<PAGE>
SCHEDULE 14A INFORMATION
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 Corporation
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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):
[X] 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:
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[Norfolk Southern Logo appears here]
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Notice and Proxy Statement
Annual Meeting of Stockholders
NORFOLK SOUTHERN CORPORATION
Three Commercial Place, Norfolk, Virginia 23510-2191
Notice of Annual Meeting of Stockholders to be Held on Thursday, May 13, 1999
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The Annual Meeting of Stockholders of Norfolk Southern Corporation will be
held at the Conference Center, Williamsburg Lodge, South England Street,
Williamsburg, Virginia, on Thursday, May 13, 1999, at 10:00 A.M., Eastern
Daylight Time, for the following purposes:
1. Election of three directors to the class whose term will expire in
2002.
2. Ratification of the appointment of independent public accountants
as auditors.
3. If properly presented at the meeting, consideration of a
stockholder proposal concerning elimination of bonuses and other
forms of incentive pay as a means of compensating any employee of
the Corporation.
4. Transaction of such other business as properly may come before the
meeting.
Stockholders of record at the close of business on March 5, 1999, will be
entitled to vote at such meeting.
By order of the Board of
Directors,
DEZORA M. MARTIN,
Corporate Secretary.
Dated: April 1, 1999
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.
<PAGE>
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-2191
April 1, 1999
PROXY STATEMENT
On March 11, we began mailing to you and other stockholders the
Corporation's Annual Report for 1998, which contains important financial and
narrative information. On April 1, 1999, 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 13, 1999 (1999 Annual
Meeting). Only stockholders of record on March 5, 1999, are entitled to vote
at the 1999 Annual Meeting. As of February 28, 1999, the Corporation had
issued and outstanding 401,366,417 shares of Common Stock, of which
379,738,575 shares were entitled to one vote per share.
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 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 Corporation; (b) executing and delivering a subsequent proxy;
or (c) attending the 1999 Annual Meeting and voting in person.
The cost of soliciting these proxies will be paid by the Corporation,
including the reimbursement, upon request, of brokerage firms, banks and other
institutions, nominees and trustees for the reasonable expenses they incur to
forward proxy material to beneficial owners. Officers and other regular
employees of the Corporation may solicit proxies by telephone, telegram or
personal interview; they receive no additional compensation for doing so.
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 $20,500 to assist in soliciting proxies directly or
through others and to tabulate all proxies and ballots cast at the 1999 Annual
Meeting, is contractually bound 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.
<PAGE>
Members of the Board of Directors and employees of the Corporation do not
have access to the 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 the 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 DIRECTORS
At the 1999 Annual Meeting, the terms of four directors will expire: those
of Gerald L. Baliles, Gene R. Carter, T. Marshall Hahn, Jr. and Steven F.
Leer. At its meeting held on January 26, 1999, the Board of Directors amended
the Bylaws of the Corporation to increase the number of directors from ten to
eleven and elected Mr. Leer to fill the resulting vacancy. Under Virginia law,
the term of a director elected by a board of directors to fill a vacancy
expires at the next stockholders' meeting at which directors are elected.
Effective the date of the 1999 Annual Meeting, Mr. Hahn will retire under
the terms of the Corporation's retirement policy for directors and accordingly
will not be a candidate for reelection. The Board of Directors, at its meeting
held on January 26, 1999, adopted a resolution--to be effective the date of
the 1999 Annual Meeting--to amend the Corporation's Bylaws to decrease the
number of directors from eleven to ten.
Unless you instruct otherwise on the enclosed proxy card, your proxy will
be voted in favor of the reelection of Messrs. Baliles, Carter and Leer as
directors for three-year terms that expire in 2002.
If any 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 1999 Annual
Meeting were selected, we confirm, as required by the Securities and Exchange
Commission, 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.
Vote Required to Elect a Director: Under Virginia law and under the
Corporation's Restated Articles of Incorporation and Bylaws, directors are
elected at a meeting, so long as a quorum exists, if the votes cast favoring
the election of that director exceed the votes cast opposing 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.
2
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Nominees--for terms expiring in 2002
Mr. Baliles, 58, Richmond, Va., has been a director since
1990. He has been a partner since 1990 in the law firm of
Gerald L. Baliles Hunton & Williams, a business law firm with offices in
several major U. S. cities and international offices in
Vienna, Austria, Brussels, Belgium, Warsaw, Poland,
Bangkok, Thailand, and Hong Kong. He is also a director
of Newport News Shipbuilding Inc.
(See information under the "Certain Relationships and
Related Transactions" caption on page 13.)
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Mr. Carter, 59, Alexandria, Va., has been a director
since 1992. He has been Executive Director of the
Association for Supervision and Curriculum Development,
among the world's largest international education
associations, since 1992.
Gene R. Carter
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Mr. Leer, 46, St. Louis, Mo., has been a director since
January 26, 1999. He has been President and Chief
Executive Officer of Arch Coal, Inc., a company engaged
in coal mining and related businesses, since 1992. He is
also a director of Arch Coal, Inc. and Mercantile Trust
Company, N.A.
Steven F. Leer (See information under the "Certain Relationships and
Related Transactions" caption on page 13.)
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Continuing Directors--those whose terms expire in 2000
Mr. Campbell, 58, Georgetown, S.C., and Alexandria, Va.,
has been a director since 1996. He has been President and
Chief Executive Officer of American Council of Life
Insurance, a trade association for the life insurance
industry, since 1995, having served prior thereto as
Governor of South Carolina. He is also a director of AVX
Corporation, Fluor Corporation and Wackenhut Corporation.
Carroll A.
Campbell, Jr.
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3
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Directors (continued)
Mr. Goode, 58, Norfolk, Va., has been a director since
1992. He has been Chairman, President and Chief Executive
Officer of the Corporation since 1992. He is also a
director of Aeroquip-Vickers, Inc., Delta Air Lines, Inc.
(effective April 22, 1999), Caterpillar, Inc., Georgia-
David R. Goode Pacific Corporation and Texas Instruments Incorporated.
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Mr. McKinnon, 71, Norfolk, Va., has been a director since
1986. He was Chairman and Chief Executive Officer of
Norfolk Southern Corporation until his retirement in
Arnold B. McKinnon 1992.
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Mr. Pote, 52, New York, N.Y., has been a director since
1988. He has been a partner of The Beacon Group, a
private investment partnership, since 1993.
(See information under the "Certain Relationships and
Harold W. Pote Related Transactions" caption on page 14.)
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Continuing Directors--those whose terms expire in 2001
Mr. Coleman, 68, Grantham, N.H., has been a director
since 1982. Now pursuing graduate studies at Dartmouth
College, he was Chairman of The Lubrizol Corporation, a
diversified specialty chemical company, until his
retirement in 1996, having served prior thereto as
Chairman and Chief Executive Officer. He is also a
director of The Lubrizol Corporation and Harris
L. E. Coleman Corporation.
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Directors (continued)
Mr. Hilliard, 59, New York, N.Y., has been a director
since 1992. He has been a partner in Brown Brothers
Harriman & Co., a private bank in New York City, since
1979. He is also a director of Owens-Corning Corporation
Landon Hilliard and Western World Insurance Company.
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(See information under the "Certain Relationships and
Related Transactions" caption on page 14.)
Ms. O'Brien, 45, St. Mary's City, Md., has been a
director since 1994. She has been President of St. Mary's
Jane Margaret College of Maryland since 1996, having served prior
O'Brien thereto as President of Hollins College, Roanoke, Va.
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2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed the firm of KPMG LLP, independent public accountants, to audit the
books, records and accounts of the Corporation for the year 1999. This firm
has acted as auditors for the Corporation (and for one of its predecessor
companies, Norfolk and Western Railway Company, since 1969), and the Board of
Directors recommends that the firm's appointment be ratified by the
stockholders.
In 1998, KPMG LLP performed audit services which consisted of the annual
audit of the consolidated financial statements of the Corporation and its
subsidiaries, including annual reports of the Corporation to the stockholders
and the Securities and Exchange Commission, audits of the financial statements
of various subsidiaries, audits of the financial statements of various
employee benefit plans, limited reviews of quarterly financial statements and
review of internal controls not directly related to the audit of the financial
statements. The firm also provided accounting and other management consulting
services in connection with the Conrail transaction and other matters.
All services rendered by KPMG LLP to the Corporation in 1998 were approved
in advance or ratified by the Audit Committee of the Board of Directors, and
this Committee determined that none jeopardized the auditing firm's
independence. (See the "Certain Relationships and Related Transactions"
caption on page 14.)
KPMG LLP has represented to the Audit Committee that its fees are customary
and that no agreement exists to limit current or future years' audit fees.
Representatives of KPMG LLP are expected to be present at the 1999 Annual
Meeting with the opportunity to make a statement if they so desire and
available to respond to appropriate questions.
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Vote Required to Ratify Appointment: Under Virginia law and under the
Corporation's Restated Articles of Incorporation and Bylaws, actions such as
the ratification of the appointment of auditors are approved, so long as a
quorum exists, if the votes cast favoring the action exceed the votes cast
opposing the action. 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.
3. STOCKHOLDER PROPOSAL
Mr. Charles O. Morgret, whose mailing address is Post Office Box 1272,
Holmes Beach, Florida 34218, and who is beneficial owner of 4,200 shares of
the Corporation's Common Stock, has submitted the following proposal, which we
are including in this Proxy Statement for stockholder vote as required by Rule
14a-8 as promulgated by the Securities and Exchange Commission. Mr. Morgret
also has provided a "Statement in Support," which appears immediately after
the text of the proposal. Your "Directors' Statement in Opposition" appears
after Mr. Morgret's statement.
Text of Proposal
----------------
Resolved that shareholders of NSC request that the Board of Directors
restore salaries and wages as the sole bases for compensating employees of
Norfolk Southern Corporation (NSC) at all levels, thereby ending the payment
of bonuses and other supplements, excepting only normal retirement incentives
and as individual cases warrant.
Stockholder's Statement in Support
----------------------------------
NSC, effective March, 1997, accepted a proposal by the Brotherhood of
Locomotive Engineers (BLE) to pay its approximately 2,900 NSC members first-
time ever bonuses of 5 percent of their 1996-1997 wages and of up to 10
percent starting in 1998. Acceptance of this proposal opens the door to
similar or even larger demands by other unions, whose members, including those
of BLE, represent some 80 percent of NSC's approximately 23,000 employees.
All bonuses sharply inflate the Company's annual labor costs and lower its
net earnings. Yet, a prime obligation of NSC's management is to minimize cost
consistent with quality service and with just treatment and compensation of
its employees. To fail in meeting that obligation is to invite the
resurrection of repressive government regulation from which all railroads are
just now emerging.
In the absence of any truly impartial or effective independent controlling
authority, the bonus system is vulnerable to abuse beginning at the highest
levels of management. For example, the current level of bonuses and other
"extras" paid to NSC's top executives is already high, even excessive, and has
continued to rise each year.
The payment of bonuses is not needed to bring out the best in employees,
whether workers or management, the traditional incentives of keeping one's job
and of winning promotion or higher pay, or both, sufficing adequately for that
purpose. In fact, across-the-board bonuses to union members tend to be
counter-productive since they are awarded equally regardless of individual
effort, merit or performance. Nor are bonuses needed to attract top talent.
All of NSC's top management, past and present, were promoted from within, thus
precluding any need to "go outside."
A worthy example for today's NSC management was Dennis William (Bill)
Brosnan, the former Chairman and CEO of Southern Railway Company, who
steadfastly refused bonuses for union members by first denying them to himself
and others in Southern's management. The management
6
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of NSC should renounce for itself any further bonuses et. al., thereby
automatically precluding further worker bonuses which under the BLE agreement
are tied to, and activated by, bonuses for management.
After the payment of legitimate expenses, the net earnings of NSC, if any,
belong traditionally, and properly, to the shareholder owners.
Directors' Statement in Opposition
----------------------------------
The proposal calls on the Board to consider eliminating bonuses or other
forms of incentive pay as an element of the compensation package of any
Norfolk Southern employee.
Because bonus or incentive pay is earned only when certain performance goals
are met, it encourages employees to improve economic results that your
directors believe advance stockholder interests--among them, return on average
invested capital, the operating ratio and total stockholder return. Moreover,
were we to eliminate incentive pay as a part of our employees' compensation
packages, base salaries would have to be raised to assure that their total
compensation opportunities remain competitive with those of employees in
comparable positions at peer companies, thereby frustrating the fundamental
and accepted concept of linking pay and performance.
Increasingly, management employees at all levels receive--partly in lieu of
base salary--various forms of incentive pay. This aligns employees' interests
more directly with those of stockholders as a group by making part of their
total compensation contingent on the realization of specific corporate goals.
In addition, Norfolk Southern Railway Company was pleased to reach a historic
agreement on incentives with the Brotherhood of Locomotive Engineers, which
represents some of our agreement employees. Rather than receiving guaranteed
salary increases, locomotive engineers now participate in an arrangement that
provides financial incentives for them to assist in improving our results.
In short, incentives are an accepted compensation tool at most public
American companies. They encourage individuals to improve performance and
thereby tend to enhance efficiency and productivity and to further other
important stockholder interests. Indeed, because incentives are not paid
unless corporate performance permits, they keep fixed payroll costs down and
link certain one-time increases in payroll costs in any year to financial and
operational results and other achievements that are of value to stockholders.
Your directors recommend a vote AGAINST this proposal.
Vote Required to Approve Stockholder Proposal: Under Virginia law and under
the Corporation's Restated Articles of Incorporation and Bylaws, stockholder
proposals are approved, so long as a quorum exists, if the votes cast favoring
the action exceed the votes cast opposing the action. 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.
4. OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
1999 Annual Meeting other than as noted in this paragraph and elsewhere in
this Proxy Statement. If any other matters 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 Securities and Exchange Commission require that we
furnish you the following information relating to the oversight and management
of your corporation and to certain matters concerning its Board of Directors,
its directors and its officers.
BENEFICIAL OWNERSHIP OF STOCK
To the knowledge of the Corporation, no person beneficially owns more than
5% of its Common Stock.
The following table sets forth as of February 28, 1999, the beneficial
ownership of the Corporation's Common Stock (including, in the case of
directors, "Stock Units," and in the case of officers, "Deferred Stock Units,"
each of which is not actually a share of Common Stock, but ultimately has a
cash value equal to the market price of a share of Common Stock at that time):
(1) each director (including the Chief Executive Officer) and each nominee;
(2) each of the other four most highly compensated executive officers,
based on the sum of salary and incentive pay in 1998; and
(3) all executive officers and directors of the Corporation 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 the Corporation
or its subsidiaries other than the Corporation's Common Stock. No one director
or executive officer, nor all executive officers and directors as a group,
owns as much as 1% of the total outstanding shares of the Corporation's Common
Stock.
<TABLE>
<CAPTION>
Shares of Shares of
Name Common Stock Name Common Stock
- ---- ------------ ---- ------------
<S> <C> <C> <C>
Gerald L. Baliles 10,324/1/,/2/ Arnold B. McKinnon 611,130/1/,/2/,/5/
Carroll A. Campbell, Jane Margaret O'Brien 8,883/1/,/2/
Jr. 7,252/1/,/2/ Harold W. Pote 11,054/1/,/2/
Gene R. Carter 11,056/1/,/2/ L. I. Prillaman 343,543/6/
L. E. Coleman 21,724/1/,/2/,/3/ Stephen C. Tobias 338,246/7/
David R. Goode 1,300,266/4/ Henry C. Wolf 358,285/8/
T. Marshall Hahn, Jr. 18,573/1/,/2/ R. Alan Brogan 414,801/9/
Landon Hilliard 13,906/1/,/2/
Steven F. Leer 6,200/1/,/2/
</TABLE>
47 Executive Officers and Directors as a group (including the
persons named above)/10/ 7,083,970/11/
- --------
/1/Includes a one-time grant of 3,000 shares to non-employee directors on
January 1, 1994, or when that director was elected to the Board thereafter.
These grants are made pursuant to the Directors' Restricted Stock Plan; the
director may vote these shares, but has no investment power over them until
they are distributed (see information on page 11 under the "Board of
Directors" caption).
/2/Includes:
(a) the grants in 1996, 1997, 1998 and 1999 of Deferred Stock Units ("Stock
Units"--one such Stock Unit is equal in value to one share of Common Stock)
to each non-employee director; and
(b) the crediting, effective June 1, 1996, of Stock Units representing the
actuarially determined present value of the retirement benefit that all
non-employee directors serving on the date of the 1996 Annual Meeting of
Stockholders agreed to forego.
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Stock Units are credited to a separate memorandum account for each director
and are administered in accordance with the Corporation's Outside Directors'
Deferred Stock Unit Program (see information on page 11 under the "Board of
Directors" caption). As of February 28, 1999, the number of Stock Units
credited to each director's account was as follows: Mr. Baliles, 7,324; Mr.
Campbell, 3,809; Mr. Carter, 7,906; Mr. Coleman, 9,388; Mr. Hahn, 11,973; Mr.
Hilliard, 7,906; Mr. Leer, 2,000; Mr. McKinnon, 11,058; Ms. O'Brien, 5,883;
and Mr. Pote, 6,554.
/3/Includes 336 shares owned by Mr. Coleman's wife, in which he disclaims
beneficial ownership.
/4/Includes 10,266 shares credited to Mr. Goode's account in the
Corporation's Thrift and Investment Plan; 229,764 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Goode possesses voting power but
has no investment power until the shares are distributed; 977,500 shares
subject to stock options granted pursuant to the Corporation's Long-Term
Incentive Plan and with respect to which Mr. Goode has the right to acquire
beneficial ownership within 60 days; and 21,566 Deferred Stock Units credited
to Mr. Goode pursuant to the Corporation's Long-Term Incentive Plan.
/5/Includes 5 shares indirectly owned by Mr. McKinnon's wife, in which he
disclaims beneficial ownership.
/6/Includes 19,858 shares credited to Mr. Prillaman's account in the
Corporation's Thrift and Investment Plan; 47,036 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Prillaman possesses voting power
but has no investment power until the shares are distributed; 221,274 shares
subject to stock options granted pursuant to the Corporation's Long-Term
Incentive Plan and with respect to which Mr. Prillaman has the right to
acquire beneficial ownership within 60 days; and 6,089 Deferred Stock Units
credited to Mr. Prillaman pursuant to the Corporation's Long-Term Incentive
Plan.
/7/Includes 12,510 shares credited to Mr. Tobias' account in the
Corporation's Thrift and Investment Plan; 49,965 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Tobias possesses voting power but
has no investment power until the shares are distributed; 242,868 shares
subject to stock options granted pursuant to the Corporation's Long-Term
Incentive Plan and with respect to which Mr. Tobias has the right to acquire
beneficial ownership within 60 days; and 6,089 Deferred Stock Units credited
to Mr. Tobias pursuant to the Corporation's Long-Term Incentive Plan.
/8/Includes 10,024 shares credited to Mr. Wolf's account in the
Corporation's Thrift and Investment Plan; 66,193 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Wolf possesses voting power but
has no investment power until the shares are distributed; 252,000 shares
subject to stock options granted pursuant to the Corporation's Long-Term
Incentive Plan and with respect to which Mr. Wolf has the right to acquire
beneficial ownership within 60 days; and 6,089 Deferred Stock Units credited
to Mr. Wolf pursuant to the Corporation's Long-Term Incentive Plan.
/9/Includes 8,621 shares credited to Mr. Brogan's account in the
Corporation's Thrift and Investment Plan; 82,422 shares held by the
Corporation under share retention agreements pursuant to the Corporation's
Long-Term Incentive Plan and over which Mr. Brogan possesses voting power but
has no investment power until the shares are distributed; 274,500 shares
subject to stock options granted pursuant to the Corporation's Long-Term
Incentive Plan and with respect to which Mr. Brogan has the right to acquire
beneficial ownership within 60 days; and 6,089 Deferred Stock Units credited
to Mr. Brogan pursuant to the Corporation's Long-Term Incentive Plan.
/10/The spouse of one executive officer owns 70 shares of Norfolk Southern
Railway Company Preferred Stock, Series A, in which the officer disclaims
beneficial ownership.
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/11/Includes 270,249 shares credited to officers' individual accounts under
the Corporation's Thrift and Investment Plan. Also includes: 965,769 shares
held by the Corporation for officers under share retention agreements pursuant
to the Corporation's Long-Term Incentive Plan and over which the individual
possesses voting power but has no investment power until the shares are
distributed; 4,657,576 shares subject to stock options granted to officers
pursuant to the Corporation's Long-Term Incentive Plan, with respect to which
the optionee has the right to acquire beneficial ownership within 60 days; and
108,964 Deferred Stock Units credited to officers pursuant to the
Corporation's Long-Term Incentive Plan. Also includes 29,677 shares in which
officers disclaim beneficial ownership.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires the Corporation's
directors and executive officers, and any persons beneficially owning more
than 10 percent of a class of the Corporation's stock, to file certain reports
of beneficial ownership and changes in beneficial ownership (Forms 3, 4 and 5)
with the Securities and Exchange Commission 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 Corporation
believes that all required Forms concerning 1998 beneficial ownership were
filed on time.
BOARD OF DIRECTORS
Composition and Attendance
On December 31, 1998, the Board of Directors of the Corporation consisted of
ten 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 an equal number of directors--a requirement of the Corporation's
Restated Articles of Incorporation. The Board met seven times in 1998. Each
director attended not less than 75% of the aggregate number of meetings of the
Board and meetings of all committees on which such director served.
Retirement Policy
Under the Corporation's retirement policy for directors, a director must
retire effective the date of the annual meeting that next follows the date of
that director's 72nd birthday; if a director's 72nd birthday coincides with
the date of the annual meeting, that director retires effective that date.
Compensation
Retainer and Fees: In 1998, each member of the Board of Directors, other
than Mr. Goode, received an annual retainer for services of $32,000 and a fee
of $1,800 for each attendance at a meeting of the Board or of any committee of
the Board, plus expenses in connection with attendance at such meetings.
Because Mr. Goode is an officer of the Corporation, he receives no additional
compensation for Board service.
Corporation's Directors' Deferred Fee Plan: A director may elect to defer
receipt of all or a portion of compensation. Amounts deferred are credited to
a separate memorandum account maintained in the name of each participating
director; interest is credited to the account at the beginning of each
quarter. For 1994 and later years, the interest rate is determined on the
basis of the director's age at the time of the deferral: under age 45, 7%; age
45-54, 10%; age 55-60, 11%; and over age 60, 12%. The total amount so credited
(including amounts deferred in prior years and interest earned thereon) is
distributed in ten annual installments beginning with the year following the
year in which the participant ceases to be a director.
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The Corporation's commitment to accrue and pay interest on amounts deferred
is facilitated by the purchase of corporate-owned life insurance on the lives
of directors. If the Board of Directors determines at any time that changes in
the law affect the Corporation's ability to recover the cost of providing the
benefits payable under this Plan, the Board, in its discretion, may reduce the
interest credited on deferrals to a rate not less than one half the rate
otherwise provided for in this Plan. In 1998, six directors participated in
this Plan.
Directors' Restricted Stock Plan: Each non-employee director serving on
January 1, 1994, was awarded 3,000 restricted shares of the Corporation's
Common Stock (Restricted Shares). Any person who is not and never has been an
employee of the Corporation and who is first elected to the Board after
January 1, 1994, also will receive a grant of 3,000 Restricted Shares.
Restricted Shares are registered in the name of the director, who has all
rights of ownership (including the right to vote the shares and receive
dividends); however, Restricted Shares may not be sold, pledged or otherwise
encumbered during a restriction period which (a) begins when the Restricted
Shares are granted and (b) ends on the earlier of (i) the date the director
dies or (ii) six months after the director becomes disabled or retires, as
that term is defined in this Plan.
Outside Directors' Deferred Stock Unit Program: Each non-employee director
has been granted the following Stock Units (not shares of Common Stock) which
are valued with respect to the market price of the Corporation's Common Stock:
600 Stock Units, effective the date of the 1996 Annual Meeting of
Stockholders; 750 Stock Units, effective the date of the 1997 Annual Meeting
of Stockholders; 1,000 Stock Units, effective January 27, 1998; and 2,000
Stock Units, effective February 1, 1999. It is anticipated that, from time to
time, non-employee directors may be granted additional Stock Units in an
amount sufficient to assure that their total annual compensation for services
is competitive. Stock Units equal in value to the actuarially determined
present value of the terminated pensions of directors serving on June 1, 1996,
also were credited to a separate memorandum account for each such director.
Stock Units in each director's memorandum account are credited with
dividends as paid on the Corporation's Common Stock, and the amount so
credited is converted into additional Stock Units, including fractions
thereof, based on the mean of the high and low trading prices of the
Corporation's Common Stock on the dividend payment date.
Upon leaving the Board for any reason, a director will receive in cash
(either in a lump sum or in ten annual installments, in accordance with an
election made by each director) an amount determined with respect to the mean
of the high and low trading prices of the Corporation's Common Stock. The
amount of a lump-sum payment is determined on the basis of the mean of the
high and low trading prices on the last business day of the month following
the director's cessation of service. The amount of installment payments is
determined annually with respect to the mean of the high and low trading
prices on the third business day following the first public announcement of
earnings for the preceding year. During the ten-year period over which
installments are paid, Stock Units in the memorandum account at any time that
have not been paid in cash will be credited with dividends as paid on the
Corporation's Common Stock.
Directors' Charitable Award Program: Each director serving on February 1,
1996, could nominate one or more tax-exempt institutions to receive up to a
total of $500,000 (payable in five equal annual installments following the
director's death); directors elected after February 1, 1996, are entitled to
designate up to $100,000 per year of service until the $500,000 cap is
reached. Another $500,000 will be paid to the Norfolk Southern Foundation in
the director's name.
11
<PAGE>
This Program supports, in part, the Corporation's long-standing commitments
to contribute to educational, cultural and other appropriate charitable
institutions and to encourage others to do the same. It is funded, and its
costs are expected to be recovered, through corporate-owned life insurance on
the directors.
Because the Corporation makes the charitable contributions (and is entitled
to the related deduction) and is the owner and the beneficiary of the life
insurance policies, directors derive no direct financial benefit from this
Program. Moreover, amounts the Foundation receives from insurance proceeds
under this Program may reduce what the Corporation otherwise would contribute
from general corporate resources to support the Foundation's activities.
Committees
Each year, not later than its Organization Meeting that usually follows the
Annual Meeting of Stockholders, the Board of Directors appoints the Audit
Committee, Compensation and Nominating Committee, Executive Committee and
Pension and Finance Committee.
The Audit Committee met six times in 1998; its members were H. W. Pote,
Chairman, Gerald L. Baliles, Carroll A. Campbell, Jr., Gene R. Carter, Landon
Hilliard and Jane Margaret O'Brien. This committee:
. recommends to the Board of Directors the engagement of, and the fee to
be paid to, the independent public accountants;
. reviews with the independent accountants the annual audit plan;
. receives, reviews and transmits to the Board the annual report and
financial statements of the Corporation and its consolidated
subsidiaries; and
. reviews, in consultation with the independent accountants and the
Corporation's internal audit staff, as deemed necessary, the
Corporation's accounting policies, conflict of interest policy, internal
control systems and financial operations and reporting.
The Compensation and Nominating Committee met six times in 1998; its members
were L. E. Coleman, Chairman, T. Marshall Hahn, Jr. and H. W. Pote. E. B.
Leisenring, Jr., was Chairman of this committee until his retirement,
effective the date of the 1998 Annual Meeting of Stockholders. This committee
makes recommendations to the Board of Directors concerning:
. executive compensation;
. adoption and administration of any management incentive bonus plan,
deferred compensation plan or other similar plans of the Corporation;
. individuals to be elected as officers of the Corporation; and
. nominees for election to the Board.
The Committee will consider nominees recommended by stockholders for
election to the Board. Such recommendations must be in writing addressed to
the Corporate Secretary, Norfolk Southern Corporation, Three Commercial Place,
Norfolk, Virginia 23510-9219, and shall include sufficient background material
to enable the Committee to consider fully the qualifications of the individual
and any potential conflict of interest or legal restrictions concerning the
person's service in the proposed capacity.
12
<PAGE>
Stockholders wishing to nominate an individual for election as a director at
an annual meeting must comply with specific Bylaw provisions, details of which
are available on request from the Corporate Secretary.
The Executive Committee met three times in 1998; its members were Arnold B.
McKinnon, Chairman, Gerald L. Baliles, L. E. Coleman, David R. Goode and T.
Marshall Hahn, Jr. E. B. Leisenring, Jr., was a member of this committee until
his retirement, effective the date of the 1998 Annual Meeting of Stockholders.
This committee is empowered to exercise, to the extent permitted by Virginia
law, all the authority of the Board of Directors when the Board is not in
session, including the declaration of a quarterly dividend upon the
Corporation's Common Stock at the rate of the quarterly dividend most recently
declared by the Board. 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.
The Pension and Finance Committee (formerly known as the Pension Committee)
met four times in 1998; its members were T. Marshall Hahn, Jr., Chairman,
Carroll A. Campbell, Jr., Gene R. Carter, Landon Hilliard and Jane Margaret
O'Brien. E. B. Leisenring, Jr., was a member of this committee until his
retirement, effective the date of the 1998 Annual Meeting of Stockholders.
This committee:
. makes recommendations to the Board of Directors concerning an annual
investment policy for the assets of the Corporation's pension fund and
the engagement of, and the fees to be paid to, firms of investment
managers to manage designated portions of such assets within the
framework of the investment policy;
. reviews the performance of the investment managers;
. receives, reviews and transmits to the Board the annual reports,
financial statements and actuarial valuations of the pension plans; and
. develops guidelines concerning and oversees implementation of policies
concerning the Corporation's capital structure and related costs.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1998, the Corporation paid approximately $587,512 for legal services to
the law firm of Hunton & Williams, in which Mr. Baliles is a partner.
Arch Coal, Inc. (including affiliates and subsidiaries, "Arch"), of which
Mr. Leer is President and Chief Executive Officer, is engaged in coal mining
and related businesses. Prior to Mr. Leer's election as a director of the
Corporation, Norfolk Southern Railway Company ("Railway") had provided
transportation services for Arch at rates fixed in conformity with law or
governmental authority. The Railway continued to provide such services for
Arch in 1998 on those bases, and it expects to do so in succeeding years. Arch
also has entered into leases with various subsidiaries of the Corporation,
generating 1998 rent and royalty income of slightly more than $26.4 million.
In the future, the parties (1) may negotiate the terms and conditions of one
or more renewals and of one or more new leases and (2) may compete to acquire
fee, leasehold or other interests in natural resource properties. Mr. Leer
would not participate in the Board's consideration of these and other similar
matters in which Arch is an interested party.
13
<PAGE>
Norfolk Southern maintains various banking relationships with Brown Brothers
Harriman & Co. ("Brown Brothers"), in which Mr. Hilliard is a partner, on
bases that are consistent with normal financial and banking practices. All
transactions are entered into in the ordinary course of business on
substantially the same terms as those prevailing at the time for comparable
transactions with other banks. Also, Brown Brothers was paid approximately
$146,400 in fees for managing a portion of the assets of the Corporation's
pension fund in 1998.
Beacon Group Energy Investment Fund L.P.--affiliated with the Beacon Group
in which Mr. Pote is a principal--has purchased Alliance Coal Company
("Alliance"). Prior to Beacon's acquisition of its interest, Norfolk Southern
Railway Company had provided transportation services for Alliance or its
predecessors at rates fixed in conformity with law or governmental authority.
The Railway continued to provide such services for Alliance in 1998 on those
bases, and it expects to do so in succeeding years. Alliance also had entered
into various leases with a natural resources subsidiary of the Corporation,
generating 1998 rent and royalty income for the subsidiary of slightly more
than $3.2 million, and the Corporation paid Alliance approximately $140,000
for steam coal used in the Roanoke Shops. The terms and conditions of such
leases and coal purchases are not expected to be affected by the acquisition.
In the future, the parties (1) may negotiate the terms and conditions of one
or more renewals of such leases and of such purchases and (2) may compete to
acquire fee, leasehold or other interests in natural resource properties. Mr.
Pote would not participate in the Board's consideration of these and other
similar matters in which Alliance is an interested party.
Kathryn B. McQuade is Vice President-Financial Planning of the Corporation.
Ms. McQuade's spouse is one of approximately 6,800 partners worldwide in KPMG
LLP ("KPMG"), a firm of independent public accountants that has acted as
auditors for the Corporation (and one of its predecessor companies, Norfolk
and Western Railway Company), since 1969. Ms. McQuade's spouse does not
participate in, or have access to, KPMG's work for the Corporation. The
Corporation paid KPMG approximately $11 million for all services rendered
during 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Nominating Committee during 1998 were
Mr. Leisenring (who also was chair of the Committee until his retirement from
the Board, effective the date of the 1998 Annual Meeting), Mr. Coleman (who
became chair following Mr. Leisenring's retirement), Mr. Hahn and Mr. Pote
(who became a member of the Committee following the 1998 Annual Meeting).
Other than Mr. Pote's relationship with Beacon Group (about which information
is provided under the preceding caption), there were no reportable business
relationships between the Corporation and such individuals.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth the cash compensation paid, as well as
certain other compensation accrued or paid, to the Chief Executive Officer and
to each of the other four most highly compensated executive officers of the
Corporation in 1998 ("Executive Officers"), for service in all capacities to
both the Corporation and its subsidiaries by the Executive Officers in the
fiscal years ending December 31, 1998, 1997 and 1996.
14
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------- --------------------
Awards Payouts
---------- ---------
Other Securities All
Annual Underlying LTIP Other
Name and Principal Salary/1 Bonus/1 Compensation/2 Options/3 Payouts/4 Compensation/5
Position Year / ($) / ($) / ($) / (#) / ($) / ($)
- ------------------ ---- -------- ------- -------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Goode 1998 900,000 887,400 739,809/6/ 250,000 1,615,566 82,083
Chairman, President and 1997 850,000 850,000 287,972 120,000 2,472,690 85,304
Chief Executive Officer 1996 800,000 800,000 1,615,682 120,000 1,778,687 73,149
L. I. Prillaman 1998 360,417 274,231 280,085 60,000 516,981 25,719
Vice Chairman and Chief 1997 320,000 240,000 24,411 36,000 309,086 25,619
Marketing Officer 1996 285,000 173,437 193,314 36,000 222,289 33,793
Stephen C. Tobias 1998 485,417 382,897 219,885 60,000 516,981 35,877
Vice Chairman and Chief 1997 400,000 320,000 68,611 36,000 772,715 37,788
Operating Officer 1996 365,000 273,750 233,858 36,000 222,289 31,391
Henry C. Wolf 1998 485,417 382,897 321,915 60,000 516,981 38,425
Vice Chairman and Chief 1997 400,000 320,000 130,907 36,000 772,715 40,636
Financial Officer 1996 365,000 273,750 483,026 36,000 555,770 34,753
R. Alan Brogan 1998 320,000 236,640 585,111 60,000 516,981 48,671
Executive Vice
President- 1997 300,000 225,000 143,093 36,000 772,715 51,926
Corporate 1996 285,000 213,750 515,321 36,000 555,770 40,224
</TABLE>
- --------
/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 Officers' Deferred Compensation Plan exceeds 120%
of the applicable Federal long-term rate provided under Section 1274(d) of the
Internal Revenue Code; for 1998, these amounts were: for Mr. Goode, $88,488;
Mr. Prillaman, $12,138; Mr. Tobias, $56,432; Mr. Wolf, $63,734; and Mr.
Brogan, $159,800. Includes a tax absorption payment in 1996 on the "earn out"
pursuant to the performance share feature of the Corporation's Long-Term
Incentive Plan and for the gain realized upon exercise of certain stock
options (in 1997 for Mr. Wolf, and in 1998, for all the Executive Officers).
/3/Options were granted without tandem SARs.
/4/Represents the value of the "earn out" pursuant to the performance share
feature of the Corporation's Long-Term Incentive Plan for periods ended
December 31, 1998, 1997 and 1996 (for 1998, performance shares were earned for
achievements in the three-year period 1996-1998; for 1997, for achievements in
the three-year period 1995-1997; and for 1996, for achievements in the three-
year period 1994-1996).
/5/Includes for 1998 (i) contributions of $4,800 to the Corporation's 401(k)
plan on behalf of Messrs. Goode, Prillaman, Tobias and Wolf, and $4,468 on
behalf of Mr. Brogan; and (ii) total premium payments (out-of-pocket cash
cost) on "split dollar" life insurance policies for Mr. Goode, $77,283; Mr.
Prillaman, $20,919; Mr. Tobias, $31,075; Mr. Wolf, $33,623; and Mr. Brogan,
$44,203.
/6/Includes personal use in 1998, as directed by resolution of the Board of
Directors, of the Corporation's aircraft valued at approximately $84,399--
calculated on the basis of the aggregate incremental cost of such use to the
Corporation.
15
<PAGE>
Long-Term Incentive Plan
The Corporation's Long-Term Incentive Plan, as last approved by stockholders
in 1995, provides for the award of incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock and performance
share units to officers and other key employees of both the Corporation and
certain of its subsidiaries. The Compensation and Nominating Committee of the
Board of Directors ("Committee") administers the Plan and has sole discretion,
subject to certain limitations, to interpret the Plan; to select Plan
participants; to determine the type, size, terms and conditions of awards
under the Plan; to authorize the grant of such awards; and to adopt, amend and
rescind rules relating to the Plan.
Stock Options
The following table sets forth certain information concerning the grant in
1998 of stock options under the Corporation's Long-Term Incentive Plan to each
Executive Officer:
Option/SAR* Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Grant Date
Individual Grants Value
- ----------------------------------------------------------------- ----------
Number of
Securities % of Total
Underlying Options Grant Date
Options Granted to Exercise or Present
Granted/1/ Employees in Base Price/2/ Expiration Value/3
Name (#) Fiscal Year ($ Per Share) Date / ($)
- ---- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
D. R. Goode 250,000 6.90% 32.1563 02/01/2008 1,942,500
L. I. Prillaman 60,000 1.66% 32.1563 02/01/2008 466,200
S. C. Tobias 60,000 1.66% 32.1563 02/01/2008 466,200
H. C. Wolf 60,000 1.66% 32.1563 02/01/2008 466,200
R. A. Brogan 60,000 1.66% 32.1563 02/01/2008 466,200
</TABLE>
*No SARs were granted in 1998.
- --------
/1/These options (of which the first 3,109 granted to each Executive Officer
are Incentive Stock Options and the remainder are Non-qualified Stock Options)
were granted as of February 2, 1998, and are exercisable one year after the
date of grant. They earn dividend equivalents in an amount equal to, and
commensurate with, dividends as paid on the Common Stock--which are converted
into Deferred Stock Units, the aggregate fair market value of which is payable
in cash to the optionee on the earliest of (a) the five-year anniversary of
the date of option grant; (b) the exercise of the option (exercises of less
than the full option grant result in a prorated cash payment); and (c) the
optionee's death, disability or retirement.
/2/The exercise price (fair market value on the date of grant) may be paid
in cash or in shares of 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 Securities and Exchange Commission,
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, an
Executive Officer may realize upon exercise depends on the stock price on the
exercise date; consequently, there is no assurance the amount realized by an
Executive Officer will be at or near the monetary value determined by using
this statistical model.
16
<PAGE>
In the case of Common Stock, the Black-Scholes model used the following
measures and assumptions:
(a) a stock volatility factor of 0.1345: volatility was determined by an
independent compensation consultant using monthly data averaged over the
60-month period January 1, 1993, through December 31, 1997;
(b) a dividend yield of 2.83%: yield was determined monthly and averaged
over the 60-month period January 1, 1993, through December 31, 1997;
(c) a 1997 risk-free rate of return of 6.15%: this represents the monthly
average 10-year Treasury strip rate during 1997, the year prior to the
issuance of these options; and
(d) that the option will be exercised during its ten-year term.
The foregoing produces a Black-Scholes factor of 0.2416 and a resulting
present value of $7.77 for each share of Common Stock subject to the 1998
option grant; that factor and resulting present value have not been adjusted
to reflect that options cannot be exercised during the first year of their 10-
year term, the payment of dividend equivalents on unexercised options or the
deferral of receipt of such dividend equivalents until the related Deferred
Stock Units actually are paid out.
The following table sets forth certain information concerning the exercise
of options by each Executive Officer during 1998 and the number of unexercised
options held by each as of December 31, 1998:
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs at In-the-Money Options/SARs
Shares FY-End at FY-End/1
Acquired on Value (#) / ($)
Exercise Realized ---------------------------------- ----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable/7/
- ---- ----------- -------- --------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
D. R. Goode 30,063/2/ 653,004/2/ 727,500 250,000 5,909,501 0
L. I. Prillaman 14,292/3/ 319,635/3/ 161,274 60,000 1,389,000 0
S. C. Tobias 7,773/4/ 182,746/4/ 182,868 60,000 1,608,470 0
H. C. Wolf 13,581/5/ 289,095/5/ 192,000 60,000 1,515,606 0
R. A. Brogan 26,097/6/ 581,240/6/ 214,500 60,000 1,746,467 0
</TABLE>
- --------
/1/Equal to the mean ($31.3438) of the high and low trading prices on the
New York Stock Exchange-Composite Transactions of the Common Stock on December
31, 1998, less the exercise prices of the options, multiplied by the number of
options.
/2/Mr. Goode surrendered 10,578 shares of stock already owned in full
satisfaction of the exercise price of options on 30,063 shares.
/3/Mr. Prillaman surrendered 4,720 shares of stock already owned in full
satisfaction of the exercise price of options on 14,292 shares.
/4/Mr. Tobias surrendered 2,481 shares of stock already owned in full
satisfaction of the exercise price of options on 7,773 shares.
/5/Mr. Wolf surrendered 4,889 shares of stock already owned in full
satisfaction of the exercise price of options on 13,581 shares.
17
<PAGE>
/6/Mr. Brogan surrendered 9,024 shares of stock already owned in full
satisfaction of the exercise price of options on 26,097 shares.
/7/Because the market price of the Common Stock at the end of 1998 was below
the exercise price ($32.1563 per share) of options granted in 1998, such
options are "out-of-the money" and have no reportable value.
Performance Share Units ("PSUs")
The following table sets forth certain information concerning the grant in
1998 of PSUs under the Corporation's Long-Term Incentive Plan to each
Executive Officer. These PSU grants entitle a recipient to "earn out" or
receive performance compensation at the end of a three-year performance cycle
(1998-2000) based on the Corporation's performance during that three-year
period. Under the 1998 award, corporate performance will be measured using
three predetermined and equally weighted standards; 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 return
on average invested capital ("ROAIC"), (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 Compensation and
Nominating Committee Report under the caption, "Long-Term Incentive Plan,"
beginning on page 20.
Long-Term Incentive Plan--Awards in Last Fiscal Year
(Performance Share Units)
<TABLE>
<CAPTION>
Number of Performance Estimated Future Payouts under
Shares, or Other Non-Stock Price-Based Plans
Units or Period Until ------------------------------------
Other Rights/1 Maturation Threshold Target/2 Maximum
Name / (#) or Payout (#) / (#) (#)
- ---- -------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
D. R. Goode 75,000 01/01/98- 0 60,075 75,000
12/31/00
L. I. 25,000 01/01/98- 0 20,025 25,000
Prillaman 12/31/00
S. C. Tobias 25,000 01/01/98- 0 20,025 25,000
12/31/00
H. C. Wolf 25,000 01/01/98- 0 20,025 25,000
12/31/00
R. A. Brogan 25,000 01/01/98- 0 20,025 25,000
12/31/00
</TABLE>
- --------
/1/"Earn outs" will be satisfied one half in cash and one half in Common
Stock, with the stock portion being held by the Corporation for up to 60
months pursuant to a share retention agreement, unless such requirement is
waived by the Committee in its sole discretion. Withholding taxes due on the
"earn outs" will be withheld from the cash portion.
/2/The Long-Term Incentive Plan does not provide a performance target for an
"earn out" under the PSU feature of the Plan; consequently, this column
represents 80.1% of the maximum potential "earn out," which, in accordance
with applicable rules of the Securities and Exchange Commission, is the
percentage actually "earned out" under the Plan at the end of the most
recently completed performance cycle.
18
<PAGE>
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 the
Corporation's 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 1998 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.
PENSION PLAN TABLE
Estimated Annual Retirement Benefits
For Years of Service Indicated
<TABLE>
<CAPTION>
Years of Creditable Service
-----------------------------------------------------------------------
Remuneration 25 30 35 40
- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 300,000 $ 95,158 $ 116,512 $ 137,865 $ 159,218
400,000 132,658 161,512 190,365 219,218
500,000 170,158 206,512 242,865 279,218
600,000 207,658 251,512 295,365 339,218
700,000 245,158 296,512 347,865 399,218
800,000 282,658 341,512 400,365 459,218
900,000 320,158 386,512 452,865 519,218
1,000,000 357,658 431,512 505,365 579,218
1,100,000 395,158 476,512 557,865 639,218
1,200,000 432,658 521,512 610,365 699,218
1,300,000 470,158 566,512 662,865 759,218
1,400,000 507,658 611,512 735,000 819,218
1,500,000 545,158 656,512 767,865 879,218
1,600,000 582,658 701,512 820,365 939,218
1,700,000 620,158 746,512 872,865 999,218
1,800,000 657,658 791,512 925,365 1,059,218
1,900,000 695,158 836,512 977,865 1,119,218
2,000,000 732,658 881,512 1,030,365 1,179,218
2,100,000 770,158 926,512 1,082,865 1,239,218
2,200,000 807,658 971,512 1,135,365 1,299,218
2,300,000 845,158 1,016,512 1,207,500 1,359,218
</TABLE>
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 consecutive
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 last five-year average compensation and approximate years of
creditable service, as of January 1, 1999, for each Executive Officer were:
Mr. Goode, $1,392,046 and 33 years; Mr. Prillaman, $466,369 and 29 years; Mr.
Tobias, $598,685 and 29 years; Mr. Wolf, $596,105 and 26 years; and Mr.
Brogan, $469,892 and 35 years.
19
<PAGE>
Change-in-Control Arrangements
In May 1996, the Compensation and Nominating Committee recommended, and the
Board of Directors approved, the Corporation's entering into new change-in-
control compensation agreements ("Agreements") with each of the Executive
Officers and with certain other key employees. The new Agreements, the terms
of which were reviewed by outside counsel, were filed as an exhibit to the
Corporation's Report on Form 10-Q for the period ended June 30, 1996, 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 new Agreements) of a covered individual during a period of twenty-four
months next following a Change in Control of the Corporation. As consideration
for these new 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 a new Agreement and
(b) one year from their Termination Date, if they accept benefits payable or
provided under the new Agreements.
These Agreements are terminable by either the Corporation or a covered
employee on twenty-four months' notice; however, the term of the prohibition
on engaging in Competing Employment is not affected by the new Agreements'
being terminated.
Generally, these Agreements provide for (a) severance compensation payments
(not continued employment) equal, in the case of each 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 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
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 the
Corporation's retirement plans (in the case of any Board-elected officer, such
service credit may not exceed the creditable service that officer would have
had upon reaching mandatory retirement age). The Agreements also provide for
payment of any Federal excise tax that may be imposed on payments made
pursuant to these Agreements.
COMPENSATION AND NOMINATING COMMITTEE REPORT CONCERNING
THE 1998 COMPENSATION OF CERTAIN EXECUTIVE OFFICERS
This Report describes Norfolk Southern Corporation's officer compensation
strategy, the components of its compensation program and the manner in which
1998 compensation determinations were made for the Corporation's Chairman,
President and Chief Executive Officer, David R. Goode, and for the other
officers (collectively, including Mr. Goode, referred to as the "Executive
Officers") whose 1998 compensation is reported in the Summary Compensation
Table of this Proxy Statement.
The Compensation and Nominating Committee of the Board of Directors
("Committee") is composed entirely of non-employee directors and met six times
during 1998. Among other things, the Committee is responsible for: (1)
recommending to the Board the salaries of corporate officers and (2)
administering the Corporation's Executive Management Incentive Plan, as
approved by the stockholders at their May 1995 Annual Meeting, its Management
Incentive Plan (applicable to non-
20
<PAGE>
officers) and its Long-Term Incentive Plan, as amended and approved by
stockholders at their May 1995 Annual Meeting, which authorizes, as more
particularly described below, awards of stock options and performance share
units.
BASE SALARY: While the Committee believes that a substantial portion of
each Executive Officer's total compensation should be "performance-based,"
the Committee also seeks to assure that the base salaries of Executive
Officers are competitive with those earned by individuals in comparable
positions.
Specifically, the 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 American corporations of
comparable revenue size. The base salaries of the other Executive
Officers--as well as all 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 American
corporations of comparable revenue 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 Executive Officers between the 50th and 75th percentiles 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 Executive Officers. Based on such evaluations,
comparative salary data and each Executive Officer's length of service in
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 Committee customarily seeks to set the NS Chairman,
President and CEO's base salary between the 50th and 75th percentiles of
the base salaries paid to CEOs of other American corporations of comparable
revenue 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 1998 approximated the 70th
percentile; the average base salaries of other Executive Officers in 1998
approximated the 40th percentile of the 1998 practices of corporations with
comparable revenues.
For 1998, Mr. Goode's annual base salary was increased by $50,000, or 5.9%.
This increase, not tied to or reflecting application of any specific
formula, reflects the Corporation's performance in 1997, including its
total operating revenues and record net income, as well as the Board's
confidence in Mr. Goode's leadership in general and in the Conrail
transaction in particular. The Committee recommended and the Board approved
average increases of 9.3% for the other Executive Officers as a group;
these increases were based on Mr. Goode's recommendations and the
Corporation's 1997 performance.
EXECUTIVE MANAGEMENT INCENTIVE PLAN ("EMIP"): The Corporation's EMIP is
designed and administered to ensure that a significant portion of each
Executive Officer's total annual cash compensation is based on the
Corporation's annual financial performance. Awards to Executive Officers,
to other participants in the Corporation's Executive Management Incentive
Plan, and to participants in the Management Incentive Plan (MIP) are paid
from an annual
21
<PAGE>
incentive fund equal to a percentage (from 0.75% to 1.5%) of the
Corporation's adjusted pretax net income, provided the Corporation's annual
return on average invested capital ("ROAIC") equals or exceeds 10%.
It is the Committee's philosophy that, when the Corporation achieves EMIP
goals, the total of the Executive Officers' base salaries and EMIP awards
should be competitive with the total annual cash compensation paid by
comparable organizations. In years in which those goals are not realized,
the Executive Officers will receive less (or no) incentive pay.
Specifically, incentive pay opportunities for Mr. Goode are determined
annually by the 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
American corporations of comparable revenue size. Incentive pay
opportunities for the other Executive Officers are determined annually by
the Committee based on its review of the annual cash compensation of
comparable positions at companies of comparable revenue size, including but
not limited to those identified in the Stock Performance Graph.
Using those criteria, in November of 1997 the Committee set Mr. Goode's
maximum 1998 incentive opportunity at 100% of his 1998 base salary, Mr.
Tobias' and Mr. Wolf's at 80% of 1998 base salary and the other Executive
Officers' at 75% of 1998 base salary (when Mr. Prillaman was elected Vice
Chairman and Chief Marketing Officer in August of 1998, his incentive
opportunity was increased to 80%). Actual payments, if any, are based on
the total amount in the annual incentive fund. For 1998, all the Executive
Officers and all other officers earned EMIP awards, and 338 other key
employees earned MIP awards. The Corporation's 1998 performance produced
payments to Mr. Goode and to the other Executive Officers equal to 98.6% of
their respective maximum incentive opportunities. Nonetheless, total 1998
cash compensation (salary and bonus) earned by Mr. Goode fell below the
25th percentile, and the average 1998 cash compensation for the three of
the four other Executive Officers who have position counterparts in
corporations with comparable revenues approximated the 53rd percentile.
LONG-TERM INCENTIVE PLAN ("LTIP"): The Committee believes that a
substantial component of the Executive Officers' total 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 is achieved by making annual grants of
stock options and performance share units and through share retention
agreements entered into with the Executive Officers. These LTIP
arrangements are intended to ensure that the longer-term financial
interests of the Executive Officers are directly aligned with those of the
Corporation's stockholders and to provide the Executive Officers with the
opportunity to acquire a meaningful beneficial stock ownership position in
the Corporation.
In determining current LTIP awards, the size of prior grants is analyzed
within a current total compensation framework predicated on a review of
both the long-term awards and the total direct compensation (base salary,
bonus and long-term awards) of comparable positions in U.S. companies with
comparable revenues. The mix of options and performance share units may
vary from year to year to reflect an analysis of the relative value of each
type of award and other considerations. The number of stock options and
performance share units granted in any year is determined so as to place
the total direct compensation of Mr. Goode and the other Executive
Officers, when corporate performance warrants, above the 75th percentile of
total compensation for their respective peer groups.
22
<PAGE>
At its January 1998 meeting, the Committee granted stock options to each of
the Executive Officers and to 310 other key employees with 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 period has elapsed.
At the same meeting, the Committee granted performance share units which
provide the Executive Officers and other recipients the opportunity to earn
awards (that will be paid one half in cash and one half in shares of the
Corporation's Common Stock) during the first quarter of 2001. The number of
performance share units actually earned by recipients is based on criteria
approved by stockholders at their May 1995 Annual Meeting--specifically,
the Corporation's three-year (i.e., 1998-2000) average Return on Average
Invested Capital, three-year average Operating Ratio and three-year Total
Return to Stockholders, evaluated relative to performance measures
established by the Committee and set out in the schedules below. One third
of the performance share units granted in 1998 are available to be earned
based on each of the three performance criteria.
Total Stockholder Return ("TSR") vs. Return on Average Invested Capital
S&P 500 ("ROAIC")
------------------------------------- -------------------------------------
Percentage of Three- Percentage of
Three-Year Performance Year Performance
Average TSR Share Units Average Share Units
vs. S&P 500 Earned Out ROAIC Earned Out
------------------------------------- -------------------------------------
90th percentile 100% 20% 100%
80th 90% 19% 90%
70th 85% 18% 80%
60th 80% 17% 70%
50th 75% 16% 60%
40th 50% 15% 50%
30th 30% 14% 40%
25th and below 0% 13% 20%
Below 13% 0%
<TABLE>
<CAPTION>
Operating Ratio ("OpR")
---------------------------------------------------------
Percentage of
Three- Performance
Year NS Share Units
Average OpR Earned Out
---------------------------------------------------------
<S> <C>
70% 100%
75% 75%
80% 50%
85% 25%
Above 85% 0%
</TABLE>
All stock options granted in 1998 to Executive Officers were subject to the
following terms: For the first five (5) years following the date stock
options are granted, the Corporation credits dividend equivalents on
unexercised options to a separate memorandum account maintained for
23
<PAGE>
each Executive Officer, and--based on the fair market value of the
Corporation's Common Stock on the dividend payment date--the dollar amount
of that dividend equivalent is converted into Deferred Stock Units (one
such unit is equal in value to one share of Common Stock). The value of
such Deferred Stock Units is paid in cash to each Executive Officer based
on the then-fair market value of the Corporation's Common Stock on the
earliest to occur of (a) the five-year anniversary of the date of grant;
(b) the exercise of the option (exercises of less than the full option
grant result in a prorated cash payment); or (c) the officer's death,
disability or retirement.
All Executive Officers have entered into share retention agreements with
the Corporation whereby they have agreed to have the Corporation hold
shares of the Corporation's Common Stock actually earned pursuant to the
performance share feature of the LTIP for a period of five years following
the date such shares are earned.
For 1998, Mr. Goode was granted options (including 3,109 incentive stock
options that may receive capital gains treatment) on 250,000 shares of
Common Stock and 75,000 performance share units; the other Executive
Officers as a group were awarded options (including in the case of each
such officer, 3,109 incentive stock options that may receive capital gains
treatment) on a total of 300,000 shares of Common Stock and the opportunity
to earn up to 125,000 performance share units.
In summary, the Committee believes that the compensation of Executive
Officers is competitive with that of similar positions at comparable American
corporations. More importantly, the Committee believes each 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.
Regulations of the Securities and Exchange Commission require the Committee
to report to stockholders on the Committee's policy concerning the Revenue
Reconciliation Act of 1993 which amended Section 162 of the Internal Revenue
Code regarding the deductibility of certain executive compensation over $1
million. Based on the requirements of this new legislation and on then-current
interpretive regulations and transition rules, the Committee recommended to
the Board, the Board approved and recommended to the stockholders, and at
their 1995 Annual Meeting the stockholders approved, modifications to the LTIP
and establishment of the Executive Management Incentive Plan (which was
effective as of January 1, 1996, for certain Board-elected officers), all as
more particularly described in the Corporation's 1995 Proxy Statement. The
Committee will continue to seek to offer its Executive Officers and other
personnel competitive compensation and to structure such compensation
arrangements to entitle the Corporation to take appropriate related tax
deductions.
L. E. Coleman, Chairman
T. M. Hahn, Jr., Member
H. W. Pote, Member
E. B. Leisenring, Jr., Past Chairman (Mr.
Leisenring chaired the Committee when the
described decisions were made in November
1997 and January 1998; he retired, effective
the date of the 1998 Annual Meeting, under
the Corporation's retirement policy for
directors, since which time Mr. Coleman has
chaired the Committee).
24
<PAGE>
PERFORMANCE GRAPH*
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Corporation's Common Stock, the
cumulative total return of the S&P Composite-500 Stock Price Index and the S&P
Railroad Stock Price Index for the five-year period commencing December 31,
1993, and ending December 31, 1998. This information was furnished by
Bloomberg Financial Markets.
TOTAL SHAREHOLDER RETURNS
S&P 500 INDEX AND S&P RAIL
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Indexed Returns
Measurement Period S&P S&P
(Fiscal Year Covered) NSC RAIL 500 INDEX
- --------------------- ------------ ----------- ---------
<S> <C> <C> <C>
Base Dec. 93 $100 $100 $100
Dec. 94 $ 88.53 $ 86.25 $101.32
Dec. 95 $119.42 $126.18 $139.36
Dec. 96 $135.98 $149.86 $171.32
Dec. 97 $144.96 $169.11 $228.46
Dec. 98 $154.47 $155.06 $293.75
</TABLE>
- --------
*Assumes that the value of the investment in the Corporation's Common Stock
and each index was $100 on December 31, 1993, and that all dividends were
reinvested.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission and with the Corporation's Bylaws. Any such proposal for the 2000
Annual Meeting of Stockholders must comply with applicable regulations and be
received by the Corporate Secretary, Norfolk Southern Corporation, Three
Commercial Place, Norfolk, Virginia 23510-9219, as follows:
to be eligible for inclusion in the Corporation's proxy statement and form
of proxy, it must be received no later than December 2, 1999; or
to be eligible to be presented from the floor for vote at the meeting (but
not intended for inclusion in the Corporation's proxy materials), it must
be received during the period that begins December 6, 1999, and ends
February 14, 2000.
By order of the Board of Directors,
DEZORA M. MARTIN,
Corporate Secretary.
25
<PAGE>
NORFOLK SOUTHERN CORPORATION
THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510-2191
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints L. E. Coleman, David R. Goode or Harold W.
Pote, 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 Corporation to be held at
the Conference Center, Williamsburg Lodge, South England Street, Williamsburg,
Virginia, on Thursday, May 13, 1999, and any adjournments, postponements or
reschedulings thereof, upon the matters more fully set forth in the Proxy
Statement dated April 1, 1999, 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 DIRECTORS, FOR ITEM (2), AND AGAINST ITEM
(3).
NORFOLK SOUTHERN CORPORATION
(Continued, and to be MARKED, DATED AND P.O. Box 11145
SIGNED on the other side) New York, N.Y. 10203-0145
<PAGE>
-----
-----
Please mark boxes or [X] in blue or black ink. [_]
-
(1) Election of Directors
FOR all nominees listed below, except as marked to the
contrary (see instruction). [_]
WITHHOLD AUTHORITY to vote
for all nominees listed
below. [_]
Gerald L. Baliles Gene R. Carter Steven F. Leer
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST ABOVE.
(2) Ratification of the appointment of KPMG LLP, independent public
accountants. The Board of Directors recommends a vote FOR.
FOR [_] AGAINST [_] ABSTAIN [_]
(3) If properly presented at the
meeting, a stockholder proposal
concerning elimination of bonuses
and other forms of incentive pay as
a means of compensating any employee
of the Corporation. The Board of
Directors recommends a vote AGAINST.
FOR [_] AGAINST [_] ABSTAIN [_]
Sign exactly as name
appears hereon. Attorneys-
in-fact, executors,
trustees, guardians,
corporate officers, etc.,
should give full title.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
Dated:_______________, 1999
___________________________
(SIGNATURE)
___________________________
(SIGNATURE)
<PAGE>
NORFOLK SOUTHERN CORPORATION
THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510-2191
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints L. E. Coleman, David R. Goode or Harold W.
Pote, 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 Corporation to be held at
the Conference Center, Williamsburg Lodge, South England Street, Williamsburg,
Virginia, on Thursday, May 13, 1999, and any adjournments, postponements or
reschedulings thereof, upon the matters more fully set forth in the Proxy
Statement, dated April 1, 1999, 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 DIRECTORS, FOR ITEM (2), AND AGAINST ITEM
(3).
(Continued, and to be MARKED, DATED AND SIGNED on the other side)
NORFOLK SOUTHERN CORPORATION
P.O. BOX 11145
NEW YORK, N.Y. 10203-0145
<PAGE>
Please mark boxes or [X] in blue or black ink. [_]
X X
FOR all nominees listed below, except WITHHOLD AUTHORITY to
as marked to the contrary (see instruction). vote
(1) Election of Directors
for all nominees listed
below.
Gerald L. Baliles Gene R. Carter Steven F. Leer
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST ABOVE.
(2) Ratification of the appointment of KPMG LLP, FOR AGAINST ABSTAIN
independent public accountants.
The Board of Directors recommends a vote FOR. X X X
(3) If properly presented at the meeting, a
stockholder proposal concerning elimination of
bonuses and other forms of incentive pay as a
means of compensating any employee of the FOR AGAINST ABSTAIN
Corporation.
The Board of Directors recommends a vote AGAINST. X X X
Address Change and/or Comments--Mark Here X
Sign exactly as name appears hereon. Attorneys-in-fact, executors, trustees,
guardians, corporate officers, etc., should give full title.
Dated: __________________, 1999
_______________________________
(SIGNATURE)
_______________________________
(SIGNATURE)
- --------------------------------------------------------------------------------
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
