 1,176,779
2,100,000 455,681 611,901 768,120 924,340 1,080,559 1,236,779
2,200,000 478,181 641,901 805,620 969,340 1,133,059 1,296,779
2,300,000 500,681 671,901 843,120 1,014,340 1,207,500 1,356,779
Under the pension plans, covered compensation includes salary and bonus;
each officer can expect to receive an annual retirement benefit equal to
average annual compensation for the five most highly compensated years out of
the last ten years of creditable service multiplied by the number that is equal
to 1.5% times total years of creditable service, but not in excess of 60% of
such average compensation, less an offset for the annual Railroad Retirement
Act annuity.
The respective five-year average compensation and approximate years of
creditable service, as of January 1, 2002, for each Named Executive Officer
were: Mr. Goode, $1,571,647 and 36 years; Mr. Prillaman, $534,530 and 32 years;
Mr. Tobias, $703,297 and 32 years; Mr. Wolf, $703,297 and 29 years; and Mr.
Hixon, $322,832 and 17 years.
The NS Board of Directors approved on September 25, 2001, NS entering into
agreements with each of Messrs. Prillaman, Tobias and Wolf, providing enhanced
pension benefits in exchange for each individual's continued employment with NS
for an additional two years. If the individual remains employed with NS through
September 30, 2003, he will receive an additional three years of creditable
service and his benefit will be based on average annual compensation for the
three most highly compensated years, instead of the five most highly
compensated years, out of the last ten years of creditable service.
12
Change-in-Control Arrangements
In May 1996, the NS Compensation and Nominating Committee recommended, and
the NS Board of Directors approved, NS' entering into change-in-control
agreements ("Agreements") with each of the Named Executive Officers and with
certain other key employees. These Agreements, the terms of which were reviewed
by outside counsel, were first filed as an exhibit to NS' Report on Form 10-Q
for the period ended June 30, 1996, and refiled as an exhibit to NS' 2001
Annual Report on Form 10-K, and provide certain economic protections in the
event of an involuntary or other specified Termination (each term with an
initial capital letter is defined in the Agreements) of a covered individual
during a period of twenty-four months next following a Change in Control of NS.
As consideration for these Agreements and to help encourage management
continuity, covered individuals agreed not to engage in Competing Employment
for a period of (a) three years, in most cases, from the date they execute an
Agreement and (b) one year from their Termination Date, if they accept benefits
payable or provided under the Agreements.
These Agreements are terminable by either NS or a covered employee on
twenty-four months' notice; however, the term of the prohibition on engaging in
Competing Employment is not affected by an Agreement's being terminated.
Generally, these Agreements provide for (a) severance compensation payments
(not continued employment) equal, in the case of each Named Executive Officer,
to three times the sum of their Base Pay and Incentive Pay (most other covered
employees are entitled to receive a lower multiple of Base Pay and Incentive
Pay); (b) redemption of outstanding Performance Share Units and of outstanding,
exercisable options (subject to restrictions, if any, in the case of persons,
such as each Named Executive Officer, imposed under Section 16 of the
Securities Exchange Act of 1934) and payment of dividend equivalents foregone
as a result of the redemption of such options; (c) payment of an amount equal
to the present value of the projected value of amounts deferred under the NS
Officers' Deferred Compensation Plan; (d) eligibility for certain Benefits
(principally medical, insurance and death benefits) for up to three years
following Termination; and (e) certain additional service credit under NS'
retirement plans. The Agreements also provide for payment of any Federal excise
tax that may be imposed on payments made pursuant to these Agreements.
NS JOINT COMMITTEE REPORT CONCERNING
THE 2001 COMPENSATION OF CERTAIN EXECUTIVE OFFICERS
This Report describes Norfolk Southern Corporation's executive officer
compensation philosophy, the components of its compensation program and the
manner in which 2001 compensation determinations were made for the
Corporation's Chairman, President and Chief Executive Officer, David R. Goode,
and for the four other officers (collectively, including Mr. Goode, referred to
in this report as the "Named Executive Officers") whose 2001 compensation is
reported in the Summary Compensation Table of this Proxy Statement.
The NS Board's Compensation and Nominating Committee ("C&N Committee") and
its Performance-Based Compensation Committee ("PBC Committee") are composed
entirely of directors who are not also officers of NS and met, respectively,
six times and five times during 2001. Among
13
other things, the C&N Committee is responsible for recommending to the NS Board
the salaries of Board-elected officers and administering the NS annual cash
incentive plans (the Executive Management Incentive Plan and the Management
Incentive Plan) and, beginning in 2001, the NS Stock Unit Plan. Established in
January of 2000, the PBC Committee is responsible for administering the NS
Long-Term Incentive Plan, as amended and last approved by NS stockholders at
their May 2001 Annual Meeting, which authorizes awards of stock options and
performance share units and certain other equity-based incentive awards.
BASE SALARY: While the Board believes that a substantial portion of each
Named Executive Officer's total compensation should be "performance-based,"
both it and the C&N Committee seek to assure that the base salaries of the
Named Executive Officers are competitive with those earned by individuals in
comparable positions.
Specifically, the C&N Committee compares Mr. Goode's base salary with
salaries paid to chief executive officers of other holding companies of
Class I railroads (the same companies comprising the S&P Railroad Index
included in the Stock Performance Graph) and of other U.S. corporations of
comparable size. The base salaries of the other Named Executive Officers--as
well as all other Board-elected officers of the Corporation--are evaluated,
principally by Mr. Goode, relative to survey data of base salaries for
comparable positions at a large number of U.S. corporations of comparable
size, including but not limited to those identified in the Stock Performance
Graph. These data are compiled by the Corporation's Human Resources
Department and by an outside compensation consultant. The Committee's
general intention is to set the base salaries of the Named Executive
Officers around the 50th percentile of their peers in the respective groups
with which they are compared.
Mr. Goode discusses with the Committee the specific contributions and
performance of each of the other Named Executive Officers. Based on such
evaluations, comparative salary data and each such Executive Officer's
performance in light of the length of service in his current position, Mr.
Goode makes base salary recommendations which are submitted for Committee
and Board approval.
Mr. Goode makes no recommendation concerning, nor does he play any role in
determining, his base salary (or other compensation), which is set by the
Board. As noted, the C&N Committee customarily seeks to set the NS Chairman,
President and CEO's base salary between the 25th and 50th percentile of the
base salaries paid to CEOs of other U.S. corporations of comparable size and
competitively (within the mid-range of compensation practice) with those of
the chairmen of the other holding companies of Class I railroads. Mr.
Goode's base salary in 2001 was below the 25th percentile; the 2001 base
salaries of the other Named Executive Officers ranged from below the 25th
percentile to around the 60th percentile.
For 2001, Mr. Goode did not receive a salary increase. This decision, not
tied to or based on the application of any specific formula, reflects the
Board's assessment of the Corporation's performance in 2000, including its
total operating revenues and net income, and market analysis considerations.
The base salaries of each of the Vice Chairmen were increased in 2001 for
the first time since 1998, based on their performance and market analyses;
Mr. Hixon's base salary was increased in 2001 based on his performance, his
promotion to Senior Vice President-Administration and market analyses.
14
EXECUTIVE MANAGEMENT INCENTIVE PLAN ("EMIP"): The Corporation's EMIP is
designed and administered to ensure that a significant portion of each Named
Executive Officer's total annual cash compensation is based on the
Corporation's annual financial performance. Awards to Named Executive
Officers, to other Board-elected officers and to participants in the
Corporation's Management Incentive Plan (MIP) are paid, if at all, based on
the Corporation's performance relative to two pre-determined criteria:
operating ratio for the year and pre-tax net income; the performance
standards relative to these two criteria are established by the C&N
Committee during the first month of each incentive year.
It is the C&N Committee's philosophy that, to the extent the Corporation
achieves EMIP goals, the total of each Named Executive Officer's base salary
and EMIP award should become increasingly competitive with the total annual
cash compensation paid by comparable organizations. In years in which those
goals are not realized, the Named Executive Officers will receive less or no
incentive pay.
Specifically, incentive pay opportunities for Mr. Goode are determined
annually by the C&N Committee by comparing Mr. Goode's total annual cash
compensation with that paid to the chief executive officers of all other
holding companies of Class I railroads (the same companies comprising the
S&P Railroad Index included in the Stock Performance Graph) and of other
U.S. corporations of comparable size. Incentive pay opportunities for the
four other Named Executive Officers are determined annually by the C&N
Committee based on its review of the annual cash compensation of comparable
positions at companies of comparable size, including but not limited to
those identified in the Stock Performance Graph.
Using those criteria, in November of 2000 the C&N Committee set Mr. Goode's
maximum 2001 incentive opportunity at 150% of his 2001 base salary, Mr.
Prillaman's, Mr. Tobias' and Mr. Wolf's at 100% of their 2001 base salary
and Mr. Hixon's at 85% of his 2001 base salary. Actual payments, if any, are
based on the extent to which established performance standards are achieved.
For 2001, Mr. Goode and all other Executive Officers earned EMIP awards and
each of 359 other officers and key employees earned EMIP or MIP awards, as
applicable, equal in the case of each such individual to 67.3% of that
individual's incentive opportunity. As a result, total 2001 cash
compensation--2001 base salary and 2001 EMIP award paid in 2002--earned by
Mr. Goode was below the 25th percentile and by the four other Named
Executive Officers ranged from below the 25th percentile to around the 55th
percentile.
NS STOCK UNIT PLAN ("Plan"): The Board adopted the NS Stock Unit Plan in
July 2001, to provide for the grant of stock units whose value is measured
by the fair market value of the Corporation's Common Stock and which will be
payable in cash upon satisfaction of applicable restrictions. In July 2001,
the C&N Committee granted awards under the Plan to Mr. Goode and each of the
other Named Executive Officers. The NS Stock Unit awards are subject to a
one-year performance period, and the C&N Committee may adjust the awards at
any time during the performance period to increase or decrease the award
based on the performance of the Corporation or on the individual's
performance. No awards were payable under the Plan during 2001, and any
awards earned during 2002 will be considered as an element of total 2002
cash compensation of Mr. Goode and the other Named Executive Officers.
15
LONG-TERM INCENTIVE PLAN ("LTIP"): The Board and the PBC Committee believe
that a substantial component of each Named Executive Officer's total direct
compensation should be based on and reflect the Corporation's efficient use
of assets, its profitability and the total returns (stock price appreciation
and dividends) to its stockholders. This objective is supported through the
making of annual grants of stock options and performance share units to each
of the Corporation's Named Executive Officers.
These LTIP arrangements are intended to ensure that the longer-term
financial interests of the Named Executive Officers are directly aligned
with those of the Corporation's stockholders and to provide the Named
Executive Officers with the opportunity to acquire a meaningful beneficial
stock ownership position in the Corporation.
In determining LTIP awards, the size of prior grants is analyzed within a
current total direct compensation framework predicated on a review of both
the long-term awards and the total compensation (base salary, bonus and
long-term awards) of comparable positions in U.S. companies of comparable
size. The mix of options and performance share units may vary from year to
year to reflect the relative expected value of each type of award and
certain other considerations. The number of stock options and performance
share units granted in any year is determined so as to place the total
compensation of Mr. Goode and the four other Named Executive Officers, when
corporate performance warrants, around or above the 75th percentile of total
compensation for their respective peer groups.
At its January 2001 meeting, the PBC Committee granted stock options to each
of the Named Executive Officers and to 359 other officers and key employees
at an exercise price equal to the market value of the shares on the date of
grant. These options are exercisable during a ten-year period following the
date of grant, after a one-year vesting period has elapsed.
At the same meeting, the PBC Committee granted performance share units which
provide the Named Executive Officers and other recipients the opportunity to
earn awards (that will be paid either in cash or in shares of the
Corporation's Common Stock, or in some combination thereof) during the first
quarter of 2004. The number of performance share units actually payable to
recipients is based on criteria specified in LTIP, last approved by
stockholders at their May 2001 Annual Meeting--specifically, the
Corporation's three-year (i.e., 2001-2003) average Return on Average Capital
Invested, three-year average Operating Ratio and three-year Total
Stockholder Return, evaluated relative to performance measures established
by the PBC Committee and set out in the schedules below.
16
One-third of the performance share units granted in 2001 are available to be
earned based on each of the three performance criteria.
-------------------------------- ----------------------------
Total Stockholder Return Return on Average Capital
("TSR") vs. S&P 500 Invested ("ROACI")
------------------------------- ---------------------------
Percentage of Percentage of
Three-Year Performance Three-Year Performance
Average TSR Share Units Average Share Units
vs. S&P 500 Earned Out ROACI Earned Out
----------------- ------------- ------------- -------------
90/th/ percentile
and above 100% 17% and above 100%
80/th/ 90% 16% 90%
70/th/ 85% 15% 80%
60/th/ 80% 14% 70%
50/th/ 75% 13% 60%
40/th/ 50% 12% 50%
30/th/ 30% 11% 40%
25/th/ and below 0% 10% 30%
9% 20%
8% 10%
Below 8% 0%
-------------------------------- ---------------------------
---------------------------
Operating Ratio ("OpR")
--------------------------
Percentage of
Three-Year Performance
NS Average Share Units
OpR Earned Out
------------ -------------
75% or below 100%
80% 75%
85% 50%
90% 25%
Above 90% 0%
--------------------------
For all stock options granted in 2001 to the Named Executive Officers, for
the first five (5) years following the date stock options are granted, the
Corporation pays in cash to each Named Executive Officer dividend
equivalents on unexercised options equal to the dividend paid on the
Corporation's Common Stock.
For 2001, Mr. Goode was granted options (including 6,462 incentive stock
options that may receive capital gains treatment) on 525,000 shares of
Common Stock and the opportunity to earn up to 120,000 performance shares;
the other four Named Executive Officers as a group were awarded options
(including in the case of each such officer, 6,462 incentive stock options
that may receive capital gains treatment) on a total of 510,000 shares of
Common Stock and the opportunity to earn up to 105,000 performance shares.
17
In summary, the C&N Committee and the PBC Committee believe that the
compensation program for Named Executive Officers is designed to offer
opportunities competitive with those of similar positions at comparable
American corporations. More importantly, these Committees believe each Named
Executive Officer's compensation has been appropriately structured and
administered so that a substantial component of total compensation is dependent
upon, and directly related to, the Corporation's efficient use of assets, its
profitability and the total returns to its stockholders.
Section 162(m) of the Internal Revenue Code limits to $1 million the
corporate federal income tax deduction for certain "non-performance based"
compensation paid in a year to any of the Corporation's Named Executive
Officers. Each Committee has carefully considered the Corporation's executive
compensation program in light of the applicable tax rules. Accordingly, the
Corporation amended the Long-Term Incentive Plan in 1995 with stockholder
approval to permit the grant of stock options that meet the requirements of
Section 162(m), and stockholders last approved the Plan in 2001. However, each
Committee believes that tax-deductibility is but one factor to be considered in
fashioning an appropriate compensation package for executives. As a result,
each Committee reserves and will exercise its discretion in this area so as to
serve the best interests of the Corporation and its stockholders.
NS Compensation and NS Performance-Based
Nominating Committee Compensation Committee
Gene R. Carter, Chairman Gene R. Carter, Chairman
Landon Hilliard, Member Jane Margaret O'Brien, Member
Jane Margaret O'Brien, Member Harold W. Pote, Member
Harold W. Pote, Member
PERFORMANCE GRAPH
The performance graph comparing the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock with the
cumulative total return of the S&P Composite 500 Stock Index and a published
industry index has been omitted because the Company's Common Stock is owned
entirely by NS and is not publicly traded.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTS
The Board of Directors has appointed the firm of KPMG LLP, independent
public accountants, to audit the books, records and accounts of the Company for
the year 2002. This firm has acted as auditors for the Company since June 1,
1982, and also provides services to NS.
In 2001, KPMG billed audit fees for audit services consisting of the annual
audit of the consolidated financial statements of the Company and its
subsidiaries and NS and its subsidiaries, including annual reports of the
Company to the stockholders and to the SEC, and limited reviews of quarterly
financial statements. KPMG also performed assurance and related services and
other non-audit services in 2001, as set forth under "All Other Fees" below.
18
All services rendered by KPMG to the Company and NS in 2001 were approved in
advance by, ratified by or reported to the NS Audit Committee. KPMG has
represented to the Board of Directors that its fees are customary and that no
agreement exists to limit current or future years' audit fees.
For the fiscal year ended December 31, 2001, KPMG billed NS and the Company
for the following services:
Audit Fees
----------
KPMG billed NS and the Company $1,075,757 for services related to the audit
of the annual financial statements and review of the quarterly financial
statements for the most recent fiscal year.
Financial Information Systems Design and Implementation Fees
------------------------------------------------------------
KPMG did not bill NS or the Company for services related to Financial
Information Systems, as defined by Section 210.2-01(c)(4)(ii) of Regulation
S-X promulgated by the SEC.
All Other Fees
--------------
KPMG billed NS and the Company $1,099,461 for all other services it rendered
to NS and the Company that are not included under the captions "Audit Fees"
or "Financial Information Systems Design and Implementation Fees" above.
This amount includes $433,163 for assurance and related services, including
ISO 9000 certifications, examination of internal controls over financial
reporting, NS employee benefit plan audits, procedures associated with the
annual report to the Surface Transportation Board and letters to
underwriters.
The Board of Directors has considered whether the provision of any services
included under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" is compatible with maintaining the
independence of the independent public accountants and has determined that the
firm's independence is not thereby compromised.
Representatives of KPMG are expected to be present at the 2002 Annual
Meeting with the opportunity to make a statement if they so desire and
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. In order for a stockholder proposal for the 2002 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's proxy statement and
form of proxy, it must be received by the Corporate Secretary, Norfolk Southern
Railway Company, Three Commercial Place, Norfolk, Virginia 23510-9219, no later
than December 9, 2002.
By order of the Board of Directors,
REGINALD J. CHANEY,
Corporate Secretary.
19
v Detach Proxy Card Here v
................................................................................
NORFOLK SOUTHERN RAILWAY COMPANY
THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510-2191
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Reginald J. Chaney, David R. Goode or L.I.
Prillaman, and each or any of them, proxy for the undersigned, with full power
of substitution, to vote with the same force and effect as the undersigned at
the Annual Meeting of Stockholders of Norfolk Southern Railway Company to be
held at Three Commercial Place, Norfolk, Virginia, on Tuesday, May 28, 2002, and
any adjournments, postponements or reschedulings thereof, upon the matters more
fully set forth in the Proxy Statement, dated April 8, 2002, and to transact
such other business, as properly may come before such meeting(s).
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON
THE OTHER SIDE BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR.
(Continued, and to be MARKED, DATED AND SIGNED on the other side)
NORFOLK SOUTHERN RAILWAY
P.O. BOX 11139
NEW YORK, N.Y. 10203-0139
To change your address, please mark this box [_]
v DETACH PROXY HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET v
................................................................................
[_] [X]
Votes MUST be indicated
(x) in Black or Blue Ink.
1. ELECTION OF DIRECTOR
Nominee--Henry C. Wolf
FOR the nominee WITHHOLD AUTHORITY to vote In addition, in their discretion, the Proxies are
listed above [_] for the nominee listed above [_] authorized to vote upon such other business as may
properly come before the meeting.
__
Date Share Owner sign here Co-Owner sign here
_____________________________ ________________________
__
_____________________________ ________________________