<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Norfolk Southern Railway Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
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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 25, 1999
- -------------------------------------------------------------------------------
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 25, 1999, 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
2002.
2.Transaction of such other business as properly may come before the
meeting.
Stockholders of record at the close of business on March 25, 1999, will be
entitled to vote at such meeting.
By order of the Board of Directors,
SANDRA T. PIERCE,
Corporate Secretary.
Dated: April 15, 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 Railway Company
Three Commercial Place
Norfolk, Virginia 23510-2191
April 15, 1999
PROXY STATEMENT
On March 12, we began mailing to you and other stockholders the Company's
Annual Report for 1998, which contains important financial and narrative
information. On April 15, 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 25, 1999 (1999 Annual
Meeting). Only stockholders of record on March 25, 1999, are entitled to vote
at the 1999 Annual Meeting. As of February 28, 1999, the Company had issued
and outstanding 1,197,027 shares of $2.60 Cumulative Preferred Stock, Series A
("Preferred Stock"), and 16,668,997 shares of Common Stock. Of these shares,
1,096,907 shares of Preferred Stock (this total excludes 100,120 shares held
by Company subsidiaries and/or in a fiduciary capacity), and all shares of
Common Stock are entitled to one vote per share. All the Common Stock is owned
directly by Norfolk Southern Corporation ("NS").
If you properly sign the enclosed proxy card and timely return it to The
Bank of New York, the shares represented by that proxy card will be voted
in accordance with its terms.
Any stockholder may revoke a signed and returned proxy card at any time
before the proxy is voted by: (a) giving prior notice of revocation in any
manner to the Company; (b) executing and delivering a subsequent proxy; or
(c) attending the 1999 Annual Meeting and voting in person.
The cost of soliciting these proxies will be paid by the Company, including
the reimbursement, upon request, of brokerage firms, banks and other
institutions, nominees and trustees for the reasonable expenses they incur to
forward proxy material to beneficial owners. Officers and other regular
employees of the Company 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 $2,200 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 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.
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 two directors will expire: those of
Jon L. Manetta and Henry C. Wolf.
Unless you instruct otherwise on the enclosed proxy card, your proxy will be
voted in favor of the reelection of Messrs. Manetta and Wolf as directors
for three-year terms that expire in 2002.
If either 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
Company'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.
The following information relates to the nominees and the directors whose
terms of office will continue after the 1999 Annual Meeting.
2
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Business
Experience Shares of Norfolk
during past 5 Years, Southern Corporation
Directorships Current Common Stock
in Other Public Term Expires/ Beneficially Owned
Corporations A Director Since as of February 28, 1999/1/,/2/,/3/
-------------------- ---------------- ----------------------------------
Nominees (for term expiring in 2002)
<S> <C> <C>
JON L. MANETTA, 60,
Norfolk, Va.; Senior Vice
President-Operations of
both Norfolk Southern
Corporation and Norfolk
Southern Railway Company
since August 1, 1998.
Served as Vice President-
Transportation &
Mechanical of Norfolk
Southern Corporation and
Norfolk Southern Railway
Company from December 1,
1995, to August 1, 1998,
and prior thereto was
Vice President-
Transportation of both
Norfolk Southern
Corporation and Norfolk
Southern Railway Company.
Director of several
Norfolk Southern Railway
Company subsidiaries. 1999/1997 86,825
HENRY C. WOLF, 56,
Norfolk, Va.; Vice
Chairman and Chief
Financial Officer of
Norfolk Southern
Corporation and Vice
President and Chief
Financial Officer of
Norfolk Southern Railway
Company since August 1,
1998. Served as Executive
Vice President-Finance of
Norfolk Southern
Corporation and Vice
President-Finance of
Norfolk Southern Railway
Company from June 1,
1993, to August 1, 1998,
and prior thereto was
Vice President-Taxation
of both Norfolk Southern
Corporation and Norfolk
Southern Railway Company.
Director of Conrail Inc.,
Consolidated Rail
Corporation and several
Norfolk Southern Railway
Company subsidiaries. 1999/1994 385,285
Other Directors
JAMES C. BISHOP, JR., 62,
Norfolk, Va.; Executive
Vice President-Law of
Norfolk Southern
Corporation and Vice
President-Law of Norfolk
Southern Railway Company
since March 1, 1996,
having served prior
thereto as Vice
President-Law of Norfolk
Southern Corporation.
Director of Conrail Inc.,
Consolidated Rail
Corporation and several
Norfolk Southern Railway
Company subsidiaries. 2000/1996 257,777
L. I. PRILLAMAN, 55,
Norfolk, Va.; Vice
Chairman and Chief
Marketing Officer of
Norfolk Southern
Corporation and Vice
President and Chief
Marketing Officer of
Norfolk Southern Railway
Company since August 1,
1998. Served as Executive
Vice President-Marketing
of Norfolk Southern
Corporation and Vice
President and Chief
Traffic Officer of
Norfolk Southern Railway
Company from October 1,
1995,
</TABLE>
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Notes begin on page 4.
3
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Business
Experience Shares of Norfolk
during past 5 Years, Southern Corporation
Directorships Current Common Stock
in Other Public Term Expires/ Beneficially Owned
Corporations A Director Since as of February 28, 1999/1/,/2/,/3/
-------------------- ---------------- ----------------------------------
Other Directors (continued)
<S> <C> <C>
to August 1, 1998, and
prior thereto was Vice
President-Properties of
both Norfolk Southern
Corporation and Norfolk
Southern Railway
Company. Director of
several Norfolk Southern
Railway Company
subsidiaries. 2000/1996 343,543
DAVID R. GOODE, 58,
Norfolk, Va.; Chairman,
President and Chief
Executive Officer of
Norfolk Southern
Corporation and
President and Chief
Executive Officer of
Norfolk Southern Railway
Company since September
1, 1992. Director of
Norfolk Southern
Corporation, Conrail
Inc., Consolidated Rail
Corporation and several
Norfolk Southern Railway
Company subsidiaries.
Also a director of
Aeroquip-Vickers, Inc.,
Caterpillar, Inc., Delta
Air Lines, Inc.
(effective April 22,
1999), Georgia-Pacific
Corporation and Texas
Instruments
Incorporated. 2001/1992 1,300,266
STEPHEN C. TOBIAS, 54,
Norfolk, Va.; Vice
Chairman and Chief
Operating Officer of
Norfolk Southern
Corporation and Vice
President and Chief
Operating Officer of
Norfolk Southern Railway
Company since August 1,
1998. Served as
Executive Vice
President-Operations of
Norfolk Southern
Corporation and Vice
President-Operations of
Norfolk Southern Railway
Company from July 1,
1994, to August 1, 1998,
and prior thereto was
Senior Vice President-
Operations of Norfolk
Southern Corporation and
Vice President of
Norfolk Southern Railway
Company. Director of
Conrail Inc.,
Consolidated Rail
Corporation and several
Norfolk Southern Railway
Company subsidiaries. 2001/1994 338,246
</TABLE>
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/1/For each named individual, the shares owned are less than 1% of the total
outstanding shares of Norfolk Southern Corporation. 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. Manetta, this amounts,
respectively, to 200 and 10,588 shares; for Mr. Wolf, 10,024 and 66,193
shares; for Mr. Bishop, 5,112 and 36,444 shares; for Mr. Prillaman, 19,858 and
47,036 shares; for Mr. Goode, 10,266 and 229,764 shares; and for Mr. Tobias,
12,510 and 49,965 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
4
<PAGE>
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. Manetta, this amounts to 73,500 shares; for Mr. Wolf, 252,000 shares; for
Mr. Bishop, 198,939 shares; for Mr. Prillaman, 221,274 shares; for Mr. Goode,
977,500 shares; and for Mr. Tobias, 242,868 shares); and includes Deferred
Stock Units credited to officers pursuant to the NS Long-Term Incentive Plan
(for Mr. Manetta, this amounts to 2,537 shares; for Mr. Wolf, 6,089 shares;
for Mr. Bishop, 4,481 shares; for Mr. Prillaman, 6,089 shares; for Mr. Goode,
21,566 shares; and for Mr. Tobias, 6,089 shares).
2. OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
1999 Annual Meeting other than as noted 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.
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 Company and of Norfolk Southern Corporation and to certain matters
concerning the Board of Directors, the directors and the officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and any persons beneficially owning more
than 10 percent of a class of the Company's stock, to file certain reports of
beneficial ownership and changes in beneficial ownership (Forms 3, 4 and 5)
with the 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 Company believes
that all required Forms concerning 1998 beneficial ownership were filed on
time.
BENEFICIAL OWNERSHIP OF NS AND COMPANY STOCK
As of February 28, 1999, 100,120 shares, or approximately 8.4%, of the
Company's Preferred Stock were held by Company subsidiaries and/or in a
fiduciary capacity. NS held 176,705 shares, or approximately 15%, 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 16,668,997 shares, or 100%, of
the Company's Common Stock on February 28, 1999.
As of February 28, 1999, all officers and directors of the Company as a
group beneficially owned 6,125,503 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. The NS
Common Stock figure includes: 238,883 shares credited to individual accounts
5
<PAGE>
under the NS Thrift and Investment Plan; 936,530 shares held by NS under share
retention agreements pursuant to the NS Long-Term Incentive Plan over which
the individual possesses voting power but has no investment power until the
shares are distributed; 4,482,300 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; and 103,890
Deferred Stock Units, which ultimately will be satisfied in cash, credited to
officers pursuant to the NS Long-Term Incentive Plan. Also included are 29,075
shares in which officers disclaim beneficial ownership. The shares held
individually by directors whose terms of office will continue after the 1999
Annual Meeting and by nominees for reelection are reported under the caption
"Election of Directors," beginning on page 2.
BOARD OF DIRECTORS AND COMMITTEES
On December 31, 1998, the Board of Directors of the Company consisted of six
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 one third of
the total number of directors. The Board of Directors has no Audit, Nominating
or Compensation Committees. In 1998, the Board of Directors acted by unanimous
written consent on eighteen separate occasions.
The Executive Committee took no action in 1998; its members are David R.
Goode, Chairman, James C. Bishop, Jr. and Henry C. Wolf. 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. All
actions taken by the Committee are to be reported to the Board at its meeting
next succeeding such action and are subject to revision or alteration by the
Board.
COMPENSATION OF DIRECTORS
Each incumbent director is also an officer of the Company and an officer of
NS; no such director is paid a retainer, meeting fees or other compensation
for service as a director.
NS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Nominating Committee of the NS Board of
Directors during 1998 were Mr. E. B. Leisenring, Jr. (who also was Chair of
the Committee until his retirement from the NS Board, effective the date of
the 1998 Annual Meeting), Mr. L. E. Coleman (who became Chair following Mr.
Leisenring's retirement), Mr. T. Marshall Hahn, Jr. and Mr. Harold W. Pote
(who became a member of the Committee following the 1998 Annual Meeting).
Other than Mr. Pote's relationship with Beacon Group, which is reported in the
Proxy Statement for the 1999 Annual Meeting of the Stockholders of Norfolk
Southern Corporation, there were no reportable business relationships between
NS and such individuals.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Kathryn B. McQuade is Vice President-Financial Planning of NS. 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 NS and
the Company. Ms. McQuade's spouse does not participate in, or have access to,
KPMG's work for NS, the Company or the subsidiaries of either. NS paid KPMG
approximately $11 million for all services rendered during 1998.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth the cash compensation paid, as well as
certain other compensation accrued or paid, to the Chief Executive Officer and
to each of the other four most highly compensated executive officers of NS in
1998 ("Executive Officers"), for service in all capacities to both NS and its
subsidiaries by the Executive Officers in the fiscal years ending December 31,
1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- -----------------------
Awards Payouts
---------- ----------
Other Securities All
Annual Underlying LTIP Other
Name and Principal Salary/1/ Bonus/1/ Compensation/2/ Options/3/ Payouts/4/ Compensation/5/
Position Year ($) ($) ($) (#) ($) ($)
- ------------------ ---- --------- -------- --------------- ---------- ---------- ---------------
<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>
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/1/Includes portion of any salary or bonus award elected to be received on a
deferred basis.
/2/Includes amounts reimbursed for the payment of taxes on personal
benefits. Also includes the amount by which the interest accrued on salary and
bonuses deferred under the NS Officers' Deferred Compensation Plan exceeds
120% of the applicable Federal long-term rate provided under Section 1274(d)
of the 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 NS' 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 NS' 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 NS' aircraft valued at approximately $84,399--calculated on the
basis of the aggregate incremental cost of such use to NS.
7
<PAGE>
Long-Term Incentive Plan
The NS Long-Term Incentive Plan, as last approved by stockholders in 1995,
provides for the award of incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock and performance share
units to officers and other key employees of both NS and certain of its
subsidiaries (including the Company). The Compensation and Nominating
Committee of the NS Board of Directors ("Committee") administers the Plan and
has the sole discretion, subject to certain limitations, to interpret the
Plan; to select Plan participants; to determine the type, size, terms and
conditions of awards under the Plan; to authorize the grant of such awards;
and to adopt, amend and rescind rules relating to the Plan.
Stock Options
The following table sets forth certain information concerning the grant in
1998 of stock options under the NS Long-Term Incentive Plan to each Executive
Officer:
Option/SAR* Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Grant
Date
Individual Grants Value
---------------------------------------------------------------- ---------
Number of
Securities % of Total Grant
Underlying Options Date
Options Granted to Exercise or Present
Granted/1/ Employees in Base Price/2/ Expiration Value/3/
Name (#) Fiscal Year ($) 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 NS 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 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 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.
8
<PAGE>
In the case of NS 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 $7.77 for each share of NS Common Stock subject to the 1998
option grant; that factor and resulting present value have not been adjusted
to reflect that options cannot be exercised during the first year of their 10-
year term, the payment of dividend equivalents on unexercised options or the
deferral of receipt of such dividend equivalents until the related Deferred
Stock Units actually are paid out.
The following table sets forth certain information concerning the exercise
of options by each Executive Officer during 1998 and the number of unexercised
options held by each as of December 31, 1998:
Aggregated Option/SAR Exercises in Last Fiscal Year
And FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs at FY- In-the-Money Options/SARs at
Shares End FY-End/1/
Acquired on Value (#) ($)
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 NS 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.
9
<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 NS 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
NS' 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 12.
Long-Term Incentive Plan--Awards in Last Fiscal Year
(Performance Share Units)
<TABLE>
<CAPTION>
Estimated Future Payouts under
Non-Stock Price-Based Plans
-------------------------------------
Performance
Number of or Other
Shares, Units Period
or 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. Prillaman 25,000 01/01/98- 0 20,025 25,000
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 NS Common
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. Withholding taxes due on the "earn outs"
will be withheld from the cash portion.
/2/The NS Long-Term Incentive Plan does not provide a performance target for
the "earn out" of PSUs; consequently, this column represents 80.1% of the
maximum "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.
10
<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 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 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.
11
<PAGE>
Change-in-Control Arrangements
In May 1996, the Compensation and Nominating Committee recommended, and the
NS Board of Directors approved, NS' 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 NS' 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 NS. 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 NS or a covered employee on
twenty-four months' notice; however, the term of the prohibition on engaging
in Competing Employment is not affected by 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 NS
Officers' Deferred Compensation Plan; (d) eligibility for certain Benefits
(principally medical, insurance and death benefits) for up to three years
following Termination; and (e) certain additional service credit under NS'
retirement plans (in the case of any NS 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 ("Corporation") 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
12
<PAGE>
stockholders at their May 1995 Annual Meeting, its Management Incentive Plan
(applicable to non-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
13
<PAGE>
Plan, and to participants in the Management Incentive Plan (MIP) 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, 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
14
<PAGE>
Officers, when corporate performance warrants, above the 75th percentile of
total compensation for their respective peer groups.
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.
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------
Total Stockholder Return Return on Average
("TSR") vs. S&P 500 Invested Capital ("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
- ---------------------------------- ----------------------------------
<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%
- ---------------------------------- ----------------------------------
<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 each
Executive Officer, and--based on the fair market value of the Corporation's
Common Stock
15
<PAGE>
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).
16
<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 PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of KPMG LLP, independent
public accountants, to audit the books, records and accounts of the Company
for the year 1999. This firm has acted as auditors for the Company since June
1, 1982, and also provides services to NS.
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.
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 1999 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's proxy statement and
form of proxy, it must be received by the Corporate Secretary, Norfolk
Southern Railway Company, Three Commercial Place, Norfolk, Virginia 23510-
9219, no later than December 14, 1999.
By order of the Board of Directors,
SANDRA T. PIERCE,
Corporate Secretary.
17
<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, James C. Bishop, Jr. or L.
I. Prillaman, and each or any of them, proxy for the undersigned, with full
power of substitution, to vote with the same force and effect as the
undersigned at the annual meeting of stockholders of Norfolk Southern Railway
Company to be held at Three Commercial Place, Norfolk, Virginia, on Tuesday,
May 25, 1999, and any adjournments, postponements or reschedulings thereof,
upon the matters more fully set forth in the Proxy Statement, dated April 15,
1999, and to transact such other business as properly may come before the
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.
(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
<PAGE>
<TABLE>
<CAPTION>
[______]
Please mark boxes [_] or [X] in blue or black ink.
<S> <C>
(1) Election of Directors FOR all nominees listed below, except WITHHOLD AUTHORITY to vote
as marked to the contrary (see instruction). [X] for all nominees listed below. [X]
Jon L. Manetta and Henry C. Wolf
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME.
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
</TABLE>
