<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
[_] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Norfolk Southern Railway Company
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Norfolk Southern Railway Company
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
- --------------------------------------------------------------------------------
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, 1996
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders of Norfolk Southern Railway Company will
be held on the 19th Floor of Norfolk Southern Tower, Three Commercial Place,
Norfolk, Virginia, on Tuesday, May 28, 1996, at 11 o'clock A.M., Eastern
Daylight Time, for the following purposes:
1. Election of two directors to the class whose term will expire in
1999 and two directors to the class whose term will expire in 1997.
2. Transaction of such other business as may properly come before the
meeting.
Stockholders of record at the close of business on March 28, 1996, will be
entitled to vote at such meeting.
By order of the Board of
Directors,
SANDRA T. PIERCE,
Corporate Secretary.
Dated: April 16, 1996
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE.
<PAGE>
NORFOLK SOUTHERN RAILWAY COMPANY
THREE COMMERCIAL PLACE
NORFOLK, VIRGINIA 23510-2191
April 16, 1996
PROXY STATEMENT
This statement and the accompanying proxy will be mailed to stockholders of
Norfolk Southern Railway Company on or about April 16, 1996. The Company's
Annual Report for 1995 was mailed under separate cover beginning on March 15,
1996. The proxy is solicited by the Board of Directors of the Company for use
at the Annual Meeting of Stockholders to be held May 28, 1996. The cost
of soliciting proxies will be paid by the Company, including the reimbursement,
upon request, of brokerage firms, banks and other institutions, nominees and
trustees for their reasonable expenses in forwarding proxy material to
beneficial owners. In addition to solicitation by mail, officers and regular
employees of the Company may solicit proxies by telephone, facsimile, telegram
or personal interview at no additional compensation.
Policies are 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 $2,500 to assist in soliciting proxies directly or through
others and to tabulate all proxies and ballots cast at the Annual Meeting, is
contractually bound to maintain the confidentiality of the voting process. 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 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.
If the enclosed proxy is properly signed and returned to The Bank of New
York, the shares represented thereby will be voted in accordance with its
terms. Any stockholder who has executed and returned a proxy and for any reason
wishes to revoke it may do so at any time before the proxy is voted by giving
prior notice of revocation in any manner to the Company, or by executing and
delivering a subsequent proxy or by attending the meeting and voting in person.
The record date for stockholders entitled to vote at the Annual Meeting is
March 28, 1996. As of February 29, 1996, 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, 1,096,833
shares of Preferred Stock, excluding 100,194 shares of Preferred Stock 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 of the Company
is owned directly by Norfolk Southern Corporation ("NS").
ELECTION OF DIRECTORS
The terms of D. Henry Watts and Henry C. Wolf, members of the Class of 1996,
expire at the Annual Meeting, and the Board of Directors has nominated them as
candidates for election to the Class of 1999. The terms of James C. Bishop, Jr.
and L. I. Prillaman expire by operation of law at the Annual Meeting, and the
Board of Directors has nominated them as candidates for election to the Class
of 1997.
John S. Shannon and John R. Turbyfill, elected by the stockholders as members
of the Class of 1997, resigned as directors, effective the end of the day on
February 29, 1996; Mr. Shannon resigned
<PAGE>
because of his retirement, effective the same date, as an officer of NS, and
Mr. Turbyfill resigned in view of his planned retirement later in the year as
an officer of NS. The Board of Directors elected Mr. Bishop and Mr. Prillaman,
respectively the Executive Vice President-Law and the Executive Vice President-
Marketing of NS, to fill the vacancies created by the resignations of Messrs.
Shannon and Turbyfill. Under Virginia law, the term of a director so elected
expires at the next stockholders' meeting at which directors are elected.
Unless otherwise instructed on the enclosed proxy, such proxy will be voted
in favor of the election of Messrs. Bishop and Prillaman to serve for one-year
terms expiring in 1997 and of Messrs. Watts and Wolf to serve for three-year
terms expiring in 1999. If any nominee becomes unable to serve, an event which
is not anticipated, the proxy will be voted for a substitute nominee to be
designated by the Board of Directors, or the number of directors will be
reduced.
Under Virginia law and under the Company's Restated Articles of Incorporation
and Bylaws, directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. Votes that are withheld 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, are not "cast" for this purpose.
The following information relates to the nominees and the directors whose
terms of office will continue after the stockholders' meeting. There are no
family relationships among any of the nominees or directors--or among any of
the nominees or directors and any officer--nor is there any arrangement or
understanding between any nominee or director and any other person, pursuant to
which the nominee or director was selected.
<TABLE>
<CAPTION>
SHARES OF
NORFOLK SOUTHERN
CORPORATION
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE CURRENT BENEFICIALLY OWNED
DURING PAST 5 YEARS, DIRECTORSHIPS TERM EXPIRES/ AS OF FEBRUARY 29,
IN OTHER PUBLIC CORPORATIONS A DIRECTOR SINCE 1996/1/,/2/,/3/
---------------------------------- ---------------- ------------------
<S> <C> <C>
NOMINEES (FOR TERM EXPIRING IN 1997)
JAMES C. BISHOP, JR., 59, Norfolk, Va. Executive Vice 1996/1996 40,890
President-Law, Norfolk Southern Corporation, and Vice
President-Law, Norfolk Southern Railway Company, since
March 1, 1996, having served prior thereto as Vice
President-Law of Norfolk Southern Corporation. Director
of several Norfolk Southern Railway Company
subsidiaries, including Norfolk and Western Railway
Company.
L. I. PRILLAMAN, 52, Norfolk, Va. Executive Vice 1996/1996 60,650
President-Marketing, Norfolk Southern Corporation, and
Vice President and Chief Traffic Officer, Norfolk
Southern Railway Company, since October 1, 1995; having
previously become Vice President-Properties of both
Norfolk Southern Corporation and Norfolk Southern
Railway Company on December 1, 1992; and having served
prior thereto as Vice President and Controller of both
Norfolk Southern Corporation and Norfolk Southern
Railway Company. Director of several Norfolk Southern
Railway Company subsidiaries, including Norfolk and
Western Railway Company.
</TABLE>
- --------
Notes begin on page 4.
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
NORFOLK SOUTHERN
CORPORATION
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE CURRENT BENEFICIALLY OWNED
DURING PAST 5 YEARS, DIRECTORSHIPS TERM EXPIRES/ AS OF FEBRUARY 29,
IN OTHER PUBLIC CORPORATIONS A DIRECTOR SINCE 1996/1/,/2/,/3/
---------------------------------- ---------------- ------------------
NOMINEES (FOR TERM EXPIRING IN 1999)
<S> <C> <C>
D. HENRY WATTS, 64, Norfolk, Va. Vice Chairman, Norfolk 1996/1986 120,857/4/
Southern Corporation, and Vice President, Norfolk
Southern Railway Company, since October 1, 1995, having
served prior thereto as Executive Vice President-
Marketing, Norfolk Southern Corporation, and Vice
President and Chief Traffic Officer, Norfolk Southern
Railway Company. Director of several Norfolk Southern
Railway Company subsidiaries, including Norfolk and
Western Railway Company.
HENRY C. WOLF, 53, Norfolk, Va. Executive Vice President- 1995/1994 59,890
Finance, Norfolk Southern Corporation, and Vice President-
Finance, Norfolk Southern Railway Company, Since June 1,
1993, having served prior thereto as Vice President-Taxation
of both Norfolk Southern Corporation and Norfolk Southern
Railway Company. Director of several Norfolk Southern Railway
Company subsidiaries, including Norfolk and Western Railway
Company.
OTHER DIRECTORS
DAVID R. GOODE, 55, Norfolk, Va. Chairman, President and 1998/1992 206,714
Chief Executive Officer, Norfolk Southern Corporation,
and President and Chief Executive Officer, Norfolk
Southern Railway Company, since September 1, 1992;
having previously become President, Norfolk Southern
Corporation, on October 1, 1991, Vice President, Norfolk
Southern Railway Company, on February 1, 1992, and Vice
President-Administration on January 1, 1991; and having
served prior thereto as Vice President-Taxation of both
Norfolk Southern Corporation and Norfolk Southern
Railway Company. Director of Norfolk Southern
Corporation and of several Norfolk Southern Railway
Company subsidiaries, including Norfolk and Western
Railway Company. Director of Caterpillar, Inc., Georgia-
Pacific Corporation, Texas Instruments, Inc. and TRINOVA
Corporation.
</TABLE>
- --------
Notes begin on page 4.
3
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
NORFOLK SOUTHERN
CORPORATION
COMMON STOCK
NAME, AGE, BUSINESS EXPERIENCE CURRENT BENEFICIALLY OWNED
DURING PAST 5 YEARS, DIRECTORSHIPS TERM EXPIRES/ AS OF FEBRUARY 29,
IN OTHER PUBLIC CORPORATIONS A DIRECTOR SINCE 1996/1/,/2/,/3/
---------------------------------- ---------------- ------------------
OTHER DIRECTORS
<S> <C> <C>
STEPHEN C. TOBIAS, 51, Norfolk, Va. Executive Vice 1998/1994 56,246
President- Operations, Norfolk Southern Corporation, and
Vice President- Operations, Norfolk Southern Railway
Company, since July 1, 1994; having previously become
Senior Vice President-Operations, Norfolk Southern
Corporation, and Vice President, Norfolk Southern
Railway Company, on October 1, 1993; and having served
prior thereto as Vice President-Strategic Planning of
both Norfolk Southern Corporation and Norfolk Southern
Railway Company. Director of several Norfolk Southern
Railway Company subsidiaries, including Norfolk and
Western Railway Company.
</TABLE>
- --------
/1/For each named individual, the shares owned are less than 1% of the total
shares outstanding. No director or nominee owns shares of the Company's
Preferred Stock.
/2/Unless otherwise indicated by footnote, all shares are held by the named
individuals with sole voting and investment powers.
/3/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. Bishop, this amounts to
1,429 and 5,259 shares, respectively; for Mr. Prillaman, 5,686 and 6,727
shares; for Mr. Watts, 3,796 and 16,957 shares; for Mr. Wolf, 2,960 and 4,700
shares; for Mr. Goode, 3,011 and 14,519 shares; and for Mr. Tobias, 3,581 and
5,255 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. Bishop, this
amounts to 32,041 shares; for Mr. Prillaman, 34,522 shares; for Mr. Watts,
85,442 shares; for Mr. Wolf, 45,527 shares; for Mr. Goode, 172,521 shares; and
for Mr. Tobias, 39,547 shares).
/4/Includes 14,662 shares held by Mr. Watts' wife, in which beneficial
ownership is disclaimed.
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 Securities and Exchange Commission and the New York Stock Exchange.
For 1995, 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 were filed on time.
4
<PAGE>
BENEFICIAL OWNERSHIP OF NS AND COMPANY STOCK
As of February 29, 1996, 100,194 shares, or approximately 8.4%, of the
Company's Preferred Stock were held by Company subsidiaries and/or in a
fiduciary capacity. NS held 131,223 shares, or approximately 11%, of the
Company's Preferred Stock. To the knowledge of the Company, no other person
beneficially owns more than 5% of the Company's Preferred Stock. NS held 100%
(16,668,997 shares) of the Company's Common Stock on February 29, 1996.
As of February 29, 1996, all officers and directors of the Company as a group
beneficially owned 1,151,060 shares of NS Common Stock and 70 shares (in which
beneficial ownership is disclaimed) of the Company's Preferred Stock, or less
than 1% of the total shares of each class of stock outstanding. Included in the
NS Common Stock figure are 60,844 shares credited to individual accounts under
the NS Thrift and Investment Plan. Also included are 93,477 shares held by NS
under share retention agreements pursuant to the NS Long-Term Incentive Plan
over which the individual possesses voting power but no investment power until
the shares are distributed, and 860,810 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. Also included
are 23,533 shares in which beneficial ownership is disclaimed. The shares held
individually by directors whose terms of office will continue after the Annual
Meeting and by nominees are included in the information under "Election of
Directors."
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company consists of six members and is divided
into three classes elected for a term of three years, with each class
containing one third of the total number of directors. The Board of Directors
has no audit, nominating or compensation committees. In 1995, the Board of
Directors acted by unanimous written consent on twenty-three separate
occasions.
Each year the Board of Directors appoints an Executive Committee, which is
empowered to exercise all the authority of the Board of Directors to the extent
permitted by law when the Board is not in session. All such actions taken by
the Committee are to be reported to the Board at its meeting next succeeding
the action and are subject to revision or alteration by the Board. During 1995
and through February 29, 1996, Executive Committee members were David R. Goode,
John S. Shannon and John R. Turbyfill. Effective March 1, 1996, they were David
R. Goode, James C. Bishop, Jr. and Henry C. Wolf. The Committee took no action
in 1995.
COMPENSATION OF DIRECTORS
Each incumbent director is also an officer of the Company and an officer of
NS; none is paid a director's fee.
NS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following identifies any reportable business relationships between NS and
Messrs. Leisenring, Coleman, Hahn or McNair, the members of the Compensation
and Nominating Committee of the NS Board of Directors.
In 1995, NS paid approximately $273,000 to McNair Law Firm, P.A., of which
Mr. McNair is Chairman, for legal and consulting services.
5
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Kathryn B. McQuade is Vice President-Internal Audit of the Company. Ms.
McQuade's spouse is one of approximately 6,100 partners worldwide in KPMG Peat
Marwick LLP ("KPMG"), a firm of independent public accountants that has acted
as auditors for NS. Ms. McQuade's spouse does not participate in, or have
access to, KPMG's work for NS or its subsidiaries, including the Company. NS
paid KPMG approximately $1.9 million for all services rendered during 1995.
EXECUTIVE COMPENSATION
The Chief Executive Officer and each of the named executive officers of the
Company are also officers of NS and receive no compensation for their services
solely as Company officers. Their compensation is set by the NS Board of
Directors, based on the recommendation of its Compensation and Nominating
Committee, for service in all capacities to NS and its subsidiaries. The
directors of the Company do not participate in decisions regarding
compensation. Consequently, the information which follows concerning executive
compensation reflects the compensation paid to Company officers for service in
all capacities to NS and its subsidiaries, including the Company.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash compensation paid, as well as certain
other compensation accrued or paid, to the Chief Executive Officer and to each
of the other five most highly compensated executive officers of NS for service
in all capacities to NS and its subsidiaries (including the Company) for the
fiscal years ending December 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- ---------------------
AWARDS PAYOUTS
---------- ----------
OTHER
ANNUAL SECURITIES
NAME AND COMPEN- UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY/1/ BONUS/1/ SATION OPTIONS/3/ PAYOUTS/4/ COMPENSATION/5/
POSITION YEAR ($) ($) ($) (#) ($) ($)
--------- ---- --------- -------- ------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Goode 1995 685,000 616,500 206,077/2/,/6/ 50,000 /7/ 63,796
Chairman, President 1994 585,000 497,250 537,303 40,000 505,965 4,500
and Chief Executive 1993 535,000 376,480 300,309 40,000 217,011 50,480
Officer
John R. Turbyfill 1995 435,000 348,000 212,612/2/ 20,000 /7/ 36,693
Vice Chairman 1994 425,000 340,000 427,235 20,000 316,195 4,500
1993 414,583 273,086 331,359 12,500 217,011 36,924
D. Henry Watts 1995 381,250 290,938 255,121/2/ 12,500 /7/ 33,758
Vice Chairman 1994 370,000 277,500 459,530 12,500 316,195 4,500
1993 360,000 237,132 377,009 12,500 217,011 33,444
John S. Shannon 1995 375,000 281,250 82,504/2/ 12,500 /7/ 31,929
Executive Vice 1994 370,000 277,500 307,848 12,500 316,195 4,500
President-Law 1993 360,000 237,132 233,296 12,500 217,011 30,681
Stephen C. Tobias 1995 305,000 228,750 40,843/2/ 12,500 /7/ 26,304
Executive Vice 1994 267,500 200,625 139,362 5,000 126,491 4,500
President-Operations 1993 223,750 147,384 99,425 5,000 86,818 22,910
Henry C. Wolf 1995 305,000 228,750 45,976/2/ 12,500 /7/ 29,693
Executive Vice 1994 267,500 200,625 142,245 12,500 126,491 4,500
President-Finance 1993 204,167 134,485 101,053 5,000 86,818 27,269
</TABLE>
- --------
6
<PAGE>
/1/Includes portion of any salary or bonus award elected to be received on a
deferred basis.
/2/Includes cash payment of dividend equivalents in an amount equal to, and
commensurate with, dividends paid on NS Common Stock on performance share
units awarded through 1992 pursuant to the NS Long-Term Incentive Plan
(dividend equivalents are not paid on performance share units awarded after
1992). Includes amounts reimbursed for the payment of taxes on personal
benefits. Does not include a tax absorption payment, which was not
determinable in time to be reported, under the Long-Term Incentive Plan for
the 1995 award of performance shares. 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 Internal Revenue Code; for 1995,
these amounts were: for Mr. Goode, $42,117; Mr. Turbyfill, $201,104; Mr.
Watts, $242,213; Mr. Shannon, $70,162; Mr. Tobias, $29,438; and Mr. Wolf,
$30,968.
/3/Options were granted without tandem SARs.
/4/Represents market value, as of the date of award, of NS Common Stock
earned pursuant to the performance share feature of the NS Long-Term Incentive
Plan for periods ended December 31, 1994 and 1993 (for 1993, performance
shares were awarded for achievements in the three-year period 1991-1993, and
for 1994, performance shares were awarded for achievements in the three-year
period 1992-1994). For 1995, the award of performance shares for achievements
in the three-year period 1993-1995 had not been approved in time to be
reported.
/5/Includes for 1995 (i) contributions of $4,500 to the NS 401(k) plan on
behalf of each named executive officer; and (ii) total premium payments (out-
of-pocket cash cost) on "split dollar" life insurance policies for Mr. Goode,
$59,296; Mr. Turbyfill, $32,193; Mr. Watts, $29,258; Mr. Shannon, $27,429; Mr.
Tobias, $21,804; and Mr. Wolf, $25,193.
/6/Includes personal use, as directed by resolution of the NS Board of
Directors, of NS aircraft valued at approximately $95,000.00, calculated on
the basis of the aggregate incremental cost of such use to NS.
/7/For 1995, the award of performance shares for achievements in the three-
year period 1993-1995 had not been approved in time to be reported.
LONG-TERM INCENTIVE PLAN
The NS Long-Term Incentive Plan, as last approved by NS stockholders in
1995, provides for the award of incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock and performance share
units to officers and other key employees of NS and certain of its
subsidiaries (including the Company). The Compensation and Nominating
Committee of the NS Board of Directors ("Committee") is charged with
administration of the Plan and has the sole discretion, subject to certain
limitations, to interpret the Plan; to select Plan participants; to determine
the type, size, terms and conditions of awards under the Plan; to authorize
the grant of such awards; and to adopt, amend and rescind rules relating to
the Plan.
7
<PAGE>
STOCK OPTIONS
The following table sets forth certain information concerning the grant in
1995 of stock options under the NS Long-Term Incentive Plan to each named
executive officer:
OPTION/SAR* GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ----------------------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE OR PRESENT
GRANTED/1/ EMPLOYEES IN BASE PRICE/2/ EXPIRATION VALUE/3/
NAME (#) FISCAL YEAR ($ PER SHARE) DATE ($)
---- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
D. R. Goode 50,000 6.96% 62.50 01/29/2005 844,000
J. R. Turbyfill 20,000 2.78% 62.50 01/29/2005 337,600
D. H. Watts 12,500 1.74% 62.50 01/29/2005 211,000
J. S. Shannon 12,500 1.74% 62.50 01/29/2005 211,000
S. C. Tobias 12,500 1.74% 62.50 01/29/2005 211,000
H. C. Wolf 12,500 1.74% 62.50 01/29/2005 211,000
</TABLE>
* No SARs were granted in 1995.
- --------
/1/Options were granted effective January 30, 1995, exercisable one year
after the date of grant. Dividend equivalents are paid in cash for five years
on these options in an amount equal to, and commensurate with, dividends paid
on 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 Securities and Exchange Commission,
the present value of the option grant at the date of grant was determined
using the Black-Scholes statistical model. The actual amount, if any, an
executive officer may realize depends on the stock price on the date the
option is exercised; 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.
The model assumes:
(a) a stock volatility factor of 0.1902: volatility was determined by an
independent compensation consultant using monthly data averaged over the
60-month period January 1, 1990, through December 31, 1994;
(b) a dividend yield of 3.23%: yield was determined monthly and averaged
over the 60-month period January 1, 1990, through December 31, 1994;
(c) a 1994 risk-free rate of return of 6.75%: this represents the return
on a comparatively "risk-free" investment in 1994, the year prior to the
issuance of these options; and
(d) that the option will be exercised during its ten-year term.
The foregoing measures and assumptions produce a Black-Scholes factor of
0.27 and a resulting present value of $16.88 for each share of common stock
subject to the 1995 option grant; that factor
8
<PAGE>
and resulting present value have not been adjusted to reflect that options
cannot be exercised during the first year of their term. Values computed under
the Black-Scholes model are not affected by payment of dividend equivalents on
unexercised options.
The following table sets forth certain information concerning the exercise
of options and/or SARs by each named executive officer during 1995 and the
unexercised options and SARs held by each as of the end of 1995:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FY-END AT FY-END/1/
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED -------------------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. R. Goode 3,300/2/ 144,443/2/ 172,521 50,000 2,267,537 846,875
J. R. Turbyfill 12,095/3/ 516,240/3/ 136,814/4/ 20,000 4,104,618/4/ 338,750
D. H. Watts 0 0 85,442 12,500 2,039,961 211,719
J. S. Shannon 0 0 85,820 12,500 2,057,492 211,719
S. C. Tobias 3,790 139,360 39,547 12,500 718,069 211,719
H. C. Wolf 4,157 178,839 45,527 12,500 703,951 211,719
</TABLE>
- --------
/1/Equal to the mean ($79.4375) of the high and low trading prices on the
New York Stock Exchange-Composite Transactions of the Common Stock on December
31, 1995, less the exercise prices of the options, multiplied by the number of
options.
/2/Includes 995 shares of Common Stock received upon exercise of 3,300 SARs
payable one half in stock and one half in cash.
/3/Includes 699 shares of Common Stock received upon exercise of 2,200 SARs
payable one half in stock and one half in cash.
/4/Includes 32,291 tandem SARs with a value of $1,835,036.
PERFORMANCE SHARE UNITS ("PSUS")
The following table sets forth certain information concerning the grant in
1995 of PSUs under the Corporation's Long-Term Incentive Plan to each named
executive officer. These PSU grants entitle a recipient to "earn out" or
receive performance shares (shares of the Corporation's Common Stock) at the
end of a three-year performance cycle (1995-1997) based on the Corporation's
performance during this three-year period. Under the 1995 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 Report of the Compensation and Nominating Committee, beginning on
page 11.
9
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<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 32,000 01/01/95- 0 24,256 32,000
12/31/97
J. R. Turbyfill 16,000 01/01/95- 0 12,128 16,000
12/31/97
D. H. Watts 10,000 01/01/95- 0 7,580 10,000
12/31/97
J. S. Shannon 10,000 01/01/95- 0 7,580 10,000
12/31/97
S. C. Tobias 10,000 01/01/95- 0 7,580 10,000
12/31/97
H. C. Wolf 10,000 01/01/95- 0 7,580 10,000
12/31/97
</TABLE>
- --------
/1/Performance shares, when earned out, will be issued one half in cash and
one half in stock, with the stock portion being held by NS for up to 60 months
pursuant to a share retention agreement unless such requirement is waived by
the Committee in its sole discretion. Because approximately one half of the
performance shares earned under the 1995 award will be subject to a share
retention agreement, the withholding taxes due will be withheld from the cash
portion of this award.
/2/The Long-Term Incentive Plan does not provide for a performance target;
consequently, this column represents 75.8% of the maximum "earn out," which,
in accordance with applicable rules of the Securities and Exchange Commission,
is based on the percentage of the previous fiscal year's actual "earn out"
under the Plan.
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 1995 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.
10
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITABLE SERVICE
-----------------------------------------------------------------------
REMUNERATION 25 30 35 40
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 200,000 $ 60,151 $ 73,639 $ 87,203 $101,129
300,000 97,651 118,639 139,703 161,129
400,000 135,151 163,639 192,203 221,129
500,000 172,651 208,639 244,703 281,129
600,000 210,151 253,639 297,203 341,129
700,000 247,651 298,639 349,703 401,129
800,000 285,151 343,639 402,203 461,129
900,000 322,651 388,639 454,703 521,129
1,000,000 360,151 433,639 507,203 581,129
1,100,000 397,651 478,639 559,703 641,129
1,200,000 435,151 523,639 612,203 701,129
1,300,000 472,651 568,639 664,703 761,129
1,400,000 510,151 613,639 717,203 821,129
1,500,000 547,651 659,639 769,703 881,129
</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, 1996, for each executive officer named in
the Summary Compensation Table were: Mr. Goode, $789,348 and 30 years; Mr.
Turbyfill, $687,595 and 35 years; Mr. Watts, $599,687 and 40 years; Mr.
Shannon, $593,438 and 39 years; Mr. Tobias, $376,668 and 26 years; Mr. Wolf,
$338,376 and 23 years.
THE NORFOLK SOUTHERN CORPORATION COMPENSATION AND
NOMINATING COMMITTEE REPORT CONCERNING THE 1995
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
1995 compensation determinations were made for the Corporation's Chairman,
President and Chief Executive Officer, David R. Goode, and the other officers
(collectively, including Mr. Goode, referred to as the "Executive Officers")
whose 1995 compensation is disclosed 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 five times
during 1995. Among other things, the Committee is responsible for: (1)
recommending to the Board the salaries of corporate officers and (2)
administering the Corporation's Management Incentive Plan ("MIP"), as adopted
by the Board of Directors (and since January 1, 1996, its Executive Management
Incentive Plan, as approved by the stockholders at their May 1995 Annual
Meeting), 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.
11
<PAGE>
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 those
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. The base salaries of the other Executive
Officers--as well as all 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. This information is compiled by the
Corporation's Personnel Department and by an outside 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 subjective
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 recommendations 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's
base salary between the 50th and 75th percentiles of the base salaries paid
to chairmen 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. Because
Mr. Goode became Chairman of the Corporation in 1992, his base salary in
1995 still was below the 50th percentile (using the most current data
available when the decision concerning his base pay was made); the base
salary of other Executive Officers in 1995 approximated the 50th
percentile.
For 1995, Mr. Goode's salary was increased by $100,000, or 17.1%. This 1995
increase, not tied to or reflecting application of any specific formula,
reflects both the Corporation's total operating revenues and record net
income in 1994, despite uncertainties about the domestic economy and
reduced export coal traffic, and the Board's confidence in Mr. Goode's
leadership. The Committee recommended and the Board approved average
increases of 3.5% for Messrs. Turbyfill, Shannon, Tobias, Watts and Wolf;
these increases were based on Mr. Goode's recommendations and the
Corporation's 1994 performance.
MANAGEMENT INCENTIVE PLAN ("MIP"): The Corporation's MIP 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 profitability. Awards to Executive Officers and other MIP
participants are paid from an annual incentive fund equal to a percentage
(from 0.75% to 1.5%) of the Corporation's adjusted pretax net income when
the Corporation's annual return on average invested capital ("ROAIC")
equals or exceeds 10%. Beginning in calendar year 1996, incentive
opportunities previously offered the Executive Officers and certain other
Board-elected officers will be made available through the Executive
Management Incentive Plan.
12
<PAGE>
Base salaries of the Corporation's Executive Officers have tended to be
lower than at comparable organizations, and their incentive pay
opportunities have tended to be higher. It is the Committee's philosophy
that, when the Corporation achieves MIP profitability goals, the total of
the Executive Officers' base salaries and MIP 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 incentive pay 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 1994 the Committee set Mr. Goode's
maximum 1995 incentive opportunity at 90% of 1995 base salary, the Vice
Chairman's at 80% of 1995 base salary, and the other Executive Officers' at
75% of 1995 base salary. Actual payments, if any, are based on the total
amount in the annual incentive fund. For 1995, 312 key employees, including
the Executive Officers, earned MIP awards. In light of the Corporation's
1995 performance, the related MIP payments earned by Mr. Goode and the
other Executive Officers were equal to 100% of their respective maximum
incentive opportunities. The 1995 MIP award paid to Mr. Goode fell below
the 50th percentile with respect to 1994 bonuses (the most current data
available when decisions concerning his incentive opportunity were made)
earned by chief executive officers in his peer group. The 1995 MIP awards
paid to the other Executive Officers also fell below the 50th percentile
with respect to 1994 bonuses earned by individuals in similar positions in
their respective peer group.
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 compensation (base salary, bonus
and long-term awards) of comparable positions at a number of U.S.
companies. 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. Since the inception of the Plan and
continuing through the awards made in 1994, this analysis resulted in a
general practice of granting options to performance share units in a ratio
of 2 to 1. For grants made in 1995, that ratio changed, reflecting the
award of relatively more performance share units than in past years--
reflecting, in part, the effects of the Committee's decision not to make
tax absorption payments on the actual earnouts of the 1995 awards: for Mr.
Goode, the ratio of
13
<PAGE>
awarded options to awarded performance share units was roughly 1.56 to 1;
for the other Executive Officers, that ratio was 1.25 to 1. Those ratios
may or may not be maintained.
The Committee compares Mr. Goode's total compensation to that of 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. The total compensation of the other Executive Officers is evaluated
relative to survey data for comparable positions at American corporations
of comparable revenue size, including but not limited to those identified
in the Stock Performance Graph. Based on this review, the number of stock
options and performance share units granted is fixed (assuming that all
performance share units actually are earned--which has not happened to
date) so as to place the total 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.
At its January 1995 meeting, the Committee granted--subject to receipt of
stockholders' approval at their May 1995 Annual Meeting, which approval was
obtained--stock options to each of the six Executive Officers and to 307
other 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 period has
elapsed.
At the same meeting, the Committee granted--subject to receipt of
stockholders' approval at their May 1995 Annual Meeting, which approval was
obtained--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 1998. The number of performance share units that are
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., 1995-1997) average Return on Average Invested Capital, three-
year average operating ratio and three-year total Return to Stockholders,
evaluated relative to pre-established performance measures set out in the
schedules below. One third of the performance share units granted in 1995
are available to be earned based on each of the three performance criteria.
<TABLE>
<CAPTION>
TOTAL STOCKHOLDER RETURN RETURN ON AVERAGE INVESTED CAPITAL
("TSR") VS. S&P 500 ("ROAIC")
- --------------------------------------------- ------------------------------------------
PERCENTAGE OF PERCENTAGE OF
THREE-YEAR PERFORMANCE THREE-YEAR PERFORMANCE
AVERAGE TSR SHARE UNITS AVERAGE SHARE UNITS
VS. S&P 500 EARNED ROAIC EARNED
- --------------------------------------------- ------------------------------------------
<S> <C> <C> <C>
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>
14
<PAGE>
OPERATING RATIO ("OPR")
----------------------------------------------------------
<TABLE>
<CAPTION>
THREE-
YEAR NS PERCENTAGE OF
AVERAGE PERFORMANCE SHARE
OPR UNITS EARNED
----------------------------
<S> <C>
70% 100%
75% 75%
80% 50%
85% 25%
Above 85% 0%
</TABLE>
All stock options and performance share units granted in 1995 to Executive
Officers were subject to the following terms. For the first five (5) years
following the date stock options are granted and while the options remain
outstanding (i.e., until such time as they are exercised by the Executive
Officer), the Corporation pays cash dividend equivalents on such options to
the Executive Officers. The 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.
Mr. Goode was granted options on 50,000 shares of common stock and 32,000
performance share units in 1995, and the other Executive Officers as a
group were awarded options on 70,000 shares of common stock and 56,000
performance share units.
In sum, the Committee believes that the compensation of Executive Officers is
competitive with that of similar positions at comparable American corporations.
More important, 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 to eliminate the deductibility of certain compensation over $1 million
paid to executive officers. Based on the requirements of this new legislation
and on 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 (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.
E. B. Leisenring, Jr., Chairman
L. E. Coleman, Member
T. M. Hahn, Jr., Member
R. E. McNair, Member
15
<PAGE>
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 ACCOUNTANTS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP,
independent public accountants, to audit the books, records and accounts of the
Company for the year 1996. This firm has acted as auditors for the Company
since June 1, 1982.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
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 1997 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 23510-2191, no later
than December 18, 1996.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than as set forth above. However, 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 person or persons
acting under the proxies.
By order of the Board of
Directors,
SANDRA T. PIERCE,
Corporate Secretary.
16
<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.
Term expiring 1999: D. Henry Watts and Henry C. Wolf
Term expiring 1997: J.C. Bishop, Jr. and L.I. Prillaman
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THAT NOMINEE'S NAME.
Address Change and/or [_]
Comments Mark Here
Sign exactly as name appears hereon.
Attorneys-in-fact,XXXXX, trustees,
guardians, corporate officers, etc.
should give full title.
Dated: ________________________, 1996
_____________________________________
(SIGNATURE)
_____________________________________
(SIGNATURE)
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
- ------------------------------------------------------
<PAGE>
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 Sandra T. Pierce, David R. Goode or
Stephen C. Tobias, and each or any of them, proxy for the undersigned, with
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, 1996, and
any adjournments thereof, upon the matters more fully set forth in the Proxy
Statement and to transact such other business as may properly come before the
meeting.
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.
(Continued, and to be MARKED, DATED AND SIGNED on the other side)
NORFOLK SOUTHERN RAILWAY COMPANY
P.O. Box 11139
New York, N.Y. 10203-0139
