Applicable SEC rules require that we furnish you the following information relating to the oversight and management of Norfolk Southern and to certain matters concerning our Board of Directors and officers who are designated by our Board of Directors as executive officers for purposes of the Securities Exchange Act of 1934 (“Executive Officers”).
Based solely on our records and our review of the most recent Schedule 13G filings with the SEC, the following tables show information concerning the persons or groups known to Norfolk Southern to be beneficial owners of more than five percent of our common stock, our only class of voting securities:
Unless otherwise indicated by footnote to the data in the table, all such shares are held with sole voting and investment power, and no director or Executive Officer beneficially owns any Norfolk Southern equity securities other than our common stock. No one director or Executive Officer owns as much as 1% of the total outstanding shares of our common stock. All directors and Executive Officers as a group own approximately .82%0.66% of the total outstanding shares of our common stock.
stock units. Also includes 5,000 shares over which Mr. Correll, 1,200 shares over which Mr. Leer and 100 shares over which Admiral Reason share voting and investment power with another individual. The amounts reported also include shares credited to certain directors’ accounts in our Dividend Reinvestment Plan.
stockholders because the value of the directors’ holdings fluctuates with the price of our common stock. These stock units ultimately are settled in cash.
The Governance and Nominating Committee has identified ten areas of expertise that are particularly relevant to the CorporationNorfolk Southern and has identified the directors whose key areas of expertise qualify them for each of the listed categories. The categories identified by the Governance and Nominating Committee are:
Each director’s biography includes a listing of the areas of expertise where each director or nominee is most skilled. In addition, the table below summarizes the particular attributes that led the Governance and Nominating Committee to nominate each individual as a director of the Corporation.
As required by the New York Stock Exchange, the Board of Directors has considered whether individual directors are independent. A director is considered “independent” if the Board determines that the director has no material relationship with Norfolk Southern (directly or as a partner, stockholder or officer of an organization that has a relationship with Norfolk Southern). The Board makes these determinations after full deliberation, considering all relevant facts and circumstances. To aid in its evaluation of director independence, the Board has adopted categorical independence standards. Under the standards, an individual director is “independent,” unless the Board determines otherwise, if none of the following relationships exists between Norfolk Southern and the director:
Under our Governance Guidelines, a director must retire effective as of the date of the annual meetingAnnual Meeting that falls on or next follows the date of that director’s 72nd birthday.
for the Directors’ Charitable Award Program, no portion of this cost was allocated to Mr. Bush.Ms. Miles. For further discussion of the Directors’ Charitable Award Program, see the narrative discussion below.
As described in the Corporate Governance Guidelines, the Governance and Nominating Committee considers potential candidates to be nominated for election as directors, whether recommended by a stockholder, director, member of management or consultant retained for that purpose, and recommends nominees to the Board. The Governance and Nominating Committee reviews the current biography of the potential candidate and additional information provided by the individual or group that recommended the candidate for consideration. The Governance and Nominating Committee fully considers the qualifications of all candidates and recommends the nomination of individuals who, in the Governance and Nominating Committee’s judgment, will best serve the long-term interests of all stockholders. In the judgment of the Governance and Nominating Committee and the Board, all director nominees recommended by the Governance and Nominating Committee should, at a minimum:
It is the intent of the Governance and Nominating Committee and the Board that at least one director on the Board will qualify as an “audit committee financial expert,” as that term is defined in regulations of the SEC.
The Governance and Nominating Committee will consider director candidates recommended by stockholders. Any such recommendation should include:
The Compensation Committee makes all salary recommendations to the independent members of the Board of Directors for the Chief Executive Officerchief executive officer and, based on the Chief Executive Officer’shis individual performance evaluations, to the Board of Directors for all other Board-electedexecutive officers. The Compensation Committee also makes long-term incentive compensation awards to directors and makes recommendations to the full Board of Directors on all other elements of director compensation. In setting such compensation for the directors and the Chief Executive Officer,chief executive officer, the Compensation Committee considers the recommendations of the compensation consultant.
The Compensation Committee has engaged Pay Governance to assist it in making compensation recommendations and decisions and otherwise fulfilling its duties under its charter. The Committee annually requests that Pay Governance assess our compensation and employee benefit arrangements, particularly those relevant to our directors and Executive Officers, and advise it whether Pay Governance recommends any changes would be recommended in order to ensure that our compensation arrangements with our directors and Executive Officers are appropriate. The Committee has directed that the assessment include comparisons of our existing compensation arrangements to those of the other Class I railroads and American corporations of comparable size. During the Compensation Committee’s 20122014 review of the directors’, the Chief Executive Officer’schief executive officer’s and other management’s compensation levels, the Committee considered the advice they received from Pay Governance; however, the Committee was responsible for deciding or for making final recommendations to the Board as to the form and amount of our compensation programs.
all additional requirements for service on an audit committee, as defined by the applicable rules of the New York Stock Exchange and the SEC, and no member of the Audit Committee serves on more than three public company audit committees. While other members of the Audit Committee may also qualify, the Board has determined that Burton M. Joyce,Karen N. Horn, Robert A. Bradway, Michael D. Lockhart, Amy E. Miles and Martin H. Nesbitt, who is a memberare members of the Audit Committee, qualifiesqualify as an “audit committee financial expert,experts,” as that term is defined by SEC rules.
| ● | reviewing procedures established for the receipt, retention, and treatment of complaints received, including confidential, anonymous submissions by employees, or others, of concerns regarding questionable accounting or auditing matters, and significant cases of alleged employee conflict of interest, ethical violations, misconduct, or fraud, the volume and nature of calls to the "Ethics and Compliance Hotline" and other matters similar in nature; and
| · | ● | preparing the “Audit Committee Report” that SEC rules require be included in our annual proxy statement. |
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Table of Contents | AUDIT COMMITTEE REPORT |  | |
Before our Annual Report on Form 10-K for the year ended December 31, 20122014, was filed with the SEC, the Audit Committee of the Board of Directors reviewed and discussed with management our audited financial statements for the year ended December 31, 2012. 2014. The Audit Committee has discussed with KPMG LLP, our independent registered public accounting firm, the matters required to be discussed by Statement onPCAOB Auditing Standards 61,Standard No. 16, “Communications with Audit Committees,Committees.” as amended. The Audit Committee also has received and reviewed the written disclosures and the letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with the Audit Committee concerning independence, and has discussed with KPMG LLP their independence. Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the financial statements referred to above be included in our Annual Report on Form 10-K for the year ended December 31, 2012,2014, filed with the SEC. 20122014 Members of the Audit Committee
Burton M. Joyce,Chair
Thomas D. Bell, Jr.,Member
Robert A. Bradway,Member
Karen N. Horn,Chair
Robert A. Bradway,Member
Michael D. Lockhart,Member
Amy E. Miles,Member
Martin H. Nesbitt,Member
John R. Thompson,Member RELATED PERSON TRANSACTIONS J. Paul Reason,Member
TRANSACTIONS WITH RELATED PERSONS
During 2014, Norfolk Southern did not have any related persons transactions. We may occasionally participate in transactions with certain “related persons.” Related persons include our Executive Officers, directors, beneficial owners of 5% or more beneficial owners of our common stock, immediate family members of these persons, and entities in which one of these persons has a direct or indirect material interest. We refer to transactions with these related persons as “related person transactions.” We have adopted a written policy to prohibit related person transactions unless they are determined to be in Norfolk Southern’s best interests. Under this policy, the Audit Committee is responsible for the review and approval of each related person transaction exceeding $120,000. In instances where it is not practicable or desirable to wait until the next meeting of the Audit Committee for review of a related person transaction, the Chair of the Audit Committee possesseshas been delegated authority to act between Audit Committee meetings. The Audit Committee, or the Chair, considers all relevant factors when determining whether to approve a related person transaction, including without limitation, whether the proposed transaction is on terms and made under circumstances that are at least as favorable to Norfolk Southern as would be available in comparable transactions with or involving unaffiliated third parties. Among other relevant factors, they consider the following: consider: | · | ● | the size of the transaction and the amount of consideration payable to the related person(s);
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| · | ● | the nature of the interest of the applicable director, director nominee, Executive Officer, or 5% stockholder, in the transaction; and
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| · | ● | whether we have developed an appropriate plan to monitor or otherwise manage the potential for a conflict of interest. |
The Chair must report any action taken pursuant to this delegated authority to the Audit Committee at its next meeting. In addition, at the Audit Committee’s first meeting of each fiscal year, it reviews all previously approved related person transactions that remain ongoing and have a remaining term or remaining amounts payable to or receivable from us of more than $120,000. Based on all relevant facts and circumstances, taking into consideration our contractual obligations, the Audit Committee determines whether it is in our and our stockholders’ best interest to continue, modify or terminate the related person transaction. | 44 | | | | 2015 Proxy Statement | 
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Table of Contents |  | EXECUTIVE COMPENSATION |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee during 20122014 were Daniel A. Carp, Chair, Gerald L. Baliles,Thomas D. Bell, Jr., Erskine B. Bowles, Wesley G. Bush, Alston D. Correll, and Steven F. Leer. None of the foregoingthese members hashave ever been employed by Norfolk Southern, and no such membermembers had during our last fiscal year, any relationship with us during 2014 requiring disclosure as a transaction with a related person, promoter, or control person under Item 404 of Regulation S-K or under the Compensation Committee Interlocks disclosure requirements of Item 407(e)(4) of Regulation S-K. EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS Compensation Discussion and AnalysisKEY CHANGES
What were the key changes in the executive compensation program for 2014? 2012 Compensation Highlights
For 2012, theThe Compensation Committee of our Board of Directors (which we will refer to as the “Committee”) madetook the following key changesactions with respect to executive compensation allfor 2014, as more fully described in this Compensation Discussion and Analysis:
| · | ● | Compared compensation to two key competitors to strengthen Norfolk Southern’s competitive pay position. After considering this market-based comparison, the Committee reallocated the compensation mix to increase base salary and annual bonus opportunity, while maintaining a consistent level ofConsidered total direct compensation.
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| · | | Replaced pre-tax net income with operating income ascompensation paid by a bonus metric,peer group of companies consisting of other North American Class I railroads and, increased the percentage offollowing that analysis, did not make any changes to salary levels or annual bonus that is tied to this metric to 50%.
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| · | | Increased performance standardsincentive opportunities for the portions ofNamed Executive Officers.
| | ● | Set financial and operating targets which, if met, would produce a 67% annual incentive payout. Norfolk Southern achieved the bonus based onmaximum performance goal for the operating ratio measure and composite service measures, and setexceeded its targeted performance goal for the new operating income metric at a level requiring increased performance over the prior year to meet target payout. |
| · | | Targeted a bonusmeasure, resulting in an annual incentive payout of 67%, and Norfolk Southern achieved a below-target bonus payout of 59.7%80.6%. Although Norfolk Southern exceeded its targetedHowever, the threshold performance goal for the composite service measure the targeted financial goals for operating income and operating ratio werewas not met, which resulted inso no award was earned for the below-target payout.portion of the annual incentive corresponding to this performance metric.
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| · | ● | Continued to grant, as in past years, long-term incentive awards consisting of approximately 35% options, 15% restricted stock units and 50% performance shares,share units, all of whose ultimate value is based on shareholderstockholder return. The value of performance shares is also affected by the amount earned, whichshare units is tied to achievement of disclosed goals for total stockholder return and return on average invested capitalcapital.
| | ● | To better align performance share earnout with total shareholder return, eliminated operating ratio as a performance goal and operating ratio.tied one-half (rather than one-third) of the performance share units awarded for the 2014-2016 cycle to three-year total stockholder return.
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| · | ● | Awarded CEO compensation that is targeted 77% at risk79% at-risk and 53% of which is tied to established corporate performance goals and 68% of whichgoals.
| | ● | Awarded CEO compensation that is 75% equity-based awards that are aligned with shareholderstockholder returns.
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| · | ● | Continued to engage with shareholdersstockholders on matters concerning executive compensation and make changes to our compensation programs and disclosure as a result of such engagement, which changes included eliminating prospective tax gross-up payments for senior executives, and imposing a dollar cap on the bonus payable to an individual executive.engagement. |
The Committee believes that the above-describedour compensation program changes were necessary to provide aprovides competitive pay, promotes retention, and provides incentive for performance package that continues to incentivize our Executive Officers to maximize long-term shareholder value while also promoting retention.stockholder value.
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What were the key changes to CEO total compensation for 2014? The Committee awarded CEO compensation at the 46th percentile of total direct compensation as compared to peer group companies, which fell at a lower percentile than the 56th percentile for 2013. While at the time the Committee made its compensation decisions the total direct compensation relative to the peer group was a reduction from 2013, the CEO’s total compensation as reported in the Summary Compensation Table increased approximately $3.9 million. This increase consists of the following components (shown in approximate amounts): | ● | $3.1 million of the increase is due to the increased actuarial present value of the pension plan benefits for Mr. Moorman as compared to the increase for 2013, consisting of $2.6 million from changes in the mortality assumptions and discount rates in 2014 (accounting and actuarial assumptions) and $0.5 million from changes in Mr. Moorman’s final average compensation.
| | ● | $0.7 million of the increase is due to higher valued equity awards, and $0.1 million is due to a higher annual incentive earnout for above-target operating income and operating ratio results. The Committee increased the equity awards to maintain competitive compensation at approximately the 50th percentile of our peer group. |
What key decisions did the Committee make for CEO total compensation awarded in 2015? The Committee reviewed the 2014 executive compensation program in light of the Corporation’s results for 2014 and made the following key decisions for Mr. Moorman’s 2015 compensation (which will be reflected in the 2016 proxy statement): | ● | The Committee did not increase Mr. Moorman’s salary level or the annual cash incentive plan opportunity for 2015.
| | ● | The Committee did not increase the targeted value of long-term equity incentive awards for Mr. Moorman in 2015.
| | ● | For Mr. Moorman and all executive officers, the Committee continued the 50% weighting for the TSR goal in performance share units and capped the earnout for the TSR goal at target payout when three-year TSR is negative.
| | ● | For Mr. Moorman and all executive officers, the Committee changed the performance targets and resulting payouts for the 2015 annual incentive award to increase the operating income and operating ratio performance goals for threshold, target and maximum payouts. |
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Objectives of Compensation Program Norfolk Southern’s primary objective with respect to executive compensation program is to design compensation programs which will: primarily designed to: | · | ● | Align executives’ compensation with overall business strategies;strategies.
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| · | ● | Attract and retain highly qualified executives; andexecutives.
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| · | ● | Provide incentives thatfor executives to drive stockholder value. |
The Committee is responsible for developing and maintaining appropriate compensation programs for our Executive Officers, including our Named Executive Officers. In order to enhance the Committee’s ability to carry out these responsibilities effectively, as well as ensure that Norfolk Southern maintains strong links between executive pay and performance, the Committee: | ● | ·Has retained Pay Governance LLC as an independent compensation consultant.
| | ● | Reviews management recommendations with respect to the compensation decisions.program.
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| · | ● | Reviews the Chief Executive Officer’sAnnually reviews individual performance evaluations of the Executive Officers and discusses such performance assessments with the Chief Executive Officer on an annual basis and recommends any compensation adjustments to the Board of Directors for approval.adjustments.
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| · | | Has retained Pay Governance as an independent compensation consultant.
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To show the compensation comparison between the Chief Executive Officer and our executive vice presidents (collectively, the “Named Executive Officers”), Norfolk Southern has chosen to report compensation for all of its executive vice presidents in the compensation tables in this proxy statement and to discuss their compensation in this Compensation Discussion and Analysis section.
Management Recommendations
The Chief Executive Officer and the Executive Vice President-Administration provide recommendations to the Committee on any adjustments to compensation for the Named Executive Officers, other than the Chief Executive Officer. Such adjustments are based on each individual’s performance, level of responsibility, and time in position. In addition, the Chief Executive Officer and Executive Vice President-Administration provide recommendations to the Committee on adjustments to compensation to address retention needs, performance goals, internal and market pay equity, overall corporate performance, and general economic conditions. Pay Governance makes recommendations to the Committee on any adjustments to compensation for the Chief Executive Officer, and the Chief Executive Officer is not present when the Committee makes decisions on his compensation package.
Use of Compensation Consultant The Committee engaged Pay Governance to provide executive compensation consulting services to the Committee during 2012.2014. Pay Governance does not provide services to Norfolk Southern other than servicesthose provided directly toat the request of the Committee. Pay Governance provides requested reports and information to the Committee and attends Committee meetings at the Committee’s request. For 2012,2014, the Committee engaged Pay Governance to (1) conduct a market pay assessment of Norfolk Southern’s compensation levels relative to both the competitive market and Norfolk Southern’s compensation philosophy, including identifying and reviewing market benchmark positions and compensation comparisonpay data, (2) assist Norfolk Southern with the development of long-term incentive grant guidelines for the officer and management groups, based on Pay Governance’s competitive pay assessment, and long-term incentive competitive market data, (3) conduct an assessment of Norfolk Southern’s non-employee directors’ compensation package relative to competitive market practices, (4) review emerging trends and issues in executive compensation with the Committee and discuss the implications for Norfolk Southern, and (5) provide certain additional executive compensation consulting services as may be requested by the Committee. In conducting the market pay assessment, Pay Governance reviews with the Committee parameters for the selection of peer group companies and compiles compensation data for the peer group. The Committee uses this information as a starting point for its compensation decisions. Management Recommendations Pay Governance makes recommendations to the Committee on any adjustments to compensation for the Chief Executive Officer, and the Chief Executive Officer is not present when the Committee makes decisions on his compensation package. The Chief Executive Officer and the Executive Vice President-Administration provide recommendations to the Committee on any adjustments to compensation for the Named Executive Officers, other than the Chief Executive Officer. Such adjustments are based on each individual’s performance, level of responsibility, and time in position. In addition to individual adjustments, the Chief Executive Officer and Executive Vice President-Administration provide recommendations to the Committee on adjustments to compensation to address retention needs, performance goals, internal and market pay equity, overall corporate performance, and general economic conditions. Compensation Policies In setting compensation for the Named Executive Officers, the Committee: | · | ● | Considers comparative market data, gatheredprovided by the compensation consultant, from other North American Class I railroads as a guideline. In aggregate, the Committee targets total direct compensation (i.e., salary plus annual incentive plus the expected value of long-term incentive awards) at the 50th percentile for the Chief Executive Officer and at a range from the 50th to the 65th percentile for the other Named Executive Officers’ total direct compensation (i.e., total cash compensation plus the expected value of long-term incentive awards)Officers as compared to the peer group. |
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| ● | Considers current salary levels, targeted bonusannual incentive opportunities and the value of long-term incentive awards at the time the awards wereare made.
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| · | ● | Considers expected corporate performance and general economic conditions. |
The Committee does not consider amounts realized from prior performance-based or stock-based compensation awards when setting the current year’s target total direct compensation, regardless of whether such amounts realized may have resulted in a higher or a lower payout than targeted in prior years. Since the nature and purpose of performance-based and stock-based compensation is to tie executives’ compensation to future performance, the Committee believes that considering amounts realized from prior compensation awards in making current compensation decisions is inconsistent with this purpose. Compensation Governance The Compensation Committee works closely with its compensation consultant and management to develop the executive compensation program through the year and to align pay with performance and with pay at comparable companies. Embedded in our overall executive compensation program are certain best-practices features: | WE DO | WE DO NOT DO | | √ | Stock Ownership Guidelines, for CEO and President – 5 times annual salary; for EVPs – 3 times annual salary | χ | Tax gross ups on perquisites | | √ | Clawback provisions in both annual and long-term incentives | χ | Stock option repricing, reloads or exchanges without stockholder approval | | √ | 79% of CEO’s pay is at-risk | χ | Stock options granted below fair market value, as all stock options are priced during an open window period after the release of earnings | | √ | 53% of CEO’s pay is performance-based | χ | Pledging of Norfolk Southern securities | | √ | Disclose metrics for annual and long-term incentives | χ | Hedging of Norfolk Southern securities | | √ | Compensation Committee comprised entirely of outside independent directors | χ | Individual employment agreements or individual supplemental retirement plans | | √ | Independent compensation consultant that is hired by and reports directly to the Compensation Committee | χ | Single trigger change in control agreements | | √ | Annual Say on Pay vote | χ | Excise tax gross ups on change in control benefits |
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Table of Contents | | · | | Does not consider amounts realized from prior performance-based or stock-based compensation awards when setting the current year’s target total direct compensation,
EXECUTIVE COMPENSATION |
| regardless of whether such amounts realized may have resulted in a higher or a lower payout than targeted in prior years. Since the nature and purpose of performance-based and stock-based compensation is to tie executives’ compensation to future performance, the Committee believes that considering amounts realized from prior compensation awards in making current compensation decisions is inconsistent with such purpose.
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Peer Group The Committee monitors the continuing appropriateness of the peer group. Beginning in 2011, theThe Committee selected anarrowed its peer group for the Named Executive Officers consisting ofbeginning in 2011 to focus on the other North American Class I railroads. The Committee selected this peer grouprailroads because Norfolk Southern is increasinglyprimarily in competition with the other North American Class I railroadsthose companies for key executive talent. As a result, the Committee determined that reference to the pay levels at the other North American Class I railroads was the most relevant comparator for the Named Executive Officers. For 2012, the Committee determined it would compare against individual companies in the peer group as well as a peer group as a whole. The Committee used this comparison because it views CSX and Union Pacific as more direct competitors for executive talent than the Canadian railroads or the comparatively smaller Kansas City Southern. BNSF Railway’s compensation was not considered for 2012 because its executive compensation data is not publicly available, and individual company data was required for the Committee’s 2012 analysis. Therefore, the publicly traded North American Class I railroads that make up the peer group companies for 20122014 (“Peer Group Companies”) are: | | | | | Canadian National Railway | | CSX | | Union Pacific | Canadian Pacific Railway | | Kansas City Southern | | |
BNSF Railway
Canadian National Railway
Canadian Pacific Railway
CSX
Kansas City Southern
Union Pacific The Committee applies its executive compensation policies consistently to all Named Executive Officers, and the application of these policies produces differing amounts of compensation for the Chief Executive Officer, the executive vice president level,President and executives at lower management levels within the Corporation.Executive Vice Presidents based on tenure and responsibilities. In setting the Chief Executive Officer’s compensation, the Committee applies the policies described above and, in particular, strives to balance comparative market data for chief executive officers of Peer Group Companies with its goal to provide meaningful performance-based incentive opportunities earned on the basis of performance which contributesdesigned to deliveringdrive stockholder returns. In considering comparative market data for the Chief Executive Officer, the Committee also considers experience. In addition, the Committee looks at executives at the executive vice president levelPresident and Executive Vice President levels and considers the appropriate compensation differential between the Chief Executive Officer, the President and the remaining executive vice presidents.officers. Because the Chief Executive Officer’s job carries the highest level of responsibility and has the greatest ability to drive shareholderstockholder value, his total compensation contains a higher variable or “at-risk”at-risk component than that of other executives. Consideration of Stockholder Advisory Vote on Compensation At Norfolk Southern’s 20122014 Annual Meeting of Stockholders, the Corporation’sour stockholders voted on a non-binding advisory resolution on the compensation provided to the Corporation’s Named Executive Officers, as reported in the Compensation Discussion and Analysis and executive compensation tables in the Corporation’s 20122014 proxy statement. Approximately 94%96% of voting stockholders approved that resolution, excluding abstentions and shares that were not voted. The Committee viewed the results of the advisory vote as demonstrating broad shareholderstockholder support for our current executive compensation program. Given the results of the stockholder advisory vote and the Committee’s ongoing review of the Corporation’sNorfolk Southern’s compensation programs, the Committee believes that the Corporation’sour existing compensation programs effectively align the interests of the Named Executive Officers with the Corporation’sNorfolk Southern’s long-term goals. While the stockholder vote on compensation is advisory in nature, the Board and Compensation Committee will carefully consider the results of any such vote in future compensation decisions.
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Stockholder Engagement Shareholder Engagement
The CorporationNorfolk Southern regularly engages with its stockholders on matters of interest to stockholders as a whole, including executive compensation issues. In responseand governance matters. During 2014, we engaged in a stockholder outreach program with our largest institutional investors to these discussions, the Committee and the Board of Directors have made several changes in thesolicit feedback concerning Norfolk Southern’s executive compensation program, and plans.the Committee was provided with a report on the results of that outreach, as described more fully on page 33. This process provided an opportunity for stockholders to provide input on our executive compensation program and policies in addition to the annual advisory vote on compensation and to comment on our disclosure of compensation matters in the proxy statement. As a result of our stockholder engagement, Norfolk Southern made the change described below in 2014 to the executive compensation program.
Tax Gross-up PaymentsEMIP and LTIP Performance Goal Overlap
In 2012,prior years, operating ratio served as a performance goal for both the Board of Directors adopted a policy providingExecutive Management Incentive Plan, which is the annual cash incentive program, and for the performance share units under the Long-Term Incentive Plan, which is the long-term equity incentive program. Stockholders expressed concern that the Corporation not make or promise to make to its senioroverlap rewarded executives any tax gross-up payments, except as provided pursuant to existing contractual obligations or a plan, policy or arrangement applicable to Norfolk Southern’s nonagreement employees generally. In January 2013, the Corporation entered into amendments to its change-in-control agreements with the Named Executive Officers to eliminate tax gross-up payments provided under the agreements. Pledging; Hedging
All Executive Officers of Norfolk Southern are required to clear any transaction involving its common stock with Norfolk Southern’s Corporate Secretary prior to engaging in the transaction. Certain Executive Officers maintain securities accounts at brokerage firms, and the positions held in such accounts, which may from time to time include shares of Norfolk Southern common stock, may have been pledged as collateral securitytwice for the repayment of any debit balances in the accounts. None of Norfolk Southern’s Executive Officers have otherwise pledged or hedged Norfolk Southern’s securities.
same performance, and overemphasized one performance criteria. In response to stockholder concerns, the Board of Directors adoptedCommittee eliminated operating ratio as a policy in January 2013, effective immediately, to prohibit the Corporation’s Executive Officers from entering into pledging or hedging transactions or positions regarding the Corporation’s securities. Executive Management Incentive Plan Cap
In addition, in April 2012, the Corporation amended the Executive Management Incentive Plan to provide that bonuses paid to any executive under the plan will not exceed the lesser of three tenths of one percent of the Corporation’s income from railway operationsperformance goal for the incentive year or ten million dollars. Bonuses paid under the Executive Management Incentive Plan had not exceeded this cap, but the Committee and Board of Directors adopted this limit in response to concerns expressed by its stockholders.performance share unit grants during 2014.
Benchmark for Chief Executive Officer’s Total Direct Compensation
In January 2013, the Committee changed its policy for setting compensation for the Chief Executive Officer to target the 50th percentile of comparative market data for total direct compensation, rather than targeting a range from the 50th to 65th percentile.
Compensation Components Overview Overview
The Committee strives to create a compensation program that provides our Named Executive Officers with a balanced compensation package that includes an appropriate base salary along with competitive annual and long-term incentive compensation, so as to directly link executives’ compensation to the Corporation’sNorfolk Southern’s financial performance and thus align their interests with those of our shareholders.stockholders. Norfolk Southern’s total compensation for its Named Executive Officers is thus weighted heavily toward performance-based incentive compensation rather than base salary, with the result that a substantial portion of 20122014 target executive compensation aligns with shareholderstockholder interests and is “at-risk”.at-risk. 2014 Named Executive Officers | Name | | Position | | Charles W. Moorman, IV | | Chairman and Chief Executive Officer | | James A. Squires | | President | | Marta R. Stewart | | Executive Vice President – Finance and Chief Financial Officer | | Deborah H. Butler | | Executive Vice President – Planning and Chief Information Officer | | Mark D. Manion | | Executive Vice President and Chief Operating Officer |
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2014 CEO Target Total Compensation Mix
 
2014 President Target Total Compensation Mix
Norfolk Southern’s executive compensation programs
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2014 Average Target Total Compensation Mix for 2012 are designed so that, atRemaining NEOs*
*Reflects the average percentage of target levels of performance, total direct compensation for NamedMs. Stewart, Ms. Butler and Mr. Manion. Actual target percentages are as follows: for Ms. Stewart, 21% salary, 19% annual incentive, 30% PSUs, 21% options and 92% RSUs; for Ms. Butler, 24% salary, 21% annual incentive, 28% PSUs, 19% options and 8% RSUs; and for Mr. Manion, 20% salary, 18% annual incentive, 31% PSUs, 22% options and 9% RSUs.
2014 Target Mix of Long-Term Incentive Plan Awards for Executive Officers is in approximately the 50th to 65th percentile as compared to the Peer Group Companies. Total direct compensation consists
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| NORFOLK SOUTHERN CORPORATION |
Table of salary, annual bonus, and long-term incentives. The greater the level of an executive’s responsibility, the higher the proportion of his or her compensation which is at risk. Contents | | EXECUTIVE COMPENSATION |
In establishing compensation for the different executive levels, the Committee striveshistorically attempted to provide internal pay equity across each level so that executives occupying positions at a similar level and having a similar level of responsibility, such as executive vice presidents, receiveExecutive Vice President, received similar total direct compensation. Given recent changes in our executive officers and resulting differences in relative responsibilities and tenure, the Compensation Committee now considers internal pay equity across each level as only one of many factors to consider and is transitioning to a greater focus on market based-pay differentiation for executives within each level. The Committee considers what proportion of total direct compensation should be paid annually as base salary, as total cash compensation (salary plus bonus)annual incentive) and as long-term compensation. This allocation is based in part on comparison to the compensation mix of the Peer Group Companies. In prior years theThe Committee benchmarked base salary and total cash compensation for Peer Group Companies and set targets for each as a percentile. For 2012, the Committee determined that it would benchmarkbenchmarks Executive Officers’ total direct compensation as the best measure of the Corporation’sour competitiveness with Peer Group Companies, rather than set a specific target for each component of compensation.Companies. While the Committee will consider benchmarked (and/or averaged, particularly where the sample size is small) base salary, total cash compensation and long-term compensation for the Peer Group Companies as a whole or for individual Peer Group Companies, the Committee willdoes not establish targeted percentiles for the componentseach component of total direct compensation. The Committee believes this approach targets a competitive level of total direct compensation, while also allowing the Committee the flexibility to consider market practices and internal pay equity and our history of salary and bonus adjustments in determining the compensation component mix. This allocation is re-evaluated annually. For 2012,Periodically, the Committee reviewedreviews the mix of compensation paid to the Chief Executive Officer in 2011 and determined thatother Named Executive Officers compared to the base salary and total cash compensation mix paid to the Chief Executive Officer were lower than the average base salaries and total cash compensation paid to the chief executivesimilar officers of theat individual Peer Group Companies. The Committee further noted thatDuring 2012, this review resulted in an increase in the Chief Executive Officer’s basecash components of executive compensation, while keeping Total Direct Compensation targets unchanged. For 2013 and 2014, this review did not result in any change to the allocation of Total Direct Compensation, and accordingly, executive salary levels and annual bonusincentive opportunities were significantly lower when compared with CSX and Union Pacific, which are the two companies that the Committee viewsnot changed, other than as the most direct competitors with Norfolk Southern for executive talent. Similarly, the Committee reviewed the compensation paid to the executive vice presidents in 2011 and determined that the executive vice presidents had relatively low total cash compensation as compared to the Peer Group Companies, and that the executive vice presidents’ annual bonuses were significantly lower as compared with the annual bonuses at CSX and Union Pacific.
To better align the compensation mix with those of the Peer Group Companies, while maintaining an overall target for total direct compensation of approximately the 50th to 65th percentile as compared to the Peer Group Companies, the Committee decided to raise salaries and bonus opportunities for all of the Named Executive Officers in 2012, as further discussed below under “Salaries” and “Annual Bonus”. As a result for 2012,of a change in position level.
For 2014, the portion of total direct compensation awarded as cash compensation was approximately 29% for Mr. Moorman and 45% for the other Named Executive Officers, and the portion of total direct compensation awarded asversus long-term incentive compensation was approximately 71% for Mr. Moorman and 55% for the other Named Executive Officers.approximately: | | | Total Cash
Compensation | | Long-Term
Compensation | | Mr. Moorman | | 25% | | 75% | | Mr. Squires | | 38% | | 62% | | Ms. Stewart | | 40% | | 60% | | Ms. Butler | | 45% | | 55% | | Mr. Manion | | 38% | | 62% |
The Committee further considers the portion of total direct compensation which is to be awarded as long-term compensation (including both the fixed and the at-risk portions) and how the long-term piece of compensation should be allocated among stock options, performance shares,share units, and restricted stock units. This allocation is based on general market practices, compensation trends, governance practices, and business issues facing Norfolk Southern. In making this determination, the Committee takes into account the potential dilutive effect of stock-based awards, and the burn rate of such awards, including guidance on these measures from proxy advisory services, and further considers the purpose behind each element of long-term compensation and how the allocation among these elements will contribute tosupport its overall compensation policies. The Committee does not target comparative market data in making this allocation decision. For 2012,2014, the Committee retained the same mix of awards as were granted in 2011. 2012 and 2013. The Committee considers where the resulting total direct compensation, valued at the time of the award, falls within the targeted 50th to 65th parameter.parameter for the Named Executive Officers. This comparison is based on salary for the upcoming year, an estimated 67% earn-out for the bonus, anand the estimated 50% earn-out forgrant date fair values of performance share units, stock options, and restricted stock units awarded for the upcoming year, a binomial model valuation for stock options, and an estimated fair market value for restricted stock units. The value of long-term incentive compensation is based on the estimated fair market value of Norfolk Southern’s stock at the time the award is approved by the Committee. year. Total direct compensation awarded for 20122014 for Mr. Moorman was positioned at the 51st46th percentile as compared to the Peer Group Companies, and therefore within a reasonable range of the targeted 50th percentile. There were no directly comparable positions to 65th parameter. Mr. Squires’ position at the Peer Group Companies, so the Committee was not able to consider where his total direct compensation was positioned as compared to other presidents at Peer Group Companies. The Committee’s intent in establishing Mr. Squires’ total direct compensation for 2014 was to position his compensation between the Chief Executive Officer and
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Table of Contents | EXECUTIVE COMPENSATION | | |
the Executive Vice Presidents, resulting in targeted direct compensation that would place him above the railroad industry executives who were not at the chief executive officer level to recognize his role as President. Total direct compensation awarded for 20122014 to the executive vice presidentsExecutive Vice Presidents was, on average, positioned at the 48th53rd percentile as compared to the Peer Group Companies, and thereforewithin a reasonable range of the 50th to 65th percentile target. Total direct compensation awarded for 2014 to Ms. Stewart was positioned at the 41st percentile as compared to the Peer Group Companies. Ms. Stewart’s total direct compensation awarded for 2014 was below the targeted percentile but within a reasonable range in light of her time in the position. Total direct compensation awarded for 2014 to Mr. Manion was positioned at the 49th percentile as compared to the Peer Group Companies, which the Committee considered to be within a reasonable range of the target. For 2014, in connection with its review of target total direct compensation, the Committee increased Mr. Manion’s long-term incentive awards as compared with the other Executive Vice Presidents, which reflects a market-based premium paid to chief operating officers for the Peer Group Companies. The Committee may adjust compensation forreduce the annual incentive paid to any executive based on individual performance or to align with the Corporation’s compensation objectives. In particular, the Committee may reduce certain compensation that is based on corporate performance (such as the annual bonus or performance shares), and may reduce or increase certain compensation that is not based on corporate performance (such as the number of restricted stock units awarded).performance. The Committee determined in 20132015 that the individual performance of all Named Executive Officers for 20122014 met or exceeded expectations and therefore did not make any adjustmentsreduction to compensationannual incentive payments on the basis of individual performance. Salaries The Committee reviews the Named Executive Officers’ base salaries annually and makes adjustments from time to time to realign salaries with market levels, after taking into account individual performance and experience, or for other circumstances. As described above, after undertaking this review in November 2011, the Committee recommended increases to eachsalaries of the Named Executive Officers’ base salaries beginning in 2012. The Board of Directors adopted the Committee’s recommendation and approved an increase in the Chief Executive Officer’s base salary to $1,000,000,Officer and an increaseother Named Executive Officers were not increased in the base salary for each of the executive vice presidents to $600,000, with the increases effective in January 2012. Before this increase, the2014. The base salary for the Chief Executive Officer and executive vice presidents wasother Named Executive Officers were last increased in 2008,2012, other than salary adjustmentschanges for individual executive vice presidents who were transitioning into their positionsMr. Squires and Ms. Stewart in recent years.2013 due to changes in position. Annual BonusIncentive Each of our Named Executive Officers participates in Norfolk Southern’s Executive Management Incentive Plan (“EMIP”), which is designed to compensate executives based on achievement of annual corporate performance goals. Each year, the Committee establishes a maximum bonus opportunity for each Named Executive Officer.Officer determined using relevant market data and internal pay equity. This opportunity is expressed as a percentage of base salary and is determined using a variety of relevant factors including but not limited to the competitive landscape reflected by the Peer Group Companies.salary: Annual
Base
Salary | X |  | Maximum
Opportunity | — | Committee’s
Discretionary
Adjustment |  | X | Company
Payout
Percentage
Earned |
For 2012,2014, the Committee established a maximum bonus opportunity for Mr. Moorman of 250% of his base salary, a maximum opportunity of 165% for Mr. Squires and a maximum bonus opportunity for each of the executive vice presidentsExecutive Vice Presidents of 145% of his or her base salary. The maximum annual incentive award that each Named Executive Officer is eligible to receive is not the amount expected to be paid to an executive, but is instead the highest amount that the Committee may award as performance-based compensation while preserving deductibility under Section 162(m) of the Internal Revenue Code. The Committee has no discretion to increase the bonus payout above the maximum bonus opportunity under the EMIP. The Committee chose these maximum opportunities to permit flexibility in the event of unusual and exceptional circumstances, and their expectation, absent such circumstances, was to approve payouts that correspond to a 225% opportunity for Mr. Moorman, a 150% opportunity for Mr. Squires and a 135% opportunity for executive vice presidentsExecutive Vice Presidents to more closely align with market pay positions. As described earlier, the Committee targetedestablished performance targets which, if met, would result in bonus payments equal to 150%, 100% and 90%, respectively (which equals in each case 67% of the 225% and 135% opportunities. respective annual incentive opportunity). After the end of the performance year 2012,2014, the Committee did not make any adjustments to the bonusannual incentive payout based on individual performance and approved bonus payouts to Mr. Moorman based on a 225% opportunity, to Mr. Squires at a 150% opportunity and to the executive vice presidentsExecutive Vice Presidents based on a 135% opportunity. The bonusannual incentive amounts paid for 20122014 and reported as “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table are based on the formula described below applied to these bonus opportunities.
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Table of Contents | | EXECUTIVE COMPENSATION |
Under EMIP, each participant has an opportunity to earn a bonus amountan annual incentive that is contingent upon achievingdetermined by the relevantcompany’s performance goals. The performancerelative to goals established by the Committee. In 2014, the Committee established goals for 2012 were based 50% on operating income, 35% on operating ratio and the composite service measure, weighted 50%, 35% and 15% on arespectively. The composite of three service measures, consistingmeasure is the weighted average of adherence to operating plan, connection performance, and train performance, (which we will refer to as the “composite service measure”).with weights of 30%, 30% and 40% respectively. Each metric is based on objective performance targets, and the composite service measure is based on goals for each of the three individual service measures. The compositeThese service measure is comprisedmeasures are used operationally by management as measures of 30% for adherence to operating plan, 30% for connectionservice performance and 40% for trainare highly visible to our employees. As a result, the Committee selected these three service measures as the best available internal metric to evaluate Norfolk Southern’s customer service performance. The portions of the bonusannual incentive based on operating income, operating ratio and the composite service measure each vest independently, so it is possible to earn aan annual incentive bonus by achieving the threshold on only one of these metrics. The Committee selected these metrics for 20122014 because it believed that use of such metrics best reflects railroadencourages employees to do all they can individually and as a team to increase revenue, hold down expenses, and improve operating performance. The Committee sets performance levels required to achieve 100% of the annual incentive opportunity so that the full bonus is only earned in years where our results are exceptional. Performance levels required to achieve target payout at the 67% level are set at levels considered challenging with a reasonable likelihood of being achieved and that represent strong levels of performance based on Norfolk Southern’s overall business outlook and general economic conditions expected during the performance year. The performance levels for the composite service measure are selected by the Committee based on management effectivenessrecommendations and thereby enhances stockholder value. reflect rigorous operational goals. In anticipation of improved business conditions in 2012,2014, the Committee raisedincreased the performance standards for operating ratio and for the composite service measure for 2012operating income as compared with performance goals established in 20112013. The Committee maintained the performance standards for the composite service measure, reflecting the Committee’s expectation that increasing customer demand for rail service would make it difficult to drive improved performance inimprove these service and implemented an operating income target which reflected growth expectations over 2011. metrics on a year-over-year basis. For 2012,2014, the Committee set the following threshold, target and maximum payouts: | · | ● | if Norfolk Southern achieved only one of each threshold performance measure listed below, then a threshold payout of:
|
| — | | 0.02% 0.06% at an operating income of $1.5$2.251 billion, or
|
| — | | 0.31% 0.70% at an operating ratio of 77.9%75.9%, or
|
| —or
| | | — 4.5% at a composite service measure of 72%73.0%
|
| · | ● | a targeted payout of 67% for an operating income of $3.63$3.40 billion, an operating ratio of 69.6%69.9% and a composite service measure of 77%80.0%, and
|
| · | ● | a maximum payout of 100% if Norfolk Southern achieved an operating income equal to or in excess of $3.8$3.63 billion, an operating ratio equal to or lower than 69.0%69.3%, and a composite service measure equal to or in excess of 80.0%82.5%. |
The dollar amounts corresponding to the above-listed threshold, target and maximum bonus opportunities for each of the Named Executive Officers can be found in the Grants of Plan-Based Awards Table. For each of the three performance goals, the Committee sets targetsperformance levels and resulting payouts at regular intervals between the threshold, target and maximum. The final bonus percentage is calculated using a weighted average of the payouts for each performance measure as shownillustrated below:
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Table of Contents | | | | | | | | | | | | | | | | | | | | | Operating Income (billions)
| | | Operating Ratio
| | | Composite Service Measure
| | 50%
| | | 35%
| | | 15%
| | OI
| | Payout
| | | OR
| | | Payout
| | | CSM
| | | Payout
| | | $3.800 | | | 100 | % | | | 69.0 | % | | | 100 | % | | | 80.0 | % | | | 100 | % | | $3.760 | | | 92 | % | | | 69.1 | % | | | 92 | % | | | 79.2 | % | | | 92 | % | | $3.720 | | | 84 | % | | | 69.3 | % | | | 84 | % | | | 78.4 | % | | | 84 | % | | $3.680 | | | 76 | % | | | 69.5 | % | | | 76 | % | | | 77.6 | % | | | 76 | % | | $3.630 | | | 67 | % | | | 69.6 | % | | | 67 | % | | | 77.0 | % | | | 67 | % | | $3.350 | | | 60 | % | | | 70.6 | % | | | 60 | % | | | 76.0 | % | | | 60 | % | | $3.070 | | | 52 | % | | | 71.6 | % | | | 52 | % | | | 75.0 | % | | | 52 | % | | $2.790 | | | 45 | % | | | 72.6 | % | | | 45 | % | | | 74.0 | % | | | 45 | % | | $2.510 | | | 37 | % | | | 73.6 | % | | | 37 | % | | | 73.0 | % | | | 37 | % | | $2.250 | | | 30 | % | | | 74.6 | % | | | 30 | % | | | 72.0 | % | | | 30 | % | | $1.500 | | | 0 | % | | | 78.0 | % | | | 0 | % | | | <72.0 | % | | | 0 | % |
| EXECUTIVE COMPENSATION | | |
| ANNUAL INCENTIVE PERFORMANCE MEASURES | | Operating Income (billions) | | Operating Ratio | | Composite Service Measure | | | 50% | | 35% | | 15% | | | | OI | | Payout | | | | OR | | Payout | | | | CSM | | Payout | | | | | $3.63 | | 100% | | | | 69.3% | | 100% | | | | 82.5% | | 100% | | | | | | $3.49 | | 76% | | | | 69.7% | | 76% | | | | 80.7% | | 76% | | | | | $3.44 | | 67% | | | | 69.9% | | 67% | | | | 80.0% | | 67% | | | | | | $3.05 | | 52% | | | | 71.4% | | 52% | | | | 77.2% | | 52% | | | | | $2.50 | | 30% | | | | 74.5% | | 30% | | | | 73.0% | | 30% | | | | | $2.25 | | 0% | | | | 76.0% | | 0% | | | | <73.0% | | 0% | | |
Actual results for the year were applied to each schedule to determine the earned 20122014 award, as detailed below: | Performance Metric | | Performance | | % of
Award
Earned | | Component
Weighting | | Subtotal | | Operating Income (billions) | | $3.575 | | 91.2% | | 50% | | 45.6% | | Operating Ratio | | 69.2% | | 100% | | 35% | | 35.0% | | Composite Service Measure | | 69.9% | | 0% | | 15% | | 0.0% | | Total (rounded) | | | | | | | | 80.6% |
| | | | | | | | | | | | | | | | | Performance Metric
| | Performance
| | | % of
Award
Earned
| | | Component
Weighting
| | | Subtotal
| | Operating Income (billions) | | $ | 3.124 | | | | 53.54 | % | | | 50 | % | | | 26.77 | % | Operating Ratio | | | 71.7 | % | | | 51.3 | % | | | 35 | % | | | 17.96 | % | Composite Service Measure | | | 83.1 | % | | | 100 | % | | | 15 | % | | | 15.00 | % | Total (rounded) | | | | | | | | | | | | | | | 59.7 | % |
Under the terms of the Executive Management Incentive Plan, the annual incentive paid to any individual executive under the plan will not exceed the lesser of three-tenths of one percent of Norfolk Southern’s income from railway operations for the incentive year or ten million dollars. Long-Term Incentive Awards Norfolk Southern believes that the most effective means to encourage long-term performance by our Named Executive Officers is to create an ownership culture. This philosophy is implemented through the granting of equity-based awards that vest based on continued employment and other long-term awards which vest on achievement of pre-determined performance goals. The Committee believes that the use of long-term incentive compensation for executives reinforces their focus on the importance of returns to stockholders, promotes achievement of long-term performance goals, and encourages executive retention. The 2012Committee allocated 2014 long-term incentive awards resulted in an award allocation of approximately 25%35% as stock options, 13%15% as restricted stock units, and 62%50% as performance shares. For 2012 awards, Executive Officers areshare units. Executives were required by contract to reimburse Norfolk Southern for amounts distributed under these plans in the event of a restatement due to material noncompliance with the financial reporting requirements of the federal securities laws during the performance period. In addition, executives are requiredenter into an agreement not to engage in competing employment as a condition toof receiving the 20122014 award. Stock Options.Norfolk Southern believes that use of options provides it with the ability to retain key employees and at the same time increase stockholder value since the value of the options is only realized if Norfolk Southern’s stock price increases from the date on which the options are granted. For 2012,2014, the Committee maintained the option vesting period at four years to encourage retention of key employees and awarded dividend equivalent payments on options during the four-year vesting period. Since 1989, Norfolk Southern has grantedgrants stock options annually at the regularly scheduled January meeting of the Committee, with the exception of employees hired in connection with the Conrail transaction in 1999.Committee. The Committee approves all option grants and set the option price based on a long-standing pricing practice. Under this long-standing practice, the Board of Directors approves year-end financial results at its January meeting, and Norfolk Southern typically releases such results after market close later that day. Also at the January meeting,level of Vice President and above. Under the Committee setsterms of the Long-Term Incentive Plan, the effective date of the grant asis the first day of the trading window during which executives are permitted to trade in Norfolk Southern’s securities and following the release of Norfolk Southern’s financial results for the prior year, thereby establishing a prospective effective date to price the options. The Committee has never issued backdated option grants. Options are priced on the effective date of the grant at the higher of (i) the closing price or (ii) the average of the high and low price on the effective date of the grant. TheIn addition, the Long-Term Incentive Plan prohibits repricing of outstanding stock options without the approval of stockholders.
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Table of Contents | | EXECUTIVE COMPENSATION |
Performance Shares.Share Units.Norfolk Southern uses performance sharesshare units to reward the achievement of performance goals over a three-year period. Performance share units settle in shares of Norfolk Southern common stock after the Committee certifies the extent to which the performance goals arewere attained after the end of the three-year period. For 2014, performance goals were established at the time of grant for threetwo equally weighted criteria: Returnafter-tax return on Average Invested Capital,average invested capital and a total stockholder return measure, and operating ratio. For performance shares, vestingmeasure. Vesting of 1/3one-half of the shares is based on Returnafter-tax return on Average Invested Capital,average invested capital, which Norfolk Southern believes is an indicator important to stockholders of a capital-intensive company such as Norfolk Southern. Return on Average Invested Capitalaverage invested capital for this purpose is calculated by dividing Norfolk Southern’s pre-taxnet operating profit after-tax (defined as net income (adjusted to excludeexcluding interest expense, and bonus accruals)adjusted for the effect of capitalizing Norfolk Southern’s operating lease obligations) by the average invested capital (defined as the average of Norfolk Southernthe current and prior year-end stockholders’ equity plusand total debt due after one year as measured atbalances, which is then adjusted for the endeffect of each year in the three-year period.capitalizing Norfolk Southern’s operating
lease obligations). Vesting of an additional 1/3the other half of the shares is based on Norfolk Southern’s total stockholder return as compared with the stockholder return of the other publicly tradedpublicly-traded North American Class I railroads withand a thresholdsecondary measure based on a comparison of Norfolk Southern’s stockholder return to the S&P 500, with each stockholder return measurement reflecting the return over the entire three-year period. The Committee adopted this metricperiod and using a 20-day average to measure performance at the beginning withand the 2011-2013 cycle; for the 2010-2012 cycle, this component was instead based on Norfolk Southern’s stockholder return as compared solely to the S&P 500. The Committee adopted the current performance criteria for total stockholder return as compared to the North American Class I Railroads to better align these awards with the Corporation’s results relative specifically to its railroad industry peers. Vestingend of the remaining 1/3 of the shares is based on the average operating ratio over a three-year performance period. Each 1/3half of performance sharesshare units granted vests independently of the other 2/3half and theirits respective performance metrics. Prior to 2014, performance goals were established for three equally weighted criteria: return on average invested capital (a pre-tax return measure), a total stockholder return measure, and operating ratio. Norfolk Southern believes that the use of the three metrics described above promotes the enhancement of stockholder value and efficient utilization of corporate assets. In setting the performance targets for the 2012-2014 cycle, the Committee considered the performance targets for the 2011-2013 and 2010-2012 cycles and the earn-out percentages for prior years’ performance share awards. For the 2012-2014 cycle, the Committee maintained the performance targets from the 2011-2013 cycle, because the Committee believed the targets continued to provide appropriate incentives. Before 2012, the Committee last raised the performance target for Operating Ratio and revised the performance targets for Total Shareholder Return in 2011, and last raised the performance targets for Return on Average Invested Capital in 2007.
For the 2010-2012 performance cycle, the performance criteria and resulting earn-out percentages are as follows:
| Performance Metric | | | | % of PSUs
Earned
2012-2014 | | NS Three-Year Total Stockholder Return (“TSR”) vs. North American | | 1st | | 100% | | Class I Railroads# | | 2nd | | 75% | | | 3rd | | 50% | | | 4th | | 25%* | | *Minimum 40% earnout if NS TSR > median S&P 500 TSR for 3-year period | | 5th | | 0%* | | #Ranking excludes any Class I Railroad that is not publicly traded | | 6th | | 0%* | | | | Three-Year Average Return on Average Invested Capital | | ≥20% | | 100% | | | 19% | | 90% | | | 18% | | 80% | | | 17% | | 70% | | | 16% | | 60% | | | 15% | | 50% | | | 14% | | 40% | | | 13% | | 20% | | | <13% | | 0% | | | | Three-Year Average Operating Ratio | | ≤67% | | 100% | | | 70% | | 75% | | | 74% | | 50% | | | 78% | | 25% | | | >78% | | 0% |
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Table of Contents | | | | | | | Performance Metric
| | Three Year
Average
| | % of PSUs
Earned 2010-2012
| | Total Stockholder Return (“TSR”) vs. S&P 500 | | ³90th | | | 100 | % | | | | 80th | | | 88 | % | | | | 70th | | | 75 | % | | | | 60th | | | 63 | % | | | | 50th | | | 50 | % | | | | 40th | | | 40 | % | | | | 30th | | | 30 | % | | | | £25th | | | 0 | % | | | | Return on Average Invested Capital (“ROAIC”) | | ³20% | | | 100 | % | | | | 19% | | | 90 | % | | | | 18% | | | 80 | % | | | | 17% | | | 70 | % | | | | 16% | | | 60 | % | | | | 15% | | | 50 | % | | | | 14% | | | 40 | % | | | | 13% | | | 20 | % | | | | <13% | | | 0 | % | | | | Operating Ratio (“OR”) | | £68% | | | 100 | % | | | | 73% | | | 75 | % | | | | 78% | | | 50 | % | | | | 83% | | | 25 | % | | | | >83% | | | 0 | % |
| EXECUTIVE COMPENSATION | | |
The earned award for the 2010-20122012-2014 performance sharescycle was determined as follows: | Performance Metric | | Performance | | % of
Award Earned | | Total Stockholder Return (“TSR”) vs. North American | | 6th | | 0% | | Class I Railroads | | | | | | | | 40% earnout if NS TSR > median S&P 500 TSR for 3-year | | NS TSR < median | | 0% | | period | | S&P 500 TSR | | | | Return on Average Invested Capital | | 18.1% | | 81.0% | | Operating Ratio | | 70.6% | | 71.3% | Total(sum of % of Award Earned divided by 3 for one-third
weighting of each of the components) | | | | 50.8% |
| | | | | | | | | Performance Metric
| | Performance
| | | % of Award
Earned
| | Total Stockholder Return (“TSR”) vs. S&P 500 | | | 46.9 | % | | | 46.9 | % | Return on Average Invested Capital (“ROAIC”) | | | 18.2 | % | | | 82.0 | % | Operating Ratio (“OR”) | | | 71.6 | % | | | 82.0 | % | Total (sum of % of Award Earned divided by 3 for one-third weighting of each of the components) | | | | 70.3 | % |
In setting the performance targets for the 2013-2015 cycle, the Committee considered the performance targets for the 2012-2014 cycle and the earn-out percentages for prior years’ performance share unit awards. For the 2011-20132013-2015 cycle, the Committee raised the performance target for operating ratio to incentivize enhanced operating performance, and 2012-2014the Committee maintained the performance cycles,targets for return on average invested capital and total stockholder return from the 2012-2014 cycle, because it believed these targets continued to provide appropriate incentives. Thus, for the 2013-2015 performance cycle, the performance criteria and resulting earn-out percentages for the total stockholder return and return on average invested capital measures are the same as listed in the table above, and the performance criteria and resulting earn-out percentages for the operating ratio measure are as follows:
| Performance Metric | | | | % of PSUs
Earned
2013-2015 | | NS Three-Year Total Stockholder Return (“TSR”) vs. North American | | 1st | | 100% | | Class I Railroads# | | 2nd | | 75% | | | 3rd | | 50% | | | 4th | | 25%* | | *Minimum 40% earnout if NS TSR > median S&P 500 TSR for 3-year period | | 5th | | 0%* | | #Ranking excludes any Class I Railroad that is not publicly traded | | 6th | | 0%* | | | | Three-Year Average Return on Average Invested Capital | | ≥20% | | 100% | | | 19% | | 90% | | | 18% | | 80% | | | 17% | | 70% | | | 16% | | 60% | | | 15% | | 50% | | | 14% | | 40% | | | 13% | | 20% | | | <13% | | 0% | | | | Three-Year Average Operating Ratio | | ≤68% | | 100% | | | 69% | | 75% | | | 71% | | 50% | | | 76% | | 25% | | | >76% | | 0% |
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Table of Contents | | | | | | | Performance Metric
| | | | % of PSUs
Earned 2011-2013, 2012-2014
| | NS Three-Year Total Stockholder Return (“TSR”) vs. North American Class I RRs# | | 1st | | | 100 | % | | | | 2nd | | | 75 | % | | | | 3rd | | | 50 | % | | | | 4th | | | 25 | %* | | | | 5th | | | 0 | %* | *Minimum 40% earnout if NS TSR > median S&P 500 TSR for 3-year period | | | | | | | #Ranking will disregard any Class I RR that is not publicly traded | | | | | | | | | | Three-Year Average Return on Average Invested Capital (“ROAIC”) | | ³20% | | | 100 | % | | | | 19% | | | 90 | % | | | | 18% | | | 80 | % | | | | 17% | | | 70 | % | | | | 16% | | | 60 | % | | | | 15% | | | 50 | % | | | | 14% | | | 40 | % | | | | 13% | | | 20 | % | | | | <13% | | | 0 | % | | | | Three-Year Average Operating Ratio (“OR”) | | £67% | | | 100 | % | | | | 70% | | | 75 | % | | | | 74% | | | 50 | % | | | | 78% | | | 25 | % | | | | >78% | | | 0 | % |
| | EXECUTIVE COMPENSATION |
In setting the performance targets for the 2014-2016 cycle, the Committee eliminated the performance goal for operating ratio, as it determined that achievement of a target operating ratio was more appropriately incentivized through annual cash incentive grants under EMIP, the Corporation’s annual cash incentive program. The Committee also adjusted the return on average invested capital performance goal to an after-tax return measure, to more closely align the performance goal to the economic returns achieved by Norfolk Southern’s stockholders. For the 2014-2016 performance cycle, the performance criteria and resulting earn-out percentages for the total stockholder return and return on average invested capital measures are as follows:
| Performance Metric | | | | | | % of PSUs
Earned
2014-2016 | | | NS Three-Year Total Stockholder Return (“TSR”) vs. North American | | | 1st | | | | 100% | | | | Class I Railroads# | | | 2nd | | | | 75% | | | | | | 3rd | | | | 50% | | | | | | 4th | | | | 25%* | | | | *Minimum 40% earnout if NS TSR > median S&P 500 TSR for 3-year period | | | 5th | | | | 0%* | | | | #Ranking excludes any Class I Railroad that is not publicly traded | | | 6th | | | | 0%* | | | | | | | | | | | | | | | Three-Year Average After-Tax Return on Average Invested Capital | | | ≥12% | | | | 100% | | | | | | 11.8% | | | | 90% | | | | | | 11.7% | | | | 80% | | | | | | 11.6% | | | | 70% | | | | | | 11.4% | | | | 60% | | | | | | 11.2% | | | | 50% | | | | | | 10.0% | | | | 40% | | | | | | 8.5% | | | | 20% | | | | | | <8.5% | | | | 0% | | |
For the 2012-20142013-2015 and 2014-2016 performance shares,share units, Norfolk Southern used a 50% earn-out assumption to value the award for market comparison purposes. Restricted Stock Units.Units:Norfolk Southern believes that the use of time-based restricted stock units serves as a key retention tool for keeping valued members of management. For 2012,2014, Norfolk Southern granted restricted stock units which vest on the fifth anniversary of the date of grant, which settle in whole shares of Norfolk Southern common stock and which units are not forfeited upon retirement, disability or death.stock. Retirement Plans and Programs Norfolk Southern believes that its Retirement Plan and Supplemental Benefit Plan provide it with the ability to retain key employees over a longer period. Norfolk Southern sponsors a qualified defined benefit pension plan that provides a benefit based on age, service and a percentage of final average compensation. Norfolk Southern also sponsors a non-qualifiednonqualified supplemental benefit plan that provides a retirement benefit for salary or bonusannual incentive that is deferred, restores the retirement benefit for amounts in excess of the Internal Revenue Code limitations for tax-qualified retirement plans and may be used to provide enhanced retirement benefits for certain executives. In addition to supporting the goal to retain key employees, Norfolk Southern believes that the supplemental benefit plan also recognizes, rewards and encourages contributions by its key employees and maintains internal equity by ensuring that pension benefit levels are based on relative compensation levels that reflect the relative contribution of each participant. Further information on the Retirement Plan and Supplemental Benefit Plan may be found in theNarrative to Pension Benefits Table on page 52.70. Norfolk Southern maintains the Executives’ Deferred Compensation Plan (the “EDCP”) for the benefit of the Named Executive Officers and certain other employees. The purpose of the EDCP is to provide executives with the opportunity to defer compensation and earnings until retirement or another specified date or event. The type of compensation eligible for deferral includes base salary and the annual bonus.incentive. Further information on the EDCP may be found in theNarrative to Nonqualified Deferred Compensation Tableon page 54.72.
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Other Benefits and Perquisites Norfolk Southern provides the Named Executive Officers with certain health and welfare benefits, a tax-qualified 401(k) plan, and certain other perquisites which Norfolk Southern believes are necessary to retain Executive Officers and to enhance their productivity. The value of perquisites is considered as part of the total compensation package when other elements are evaluated. Norfolk Southern’s Board of Directors has directed and requires the Chairman, President and Chief Executive Officer and his familythe President, and their families and guests when appropriate, to use Norfolk Southern’s aircraft whenever reasonably possible for air travel. Norfolk Southern believes that such use of the corporate aircraft promotes its best interests by ensuring the immediate availability of this officerthese officers and by providing a prompt, efficient means of travel and in view of the need for security in such travel. For the same reasons, Norfolk Southern’s Board of Directors has determined that the Chairman, President and Chief Executive Officer and the President may authorize employees and their guests to use the corporate aircraft for purposes which further the business interests of Norfolk Southern and when the aircraft is not otherwise needed for business use. Such non-business use by other employees and their guests is infrequent. Other perquisites include executive physicals, personal use of company facilities, certain approved spousal travel, and tax preparation services. Norfolk Southern discontinueddoes not make tax gross-up payments on all perquisites for the Named Executive Officers in 2009, and the provision ofor provide them with company cars and club dues for the Chairman, President and Chief Executive Officer and the Executive Vice Presidents was discontinued in 2008 (except for thecars. The chief marketing officer who is reimbursedreceives a business expense reimbursement for club dues on memberships which furtherin cases where the membership furthers the business interests of Norfolk Southern). Southern. Norfolk Southern believes that the benefits and perquisites described above are appropriate to remain competitive compared to other companies and to promote retention of these officers. Impact of the Tax Treatment of Awards on Norfolk Southern’s Compensation Policies Norfolk Southern’s executive compensation program has been carefully considered in light of the applicable tax rules. Section 162(m) of the Internal Revenue Code generally provides that a publicly heldpublicly-held company may not deduct compensation paid to certain of its top executive officers to the extent such compensation exceeds $1 million per executive officer in any year. However, limited exceptions to Section 162(m) apply with respect to performance-based compensation. In order to allow deductibility of the annual bonusincentive and certain long-term incentive awards, Norfolk Southern amended the Long-Term Incentive Plan and Executive Management Incentive Plan in 2010 with stockholder approval to permit the continued grant of performance-based compensation that meets the requirements of Section 162(m) under those plans.plans and is re-submitting both plans to stockholders for approval at this meeting (see pages 17 through 27). However, Norfolk Southern believes that tax-deductibility is but one factor to be considered in fashioning an appropriate compensation package for executives. Norfolk Southern reserves and will continue to exercise its discretion in this area so as to serve the best interests of Norfolk Southern and its stockholders. Change-in-Control Agreements Norfolk Southern entered into change-in-control agreements during 1996 at a time of consolidation in the rail industry. The agreements were intended to provide certain economic protections to executives in the event of a termination of employment following a change-in-control of Norfolk Southern and to keep management intact and focused on the best interests of Norfolk Southern and its shareholdersstockholders without the distraction of possible job and income loss. The Committee continues to believe that the agreements are reasonable and appropriate. Benefits will not be paid under the agreements unless both a change in control occurs and the executive’s employment is terminated or constructively terminated following the change in control. We believe this “double trigger” maximizes stockholder value because this structure would prevent an unintended windfall to management in the event of a change in control that does not result in the termination (or constructive termination) of employment of management. In 2002, the Board of Directors agreed to abide by a stockholder approved proposal that future severance agreements with senior executives that exceed 2.99 times the sum of the executive’s base salary plus bonus require stockholder approval. The change-in-control agreements were revised in 2008 to comply with Section 409A of the Internal Revenue Code but did not enhance or increase benefits provided under the agreements as they existed prior to the revisions. In January 2013, the CorporationNorfolk Southern entered into amendments to its change-in-control agreements with the Named Executive Officers to eliminate tax gross-up payments provided under the agreements. Each Named Executive Officer appointed since that time has signed an
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amendment agreeing to the elimination of this tax gross-up. A detailed description of the benefits provided under the change-in-control agreements may be found under the sectionChange-in-Control Agreements on page 55.78. Share Ownership Guidelines Norfolk Southern’s Board of Directors has established as part of its Corporate Governance Guidelines the following ownership guidelines for shares of Norfolk Southern stock for its directors and Executive Officers: officers: | Position | | Minimum Value | | Directors | | 5 times annual retainer | | Chairman and Chief | | | Position
Executive Officer, | | Minimum Value
| Directors
| | 5 times annual retainer salary | | President | | | Chairman, President and Chief Executive Officer
| | 5 times annual salary
| | | Executive Vice Presidents | | 3 times annual salary | | Vice Presidents | | Senior Vice Presidents and Vice Presidents
| | 1 times annual salary |
For directors, Norfolk Southern common stock, restricted stock, stock equivalents held in Norfolk Southern’s dividend reinvestment plan, and deferred and restricted stock units held in Norfolk Southern’s Long-Term Incentive Plan or under the Directors’ Deferred Fee Plan count toward this requirement. For Executive Officers,officers, Norfolk Southern common stock and stock equivalents held in Norfolk Southern’s 401(k) plan dividend reinvestment plan and through share retention agreements are counted toward these requirements, but unexercised stock options or unvested equity awards do not count. Directors and officers may acquire such holdings over a five-year period. All directors and officers currently meet this guideline or are expected to meet the guideline within the five-year grace period. Pledging; Hedging All of our Executive Officers are prohibited from entering into pledging or hedging transactions or positions regarding Norfolk Southern’s securities. All Executive Officers of Norfolk Southern are required to clear any transaction involving its common stock with Norfolk Southern’s Corporate Secretary prior to engaging in the transaction. Policies and Decisions Regarding the Adjustment or Recovery of Awards While Norfolk Southern does not anticipate there would ever be circumstances where a restatement of earnings upon which incentive plan award decisions were based would occur, should such an unlikely event take place, Norfolk Southern in evaluating such circumstances, would have discretion to take all actions necessary to protect the interests of stockholders up to and including actions to recover such incentive awards. The performance share awards include a clawback provision to permit the recovery of performance share awards following a material restatement of Norfolk Southern’s financial results. Similarly, the Executive Management Incentive Plan includes a clawback provision to permit recovery of bonusesannual incentives as a result of any material noncompliance with any financial reporting requirement under the securities laws. Both the Long-Term Incentive Plan and the Executive Management Incentive Plan further allow for the reduction, forfeiture or recoupment of any award as may be required by law.
| | 61 | | NORFOLK SOUTHERN CORPORATION | | 2015 Proxy Statement |
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COMPENSATION TABLES Compensation Tables
Summary Compensation Table The following table shows the total compensation awarded to, earned by or paid to each Named Executive Officer during 20122014 for service in all capacities to Norfolk Southern and our subsidiaries for the fiscal year ended December 31, 2012.2014. The table also sets forth information regarding the fiscal 20112013 and 20102012 compensation. As described in the Compensation Discussion and Analysis section of this proxy statement, we are reporting compensation during 2012 for all our officers with positions at or above the level of executive vice president. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and
Principal Position
(a)
| | Year
(b)
| | | Salary2
($)
(c)
| | | Bonus
($)
(d)
| | | Stock
Awards3
($)
(e)
| | | Option
Awards3
($)
(f)
| | | Non-
Equity
Incentive
Plan
Compen-
sation2
($)
(g)
| | | Change in
Pension Value
and Nonquali-
fied Deferred
Compensation
Earnings4
($)
(h)
| | | All Other
Compen-
sation5
($)
(i)
| | | Total
($)
(j)
| | Charles W. Moorman, IV | | | 2012 | | | | 1,000,000 | | | | 0 | | | | 5,368,302 | | | | 1,811,840 | | | | 1,343,250 | | | | 2,924,375 | | | | 217,310 | | | | 12,665,077 | | Chairman, President and
Chief Executive Officer | | | 2011 | | | | 950,000 | | | | 0 | | | | 5,334,831 | | | | 1,847,580 | | | | 1,320,500 | | | | 3,340,021 | | | | 123,834 | | | | 12,916,766 | | | | | 2010 | | | | 950,000 | | | | 0 | | | | 3,914,529 | | | | 2,085,750 | | | | 1,181,800 | | | | 2,705,649 | | | | 124,818 | | | | 10,962,546 | | | | | | | | | | | | John P. Rathbone1 | | | 2012 | | | | 600,000 | | | | 0 | | | | 1,269,565 | | | | 429,120 | | | | 483,570 | | | | 1,063,450 | | | | 72,585 | | | | 3,918,290 | | Executive Vice President-
Finance and Chief
Financial Officer | | | 2011 | | | | 500,000 | | | | 0 | | | | 1,253,896 | | | | 422,940 | | | | 434,400 | | | | 945,062 | | | | 88,167 | | | | 3,644,465 | | | | | 2010 | | | | 500,000 | | | | 0 | | | | 916,252 | | | | 491,310 | | | | 388,750 | | | | 755,209 | | | | 60,325 | | | | 3,111,846 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deborah H. Butler | | | 2012 | | | | 600,000 | | | | 0 | | | | 1,269,565 | | | | 429,120 | | | | 483,570 | | | | 1,767,170 | | | | 64,500 | | | | 4,613,925 | | Executive Vice President-
Planning and Chief
Information Officer | | | 2011 | | | | 500,000 | | | | 0 | | | | 1,253,896 | | | | 422,940 | | | | 434,400 | | | | 1,268,173 | | | | 83,309 | | | | 3,962,718 | | | | | 2010 | | | | 500,000 | | | | 0 | | | | 916,252 | | | | 491,310 | | | | 388,750 | | | | 809,441 | | | | 57,384 | | | | 3,163,137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | James A. Hixon | | | 2012 | | | | 600,000 | | | | 0 | | | | 1,269,565 | | | | 429,120 | | | | 483,570 | | | | 1,282,374 | | | | 66,041 | | | | 4,130,670 | | Executive Vice
President-Law and
Corporate Relations | | | 2011 | | | | 500,000 | | | | 0 | | | | 1,253,896 | | | | 422,940 | | | | 434,400 | | | | 935,128 | | | | 72,072 | | | | 3,618,436 | | | | | 2010 | | | | 500,000 | | | | 0 | | | | 916,252 | | | | 491,310 | | | | 388,750 | | | | 637,630 | | | | 63,054 | | | | 2,996,996 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mark D. Manion | | | 2012 | | | | 600,000 | | | | 0 | | | | 1,269,565 | | | | 429,120 | | | | 483,570 | | | | 1,669,726 | | | | 26,140 | | | | 4,478,121 | | Executive Vice President
and Chief Operating Officer | | | 2011 | | | | 500,000 | | | | 0 | | | | 1,253,896 | | | | 422,940 | | | | 434,400 | | | | 1,259,920 | | | | 41,329 | | | | 3,912,485 | | | | | 2010 | | | | 500,000 | | | | 0 | | | | 916,252 | | | | 491,310 | | | | 388,750 | | | | 877,134 | | | | 35,306 | | | | 3,208,752 | | | | | | | | | | | | Donald W. Seale | | | 2012 | | | | 600,000 | | | | 0 | | | | 1,269,565 | | | | 429,120 | | | | 483,570 | | | | 1,681,260 | | | | 57,889 | | | | 4,521,404 | | Executive Vice President
and Chief Marketing Officer | | | 2011 | | | | 500,000 | | | | 0 | | | | 1,253,896 | | | | 422,940 | | | | 434,400 | | | | 1,256,085 | | | | 46,867 | | | | 3,914,188 | | | | | 2010 | | | | 500,000 | | | | 0 | | | | 916,252 | | | | 491,310 | | | | 388,750 | | | | 859,680 | | | | 42,317 | | | | 3,198,309 | | | | | | | | | | | | James A. Squires1 | | | 2012 | | | | 600,000 | | | | 0 | | | | 1,269,565 | | | | 429,120 | | | | 483,570 | | | | 952,248 | | | | 44,755 | | | | 3,779,258 | | Executive Vice President-
Administration | | | 2011 | | | | 500,000 | | | | 0 | | | | 1,253,896 | | | | 422,940 | | | | 434,400 | | | | 627,771 | | | | 63,676 | | | | 3,302,683 | | | | | 2010 | | | | 500,000 | | | | 0 | | | | 916,252 | | | | 491,310 | | | | 388,750 | | | | 399,285 | | | | 52,854 | | | | 2,748,451 | |
Name and
Principal Position
(a) | | Year
(b) | | Salary
($)
(c) | | Bonus
($)
(d) | | Stock
Awards
($)
(e) | | Option
Awards
($)
(f) | | Non-
Equity
Incentive
Plan
Compensation
($)
(g) | | Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)
(h) | | All Other
Compensation
($)
(i) | | Total
($)
(j) | | | Charles W. Moorman, IV | | 2014 | | 1,000,000 | | 0 | | 4,879,422 | | 2,624,976 | | 1,813,500 | | 3,117,088 | | 101,031 | | 13,536,017 | | Chairman and Chief
Executive Officer | | 2013 | | 1,000,000 | | 0 | | 4,690,900 | | 2,080,800 | | 1,685,250 | | 12,727 | | 170,073 | | 9,639,750 | | | 2012 | | 1,000,000 | | 0 | | 5,368,302 | | 1,811,840 | | 1,343,250 | | 2,924,375 | | 217,310 | | 12,665,077 | | | James A. Squires1 | | 2014 | | 750,000 | | 0 | | 1,626,323 | | 874,892 | | 906,750 | | 1,657,155 | | 115,709 | | 5,930,829 | | | President | | 2013 | | 687,500 | | 0 | | 1,126,917 | | 489,600 | | 744,319 | | 109,036 | | 105,310 | | 3,262,682 | | | | 2012 | | 600,000 | | 0 | | 1,269,565 | | 429,120 | | 483,570 | | 952,248 | | 44,755 | | 3,779,258 | | | Marta R. Stewart2 | | 2014 | | 500,000 | | 0 | | 910,756 | | 489,868 | | 544,050 | | 1,303,712 | | 48,063 | | 3,796,449 | | Executive Vice President-
Finance and Chief
Financial Officer | | 2013 | | 333,333 | | 0 | | 225,062 | | 102,000 | | 271,512 | | 0 | | 32,877 | | 964,784 | | | Deborah H. Butler | | 2014 | | 600,000 | | 0 | | 910,756 | | 489,868 | | 652,860 | | 2,362,457 | | 71,191 | | 5,087,132 | | Executive Vice President-
Planning and Chief
Information Officer | | 2013 | | 600,000 | | 0 | | 1,126,917 | | 489,600 | | 606,690 | | 536,539 | | 66,959 | | 3,426,705 | | | 2012
| | 600,000
| | 0
| | 1,269,565
| | 429,120
| | 483,570
| | 1,767,170
| | 64,500
| | 4,613,925
| | | Mark D. Manion | | 2014 | | 600,000 | | 0 | | 1,236,397 | | 664,906 | | 652,860 | | 1,742,135 | | 37,361 | | 4,933,659 | | Executive Vice President
and Chief Operating
Officer | | 2013 | | 600,000 | | 0 | | 1,126,917 | | 489,600 | | 606,690 | | 48,369 | | 35,437 | | 2,907,013 | | | 2012
| | 600,000
| | 0
| | 1,269,565
| | 429,120
| | 483,570
| | 1,669,726
| | 26,140
| | 4.478,121
| |
____________________ 1Effective AugustJune 1, 2012, John P. Rathbone2013, James A. Squires was appointed to the position of President of the Corporation. Mr. Squires previously served as Executive Vice President – Administration. 2Effective November 1, 2013, Marta R. Stewart became Executive Vice President-Finance and Chief Financial Officer,Officer. Ms. Stewart previously served as Vice President and James A. Squires became Executive Vice President-Administration. Previously their roles were reversed.Treasurer of the Corporation. 2Salary (Column (c))
Represents salary and non-equity incentive plan compensation earned during 2010, 20112012, 2013 and 20122014 received on a current or deferred basis.
3Stock Awards (Column (e))
RepresentsThe amounts reported for Stock Awards are the full grant date fair valuevalues of the awards computed in accordance with FASB ASC Topic 718 “Compensation – Stock CompensationCompensation..” This column includes Performance Share Units and Restricted Stock Units.
For Performance Share Units, the full grant date fair value is determined consistent with the estimated full accounting cost to be recognized over the three-year performance period, determined as of January 31 following the grant date under FASB ASC Topic 718. For discussions of the relevant assumptions made in calculating these amounts, see note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.2014. For the grant date fair value of only those awards granted to the Named Executive Officers in 2012,2014, see the Grants of Plan-Based Awards Table on page 46. 65. | 62 | | | | 2015 Proxy Statement |
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The value of the Stock Awards reported in column (e), assuming the highest level of performance would be achieved, is as follows: | | Year | C. W. Moorman, IV | J. A. Squires | M. R. Stewart | D. H. Butler | M. D. Manion | | 2014 | $6,694,313 | $2,231,365 | $1,249,533 | $1,249,533 | $1,696,182 | | 2013 | $7,401,980 | $1,745,750 | $328,201 | $1,745,750 | $1,745,750 | | 2012 | $6,687,460 | $1,577,940 | | $1,577,940 | $1,577,940 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year
| | C. W. Moorman
| | | J. P. Rathbone
| | | D. H. Butler
| | | J. A. Hixon
| | | M. D. Manion
| | | D. W. Seale
| | | J. A. Squires
| | 2012 | | $ | 6,687,460 | | | $ | 1,577,940 | | | $ | 1,577,940 | | | $ | 1,577,940 | | | $ | 1,577,940 | | | $ | 1,577,940 | | | $ | 1,577,940 | | 2011 | | $ | 6,650,970 | | | $ | 1,568,625 | | | $ | 1,568,625 | | | $ | 1,568,625 | | | $ | 1,568,625 | | | $ | 1,568,625 | | | $ | 1,568,625 | | 2010 | | $ | 6,208,800 | | | $ | 1,456,680 | | | $ | 1,456,680 | | | $ | 1,456,680 | | | $ | 1,456,680 | | | $ | 1,456,680 | | | $ | 1,456,680 | |
4Option Awards (Column (f))
OfThe amounts reported for Option Awards are the full grant date fair values of the awards computed in accordance with FASB ASC Topic 718 “Compensation – Stock Compensation.” For discussions of the relevant assumptions made in calculating these amounts, see note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for 2012,the fiscal year ended December 31, 2014.
Non-Equity Incentive Plan Compensation (Column (g))
The amounts reported as Non-Equity Incentive Plan Compensation were paid under the Executive Management Incentive Plan, as more fully described in the Compensation Discussion and Analysis. Amounts reported in this column were earned in the indicated year, and may have been received on a current basis or deferred in accordance with our deferred compensation plans. Change in Pension Values and Nonqualified Deferred Compensation Earnings (Column (h))
In accordance with SEC rules, any increase or decrease in the present value of the benefits under our Retirement Plan is aggregated with any increase or decrease in the present value of the benefits under our Supplemental Benefit Plan. All of the Named Executive Officers had an increase in the present value of the benefits under our Retirement Plan and Supplemental Benefit Plan in 2014. The changes in the values result from increases in each individual’s years of service, final average compensation calculation and age, as well as from a decrease in the pension discount rate and revised mortality assumptions. Of the amounts shown in this column, the following representrepresents the aggregate changeincrease in the actuarial present value of the Named Executive Officer’sOfficers’ accumulated benefits under ourthe Retirement Plan and the Supplemental BenefitBenefits Plan during 2012:for 2014: Mr. Moorman, $2,912,805,$3,103,088; Mr. Rathbone, $1,019,551,Squires, $1,657,155; Ms. Stewart, $1,303,712; Ms. Butler, $1,759,378, Mr. Hixon, $1,272,566,$2,353,028; and Mr. Manion, $1,626,493, Mr. Seale, $1,622,859, and Mr. Squires, $952,248. $1,688,013. The remainder of the amounts shown in this column for 20122014 represent the amounts by which 20122014 interest accrued on salary and bonusesannual incentives deferred by them under the Officers’ Deferred Compensation Plan exceeded 120% of the applicable Federal long-term rate provided in Section 1274(d) of the Internal Revenue Code. 5All Other Compensation (Column (i))
ForThe amounts reported as All Other Compensation include, for each Named Executive Officer, the amount for 2012 includes (i) perquisites as set forth in the table below,below; (ii) matching contributions to our Thrift and Investment Plan of $8,575$9,100 for all Named Executive Officers, andOfficers; (iii) premiums paid on individually owned executive life insurance policies as follows: for Mr. Moorman, $17,899,$17,678; Mr. Rathbone, $11,009,Squires, $14,483; Ms. Stewart, $7,693; Ms. Butler, $12,567, Mr. Hixon, $11,056,$14,396; and Mr. Manion, $11,444, Mr. Seale, $10,075,$13,457; and Mr. Squires, $9,576. For the following Named Executive Officers, the figure also includes(iv) amounts we contributed to charitable organizations on their behalf pursuant to our matching gifts programs:programs as follows: for Mr. Moorman, $39,492,$39,250; Mr. Rathbone, $50,000,Squires, $42,260; Ms. Stewart, $28,635; Ms. Butler, $36,750, Mr. Hixon, $40,000, Mr. Seale, $18,684,$37,500; and Mr. Squires, $25,500.Manion, $10,000. For Mr. Moorman, the amount also includes his proportional cost of NS-owned life insurance policies used to fund the Directors’ Charitable Award Program.
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Perquisites for our Named Executive Officers during 20122014 consisted of the following: | | Use of
Corporate
Aircraft
($) | | Tax
Preparation
and
Financial
Planning
($) | | Annual
Physicals
($) | | Spousal/
Guest
Meals &
Travel
($) | | Gifts
($) | | Other
($) | | Total
($) | | | C. W. Moorman, IV | | 26,496 | | 0 | | 3,800 | | 179 | | 481 | | 0 | | 30,956 | | | J. A. Squires | | 43,424 | | 0 | | 4,800 | | 523 | | 729 | | 390 | | 49,866 | | | M. R. Stewart | | 0 | | 2,000 | | 0 | | 394 | | 46 | | 195 | | 2,635 | | | D. H. Butler | | 4,416 | | 0 | | 5,000 | | 343 | | 46 | | 390 | | 10,195 | | | M. D. Manion | | 0 | | 0 | | 3,800 | | 523 | | 481 | | 0 | | 4,804 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Use of Corporate Aircraft ($)
| | | Tax Preparation and Financial Planning ($)
| | | Use of Corporate Facilities ($)
| | | Annual Physicals ($)
| | | Spousal/ Guest
Meals &
Travel ($)
| | | Gifts ($)
| | | Total ($)
| | C. W. Moorman | | | 116,919 | | | | 0 | | | | 0 | | | | 3,800 | | | | 389 | | | | 899 | | | | 122,007 | | | | | | | | | | J. P. Rathbone | | | 0 | | | | 1,600 | | | | 1,098 | | | | 0 | | | | 0 | | | | 128 | | | | 2,826 | | | | | | | | | | D. H. Butler | | | 0 | | | | 2,000 | | | | 0 | | | | 4,000 | | | | 283 | | | | 150 | | | | 6,433 | | | | | | | | | | J. A. Hixon | | | 0 | | | | 0 | | | | 2,340 | | | | 3,800 | | | | 0 | | | | 95 | | | | 6,235 | | | | | | | | | | M. D. Manion | | | 0 | | | | 2,000 | | | | 390 | | | | 3,300 | | | | 0 | | | | 256 | | | | 5,946 | | | | | | | | | | D. W. Seale | | | 13,463 | | | | 2,000 | | | | 106 | | | | 3,800 | | | | 430 | | | | 581 | | | | 20,380 | | | | | | | | | | J. A. Squires | | | 0 | | | | 0 | | | | 390 | | | | 0 | | | | 389 | | | | 150 | | | | 929 | |
All perquisites are valued on the basis of aggregate incremental cost to us. Perquisites also included participation in the Executive Accident Plan, for which there was no aggregate incremental cost. All perquisites are valued on the basis of aggregate incremental cost to us. With regard to personal use of company aircraft, aggregate incremental cost is calculated as the weighted-average cost of fuel, crew hotels and meals, aircraft maintenance and other variable costs. Use of corporate aircraft includes use by the Named Executive Officers as permitted by resolution of the Board of Directors. The aggregate incremental cost for personal use of company aircraft by our Named Executive Officers is allocated entirely to the highest ranking Named Executive Officer on the flight. Figures included in “Other” represent imputed income for the use of Corporate Facilities. | 64 | | | | 2015 Proxy Statement |
| NORFOLK SOUTHERN CORPORATION |
2012Table of Contents
| | EXECUTIVE COMPENSATION |
2014 Grants of Plan-Based Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name (a)
| | Grant Date (b)
| | | Committee
Action
Date1
| | | Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards2
| | | Estimated Future Payouts
Under Equity Incentive
Plan Awards3
| | | All
Other
Stock
Awards:
Number
of
Shares
of Stock
or
Units4 (#) (i)
| | | All Other
Option
Awards:
Number of
Securities
Underlying
Options5 (#) (j)
| | | Exercise
or Base
Price of
Option
Awards6
($/Sh) (k)
| | | Grant
Date Fair
Value of
Stock and Option
Awards7 ($) (l)
| | | | | | Threshold ($) (c)
| | | Target ($) (d)
| | | Maximum
($) (e)
| | | Threshold (#) (f)
| | | Target (#) (g)
| | | Maximum (#) (h)
| | | | | | Charles W.
Moorman, IV | | | 01/23/12 | | | | 01/23/12 | | | | 500 | | | | 1,507,500 | | | | 2,500,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | 5,133 | | | | 38,500 | | | | 77,000 | | | | | | | | | | | | | | | | 4,466,622 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,000 | | | | | | | | | | | | 901,680 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 76,000 | | | | 75.14 | | | | 1,811,840 | | | | | | | | | | | | | | | John P. Rathbone | | | 01/23/12 | | | | 01/23/12 | | | | 180 | | | | 542,700 | | | | 870,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | 1,200 | | | | 9,000 | | | | 18,000 | | | | | | | | | | | | | | | | 1,044,145 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,000 | | | | | | | | | | | | 225,420 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | | | | 75.14 | | | | 429,120 | | | | | | | | | | | | | | | Deborah H. Butler | | | 01/23/12 | | | | 01/23/12 | | | | 180 | | | | 542,700 | | | | 870,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | 1,200 | | | | 9,000 | | | | 18,000 | | | | | | | | | | | | | | | | 1,044,145 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,000 | | | | | | | | | | | | 225,420 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | | | | 75.14 | | | | 429,120 | | | | | | | | | | | | | | | James A. Hixon | | | 01/23/12 | | | | 01/23/12 | | | | 180 | | | | 542,700 | | | | 870,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | 1,200 | | | | 9,000 | | | | 18,000 | | | | | | | | | | | | | | | | 1,044,145 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,000 | | | | | | | | | | | | 225,420 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | | | | 75.14 | | | | 429,120 | | | | | | | | | | | | | | | Mark D. Manion | | | 01/23/12 | | | | 01/23/12 | | | | 180 | | | | 542,700 | | | | 870,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | 1,200 | | | | 9,000 | | | | 18,000 | | | | | | | | | | | | | | | | 1,044,145 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,000 | | | | | | | | | | | | 225,420 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | | | | 75.14 | | | | 429,120 | | | | | | | | | | | | | | | Donald W. Seale | | | 01/23/12 | | | | 01/23/12 | | | | 180 | | | | 542,700 | | | | 870,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | 1,200 | | | | 9,000 | | | | 18,000 | | | | | | | | | | | | | | | | 1,044,145 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,000 | | | | | | | | | | | | 225,420 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | | | | 75.14 | | | | 429,120 | | | | | | | | | | | | | | | James A. Squires | | | 01/23/12 | | | | 01/23/12 | | | | 180 | | | | 542,700 | | | | 870,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | 1,200 | | | | 9,000 | | | | 18,000 | | | | | | | | | | | | | | | | 1,044,145 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,000 | | | | | | | | | | | | 225,420 | | | | | | 01/26/12 | | | | 01/23/12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | | | | 75.14 | | | | 429,120 | |
| | | | | | Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards | | Estimated Future Payouts
Under Equity Incentive
Plan Awards | | All
Other
Stock
Awards:
Number
of
Shares
of Stock
or
Units
(#)
(i) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j) | | Exercise
or Base
Price of
Option
Awards
($/Sh)
(k) | | Grant
Date Fair
Value of
Stock
and
Option
Awards
($)
(l) | Name
(a) | | Grant
Date
(b) | | Committee
Action
Date1 | | Threshold
($)
(c) | | Target
($)
(d) | | Maximum
($)
(e) | | Threshold
(#)
(f) | | Target
(#)
(g) | | Maximum
(#)
(h) | Charles W.
Moorman, IV | | 01/20/14 | | 01/20/14 | | 1,500 | | 1,507,500 | | 2,500,000 | | | | | | | | | | | | | | | | | 01/23/14 | | 01/20/14 | | | | | | | | 7,709 | | 38,545 | | 77,090 | | | | | | | | 3,754,090 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | 11,950 | | | | | | 1,125,332 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | | | 87,880 | | 94.17 | | 2,624,976 | | | | James A. Squires | | 01/20/14 | | 01/20/14 | | 750 | | 753,750 | | 1,237,500 | | | | | | | | | | | | | | | | | 01/23/14 | | 01/20/14 | | | | | | | | 2,570 | | 12,850 | | 25,700 | | | | | | | | 1,251,526 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | 3,980 | | | | | | 374,797 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | | | 29,290 | | 94.17 | | 874,892 | | | | Marta R. Stewart | | 01/20/14 | | 01/20/14 | | 450 | | 452,250 | | 725,000 | | | | | | | | | | | | | | | | | 01/23/14 | | 01/20/14 | | | | | | | | 1,439 | | 7,195 | | 14,390 | | | | | | | | 700,757 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | 2,230 | | | | | | 209,999 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | | | 16,400 | | 94.17 | | 489,868 | | | | Deborah H. Butler | | 01/20/14 | | 01/20/14 | | 540 | | 542,700 | | 870,000 | | | | | | | | | | | | | | | | | 01/23/14 | | 01/20/14 | | | | | | | | 1,439 | | 7,195 | | 14,390 | | | | | | | | 700,757 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | 2,230 | | | | | | 209,999 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | | | 16,400 | | 94.17 | | 489,868 | | | | Mark D. Manion | | 01/20/14 | | 01/20/14 | | 540 | | 542,700 | | 870,000 | | | | | | | | | | | | | | | | | 01/23/14 | | 01/20/14 | | | | | | | | 1,953 | | 9,765 | | 19,530 | | | | | | | | 951,062 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | 3,030 | | | | | | 285,335 | | | 01/23/14 | | 01/20/14 | | | | | | | | | | | | | | | | 22,260 | | 94.17 | | 664,906 | | | | | | | | | | | | | | | | | | | | | | | | | | |
____________________ 1Consistent with past practice and the terms of LTIP, the Committee made all equity awards to directors and executive officers effective on the day after a full trading day has elapsed following the release of our fiscal year financial results. Because the meeting at which these awards were made occurred prior to the effective date of the awards, we have provided both dates in accordance with SEC rules. See page 30 of our Compensation Discussion and Analysis section for further discussion of our equity award grant practices. | | 65 | | NORFOLK SOUTHERN CORPORATION | | 2015 Proxy Statement |
2Table of Contents
| EXECUTIVE COMPENSATION | | |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (EMIP) (Columns (c), (d) and (e))
These awards were made pursuant to our Executive Management Incentive Plan (“EMIP”) and were earned upon the achievement of certain performance goals established by the Committee for the fiscal year ended December 31, 2012.2014. For a discussion of these performance goals, see page 3054 of our Compensation Discussion and Analysis section included in this proxy statement. The Committee targeted a payout of 67% in 20122014 in setting the annual performance goals for EMIP incentive awards, and using a bonusan annual incentive opportunity equal to 225% of salary for Mr. Moorman, 150% for Mr. Squires, and 135% of salary for the remaining Named Executive Officers.Vice Presidents. Consequently, the target amounts in this column assume that the Named Executive Officers earned 67% of the maximum potential EMIP awards that they could have earned using these bonusannual incentive opportunities. The threshold amounts assume that the Named Executive Officers earned the minimum EMIP awards based on performance required to trigger any level of payment; if company performance fell below performance goals required to earn the threshold amount, they would not have been entitled to any EMIP awards. For 2012, the bonus payout was calculated based on a bonus opportunity equal to 225% of salary for Mr. Moorman and 135% of salary for the remainingThe Named Executive Officers. The Named Executive Officers earned 59.7%80.6% of these EMIP awards based on our performance during 2012.2014. These bonusannual incentive amounts are also included under “Non-Equity Incentive Compensation” in the Summary Compensation Table. 3Estimated Future Payouts Under Equity Incentive Plan Awards (PSUs) (Columns (f), (g) and (h))
These amounts represent grants of performance share units made pursuant to our Long-Term Incentive Plan (“LTIP”). These performance share units will be earned over the performance cycle ending December 31, 2014.2016. For a discussion of the other material terms of these awards, see the narrative discussion which follows this table. LTIP does not provide a performance target for earning performance share units under this feature of the plan; however, the Committee targets a payout of 50% in setting the performance goals for performance share unit awards. Consequently, the target amounts assume that the Named Executive Officers will earn 50% of the maximum potential number of performance share units that can be earned under the awards. The threshold amounts assume that the Named Executive Officers will earn the minimum number of performance share units based on performance required to trigger any level of payment; if company performance fell below performance goals required to earn the threshold amount, they would not receive any performance share units. Our Named Executive Officers actually earned 70.3%50.8% of their maximum potential performance share unit awards for the performance cycle ended December 31, 2012,2014, based on our performance during the three-year period ended December 31, 2012.2014.
4All Other Stock Awards (RSUs) (Column (i))
These amounts represent grants of restricted stock units made under LTIP. For a discussion of the material terms of these awards, see the narrative discussion which follows this table.
5All Other Option Awards (Stock Options) (Columns (j), (k) and (l))
These stock options (of which the first 1,3301,061 granted to each Named Executive Officer are incentive stock options and the remainder are non-qualifiednonqualified stock options) were granted as of January 26, 2012,23, 2014, and are exercisable as of January 26, 2016.23, 2018. Dividend equivalent payments are paid in cash to active employees on unvested options for four years in an amount equal to, and commensurate with, regular quarterly dividends paid on our common stock.
6The Committee granted these options at an exercise price equal to the higher of the closing market price or the average of the high and low prices of our common stock on the effective date of the grant. The closing price was lower than the average price on the date of grant, so the exercise price shown is the average price on the date of grant. The exercise price may be paid in cash or in shares of our common stock (previously owned by the optioneeparticipant for at least six months preceding the date of exercise) valued on the date of exercise.
7AmountsThe amounts reported in Column (l) represent the full grant date fair value of each equity award computed in accordance with FASB ASC Topic 718. For awards that entitle the Named Executive Officers to dividends or dividend equivalents, those amounts are also computed in accordance with FASB ASC Topic 718.
| 66 | | | | 2015 Proxy Statement |
| NORFOLK SOUTHERN CORPORATION |
Table of Contents | | EXECUTIVE COMPENSATION |
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table Awards Awards
Our Long-Term Incentive Plan (“LTIP”), as last approved by stockholders in 2010, providesallows for the award of equity-based awards, including incentive stock options, non-qualifiednonqualified stock options, stock appreciation rights, restricted shares, restricted stock units and performance share units to directors, officers and other key employees of Norfolk Southern and its subsidiaries. employees. The Compensation Committee or any other Committee of the Corporation’s Board of Directors that is authorized to grant awards under LTIP has sole discretion (except as the Committee may have delegated to the Chief Executive Officer) to: | · | | select LTIP participants;
|
| · | | determine the type, size, terms and conditions of awards under LTIP;
|
| · | | authorize the grant of such awards; and
|
| · | | adopt, amend and rescind rules relating to LTIP.
|
Except for capital adjustments such as stock splits, the exercise price of a stock option granted under LTIP may not be decreased after the option is granted, nor may any outstanding option be modified or replaced through cancellation if the effect would be to reduce the price of the option, unless the repricing, modification or replacement is approved by our stockholders. Receipt of an award under LTIP in 2012 was made contingent upon the participant’s execution of a non-competition agreement, and all awards are subject to forfeiture in the event the participant “engages in competing employment” within a period of time following retirement.
The Committee met to approve the 20122014 option grants on January 23, 2012.20, 2014. In order to permit thorough dissemination of our financial results for the fiscal year ended December 31, 2011,2013, the Committee made these grants effective January 26, 2012.23, 2014. See page 30 of our Compensation Discussion and Analysis section for further discussion of our equity award grant practices. These options become exercisable as of January 26, 2016,23, 2018, or if the Named Executive Officer retires or dies before that date, the later of one year after the grant date or the participant’s retirement or death. Dividend equivalent payments are paid in cash to active employees on unvested options for four years in an amount equal to, and commensurate with, regular quarterly dividends paid on our common stock. The exercise price may be paid in cash or in shares of our common stock valued at fair market value on the date of exercise.
Except for capital adjustments such as stock splits, the exercise price of a stock option granted under LTIP may not be decreased after the option is granted, nor may any outstanding option be modified or replaced through cancellation if the effect would be to reduce the price of the option, unless the repricing, modification or replacement is approved by our stockholders. The restricted stock units awarded in 20122014 are subject to a five-year restriction period and will be settled in shares of our common stock. Dividend equivalent payments are paid in cash on restricted stock units in an amount equal to, and commensurate with, regular quarterly dividends paid on our common stock. During the restriction period, the holder of restricted stock units has no voting or investment power over the underlying common stock. Performance share units entitle a recipient to receive performance-based compensation at the end of a three-year performance cycle based on our performance during that three-year period. For awards made in 2012,2014, the award cycle began on January 1, 20122014, and ends December 31, 2014.2016. Under the 20122014 performance share unit awards, corporate performance will be measured using threetwo predetermined and equally weighted standards; that is,each of the following performance areas will serve as the basis for earning up toone-third one-half of the total number of performance share units granted (with each one-thirdone-half portion vesting independent of the other portions)other): (1) three-year averageafter-tax return on average invested capital (2) three-year average operating ratio, and (3)(2) total return to stockholders measured at the end of the three-year period. A more detailed discussion of these performance criteria can be found beginning on page 3057 of our Compensation Discussion and Analysis section included in this proxy statement. Performance share units that are earned will be distributed in whole shares of our common stock. Receipt of an award under LTIP in 2014 was made contingent upon the participant’s execution of a non-competition agreement, and all awards are subject to forfeiture in the event the participant “engages in competing employment” within a period of time following retirement. For 2012,2014, awards to our Named Executive Officers under the Executive Management Incentive Plan (“EMIP”) were paid based on our performance relative to the following pre-determined criteria: operating income, operating ratio, and a composite of three service measures, consisting of adherence to operating plan, connection performance and train performance. The performance standards relative to these criteria were established by the Committee in January 2012.2014. A more detailed discussion of these performance criteria can be found on page 3054 of our Compensation Discussion and Analysis included in this proxy statement. The Committee set Mr. Moorman’s 20122014 incentive opportunity at 250% of his 20122014 base salary, Mr. Squires at 165% of his 2014 base salary, and the remaining Named Executive Officers’Vice Presidents at 145% of their 20122014 base salaries. However, in applying the 59.7% bonus80.6% annual incentive earnout, the Committee approved payouts that corresponded to a 225% opportunity for Mr. Moorman, 150% opportunity for Mr. Squires, and a 135% opportunity for the remaining Named Executive Officers,Vice Presidents, as further described underAnnual BonusIncentive in the Compensation Discussion and Analysis section. These amounts are reported as “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table. For further discussion of our plans and how these LTIP and EMIP awards fit into our executive compensation program, see the Compensation Discussion and Analysis section beginning on page 3045 of this proxy statement.
| | 67 | | NORFOLK SOUTHERN CORPORATION | | 2015 Proxy Statement |
Table of Contents | EXECUTIVE COMPENSATION | | |
Employment and Other Agreements None of the Corporation’s Named Executive Officers is employed pursuant to an employment agreement. Outstanding Equity Awards at Fiscal Year-End 20122014 | | Option Awards | | Stock Awards | Name
(a) | | Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b) | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c) | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d) | Option
Exercise
Price
($)
(e) | Option
Expiration
Date
(f) | | Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)5
(g) | Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)6
(h) | Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)7
(i) | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)6
(j) | C. W.
Moorman, IV | | 123,030 | | | 50.740 | 01/23/2018 | | 69,450 | 7,612,415 | 84,444 | 9,255,907 | | 137,500 | | | 38.705 | 01/28/2019 | | | | | | | 112,500 | | | 47.760 | 01/28/2020 | | | | | | | | 83,0001 | | 62.745 | 01/26/2021 | | | | | | | | 76,0002 | | 75.140 | 01/25/2022 | | | | | | | | 102,0003 | | 69.830 | 01/23/2023 | | | | | | | | 87,8804 | | 94.170 | 01/22/2024 | | | | | | | J. A. Squires | | 37,000 | | | 38.705 | 01/28/2019 | | 17,980 | 1,970,788 | 22,282 | 2,442,330 | | 26,500 | | | 47.760 | 01/28/2020 | | | | | | | | 19,0001 | | 62.745 | 01/26/2021 | | | | | | | | 18,0002 | | 75.140 | 01/25/2022 | | | | | | | | 24,0003 | | 69.830 | 01/23/2023 | | | | | | | | 29,2904 | | 94.170 | 01/22/2024 | | | | | | M. R.
Stewart | | 1,970 | | | 50.740 | 01/23/2018 | | 6,630 | 726,714 | 7,463 | 818,019 | | 2,583 | | | 38.705 | 01/28/2019 | | | | | | | 5,000 | | | 47.760 | 01/28/2020 | | | | | | | | 4,2001 | | 62.745 | 01/26/2021 | | | | | | | | 3,7002 | | 75.140 | 01/25/2022 | | | | | | | | 5,0003 | | 69.830 | 01/23/2023 | | | | | | | | 16,4004 | | 94.170 | 01/22/2024 | | | | | | | D. H. Butler | | 27,000 | | | 38.705 | 01/28/2019 | | 16,230 | 1,778,970 | 18,086 | 1,982,406 | | 26,500 | | | 47.760 | 01/28/2020 | | | | | | | | 19,0001 | | 62.745 | 01/26/2021 | | | | | | | | 18,0002 | | 75.140 | 01/25/2022 | | | | | | | | 24,0003 | | 69.830 | 01/23/2023 | | | | | | | | 16,4004 | | 94.170 | 01/22/2024 | | | | | | M. D.
Manion | | 1,970 | | | 50.740 | 01/23/2018 | | 17,030 | 1,866,658 | 19,993 | 2,191,433 | | 37,000 | | | 38.705 | 01/28/2019 | | | | | | | 26,500 | | | 47.760 | 01/28/2020 | | | | | | | | 19,0001 | | 62.745 | 01/26/2021 | | | | | | | | 18,0002 | | 75.140 | 01/25/2022 | | | | | | | | 24,0003 | | 69.830 | 01/23/2023 | | | | | | | | 22,2604 | | 94.170 | 01/22/2024 | | | | | |
| 68 | | | | 2015 Proxy Statement |
| NORFOLK SOUTHERN CORPORATION |
Table of Contents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name (a)
| | Option Awards
| | | Stock Awards
| | | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
| | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c)
| | | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) (d)
| | Option
Exercise
Price ($) (e)
| | | Option
Expiration
Date (f)
| | | Number
of
Shares
or
Units
of Stock
That
Have Not
Vested
(#)5 (g)
| | | Market
Value of
Shares
or Units of Stock
That
Have Not
Vested ($)6 (h)
| | | Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)7 (i)
| | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights That
Have Not
Vested ($)6 (j)
| | C. W. Moorman | | | 45,000 | | | | | | | | | | 34.100 | | | | 01/27/2015 | | | | 109,000 | | | | 6,740,560 | | | | 112,577 | | | | 6,961,762 | | | | | | 75,000 | | | | | | | | | | 49.425 | | | | 01/26/2016 | | | | | | | | | | | | | | | | | | | | | | 125,000 | | | | | | | | | | 49.555 | | | | 01/24/2017 | | | | | | | | | | | | | | | | | | | | | | 125,000 | | | | | | | | | | 50.740 | | | | 01/23/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | 137,500 | 1 | | | | | 38.705 | | | | 01/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | 112,500 | 2 | | | | | 47.760 | | | | 01/28/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | 83,000 | 3 | | | | | 62.745 | | | | 01/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 76,000 | 4 | | | | | 75.140 | | | | 01/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. P. Rathbone | | | 4,541 | | | | | | | | | | 22.020 | | | | 01/29/2014 | | | | 27,000 | | | | 1,669,680 | | | | 26,636 | | | | 1,647,170 | | | | | | 2,932 | | | | | | | | | | 34.100 | | | | 01/27/2015 | | | | | | | | | | | | | | | | | | | | | | 20,000 | | | | | | | | | | 49.425 | | | | 01/26/2016 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 49.555 | | | | 01/24/2017 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 50.740 | | | | 01/23/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | 37,000 | 1 | | | | | 38.705 | | | | 01/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | 26,500 | 2 | | | | | 47.760 | | | | 01/28/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | 19,000 | 3 | | | | | 62.745 | | | | 01/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | 4 | | | | | 75.140 | | | | 01/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | D. H. Butler | | | 34,000 | | | | | | | | | | 50.740 | | | | 01/23/2018 | | | | 27,000 | | | | 1,669,680 | | | | 26,636 | | | | 1,647,170 | | | | | | | | | | 37,000 | 1 | | | | | 38.705 | | | | 01/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | 26,500 | 2 | | | | | 47.760 | | | | 01/28/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | 19,000 | 3 | | | | | 62.745 | | | | 01/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | 4 | | | | | 75.140 | | | | 01/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. A. Hixon | | | 16,000 | | | | | | | | | | 34.100 | | | | 01/27/2015 | | | | 27,000 | | | | 1,669,680 | | | | 26,636 | | | | 1,647,170 | | | | | | 20,000 | | | | | | | | | | 49.425 | | | | 01/26/2016 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 49.555 | | | | 01/24/2017 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 50.740 | | | | 01/23/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | 37,000 | 1 | | | | | 38.705 | | | | 01/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | 26,500 | 2 | | | | | 47.760 | | | | 01/28/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | 19,000 | 3 | | | | | 62.745 | | | | 01/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | 4 | | | | | 75.140 | | | | 01/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | M. D. Manion | | | 16,000 | | | | | | | | | | 34.100 | | | | 01/27/2015 | | | | 27,000 | | | | 1,669,680 | | | | 26,636 | | | | 1,647,170 | | | | | | 20,000 | | | | | | | | | | 49.425 | | | | 01/26/2016 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 49.555 | | | | 01/24/2017 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 50.740 | | | | 01/23/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | 37,000 | 1 | | | | | 38.705 | | | | 01/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | 26,500 | 2 | | | | | 47.760 | | | | 01/28/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | 19,000 | 3 | | | | | 62.745 | | | | 01/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | 4 | | | | | 75.140 | | | | 01/25/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | D. W. Seale | | | 16,000 | | | | | | | | | | 34.100 | | | | 01/27/2015 | | | | 27,000 | | | | 1,669,680 | | | | 26,636 | | | | 1,647,170 | | | | | | 20,000 | | | | | | | | | | 49.425 | | | | 01/26/2016 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 49.555 | | | | 01/24/2017 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 50.740 | | | | 01/23/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | 37,000 | 1 | | | | | 38.705 | | | | 01/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | 26,500 | 2 | | | | | 47.760 | | | | 01/28/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | 19,000 | 3 | | | | | 62.745 | | | | 01/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | 4 | | | | | 75.140 | | | | 01/25/2022 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name (a)
| | Option Awards
| | | Stock Awards
| | | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
| | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c)
| | | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) (d)
| | Option
Exercise
Price ($) (e)
| | | Option
Expiration
Date (f)
| | | Number
of
Shares
or
Units
of Stock
That
Have Not
Vested
(#)5 (g)
| | | Market
Value of
Shares
or Units of Stock
That
Have Not
Vested ($)6 (h)
| | | Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)7 (i)
| | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights That
Have Not
Vested ($)6 (j)
| | | | | | | | | | | | J. A. Squires | | | 4,541 | | | | | | | | | | 22.020 | | | | 01/29/2014 | | | | 27,000 | | | | 1,669,680 | | | | 26,636 | | | | 1,647,170 | | | | | | 9,000 | | | | | | | | | | 34.100 | | | | 01/27/2015 | | | | | | | | | | | | | | | | | | | | | | 6,800 | | | | | | | | | | 49.425 | | | | 01/26/2016 | | | | | | | | | | | | | | | | | | | | | | 11,000 | | | | | | | | | | 49.555 | | | | 01/24/2017 | | | | | | | | | | | | | | | | | | | | | | 34,000 | | | | | | | | | | 50.740 | | | | 01/23/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | 37,000 | 1 | | | | | 38.705 | | | | 01/28/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | 26,500 | 2 | | | | | 47.760 | | | | 01/28/2020 | | | | | | | | | | | | | | | | | | | | | | | | | | 19,000 | 3 | | | | | 62.745 | | | | 01/26/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,000 | 4 | | | | | 75.140 | | | | 01/25/2022 | | | | | | | | | | | | | | | | | |
| | EXECUTIVE COMPENSATION |
____________________ 1These options vestvested on January 29, 2013.27, 2015. 2These options vest on January 29, 2014 or, if the Named Executive Officer retires or dies before that date, the later of one year after the grant date or the date of retirement or death. 3These options vest on January 27, 2015 or, if the Named Executive Officer retires or dies before that date, the later of one year after the grant date or the date of retirement or death.
4These options vest on January 26, 2016 or, if the Named Executive Officer retires or dies before that date, the later of one year after the grant date or the date of retirement or death.
3These options vest on January 24, 2017 or, if the Named Executive Officer retires or dies before that date, the later of one year after the grant date or the date of retirement or death. 4These options vest on January 23, 2018 or, if the Named Executive Officer retires or dies before that date, the later of one year after the grant date or the date of retirement or death. 5The following table provides information with respect to the vesting of each Named Executive Officer’s restricted stock units: | | | | | | | | | | | | | | | | | | | | | Name
| | 1/24/13
| | | 1/29/14
| | | 1/29/15
| | | 1/27/16
| | | 01/26/17
| | C. W. Moorman | | | 30,000 | | | | 35,500 | | | | 17,500 | | | | 14,000 | | | | 12,000 | | J. P. Rathbone | | | 7,000 | | | | 10,000 | | | | 4,000 | | | | 3,000 | | | | 3,000 | | D. H. Butler | | | 7,000 | | | | 10,000 | | | | 4,000 | | | | 3,000 | | | | 3,000 | | J. A. Hixon | | | 7,000 | | | | 10,000 | | | | 4,000 | | | | 3,000 | | | | 3,000 | | M. D. Manion | | | 7,000 | | | | 10,000 | | | | 4,000 | | | | 3,000 | | | | 3,000 | | D. W. Seale | | | 7,000 | | | | 10,000 | | | | 4,000 | | | | 3,000 | | | | 3,000 | | J. A. Squires | | | 7,000 | | | | 10,000 | | | | 4,000 | | | | 3,000 | | | | 3,000 | |
| Name | 1/29/15 | 1/27/16 | 01/26/17 | 01/24/18 | 01/23/19 | | C. W. Moorman, IV | | 17,500 | | | 14,000 | | | 12,000 | | | 14,000 | | | 11,950 | | | J. A. Squires | | 4,000 | | | 3,000 | | | 3,000 | | | 4,000 | | | 3,980 | | | M. R. Stewart | | 1,250 | | | 1,000 | | | 950 | | | 1,200 | | | 2,230 | | | D. H. Butler | | 4,000 | | | 3,000 | | | 3,000 | | | 4,000 | | | 2,230 | | | M. D. Manion | | 4,000 | | | 3,000 | | | 3,000 | | | 4,000 | | | 3,030 | |
6These values are based on the $61.84$109.61 closing market price of our common stock on December 31, 2012.2014. 7These amounts represent (i) grants of performance share units made in 20112013 pursuant to the Long-Term Incentive Plan (“LTIP”) that will be earned out over the three-year period ending December 31, 2013,2015, and (ii) grants of performance share units made in 20122014 pursuant to LTIP that will be earned out over the three-year period ending December 31, 2014.2016. Because the number of performance share units earned is determined based on a three-year performance period for each cycle, in accordance with the SEC requirements for this table, the number of performance share units disclosed is determined by reporting performance based on achieving threshold performance goals, except that if performance during the last completed fiscal years over which performance is measured has exceeded the threshold, then the disclosure is based on the next highest performance measure (target or maximum) that exceeds the last completed fiscal years over which performance is measured. In accordance with this rule, the number of performance share units shown by each Named Executive Officer for these grants is 64.7%60.7% for the grants of performance share units made in 2011,2013, and 68.9%37.1% for the grants of performance share units made in 2012,2014, which represents (a) the actual percentage achieved for each completed year in the performance period for the Returnreturn on Average Invested Capitalaverage invested capital metric and Operating Ratio metrics,for the operating ratio metric (for the 2013-2015 performance period), (b) the maximum percentage that can be earned for each of these metricsthe pre-tax return on average invested capital metric for the uncompleted year in the 2013-2015 performance period, (c) the target percentage for the after-tax return on average invested capital for each uncompleted year in the 2014-2016 performance period, (d) the maximum percentage that can be earned for the operating ratio metric for the uncompleted year in the 2013-2015 performance period, and (e) the threshold percentage that can be earned for the Total Shareholder Returntotal shareholder return metric over the three-year performance period. Grants of performance share units will be distributed in whole shares of common stock. Option Exercises and Stock Vested in 20122014 | Option Awards | | | Stock Awards | Name
(a) | Number of
Shares Acquired
on Exercise
(#)
(b) | | Value Realized
on Exercise
($)1
(c) | | | Number of
Shares Acquired
on Vesting
(#)2
(d) | | Value Realized
on Vesting
($)2
(e) | | C. W. Moorman, IV | | 201,970 | | | | 10,405,921 | | | | | 74,616 | | | | 7,512,052 | | | J. A. Squires | | 38,040 | | | | 2,059,088 | | | | | 19,144 | | | | 1,909,266 | | | M. R. Stewart | | 4,040 | | | | 198,137 | | | | | 3,524 | | | | 348,228 | | | D. H. Butler | | 44,000 | | | | 2,458,581 | | | | | 19,144 | | | | 1,909,266 | | | M. D. Manion | | 86,030 | | | | 3,942,319 | | | | | 19,144 | | | | 1,909,266 | |
| | 69 | | NORFOLK SOUTHERN CORPORATION | | 2015 Proxy Statement |
Table of Contents | | | | | | | | | | | | | | | | | Name (a)
| | Option Awards
| | | Stock Awards
| | | | Number of Shares Acquired on Exercise (#) (b)
| | | Value Realized on Exercise ($)1 (c)
| | | Number of Shares Acquired on Vesting (#)2 (d)
| | | Value Realized on Vesting ($)2 (e)
| | C. W. Moorman | | | 25,459 | | | | 1,342,719 | | | | 104,088 | | | | 6,694,835 | | | | | | | J. P. Rathbone | | | 10,000 | | | | 532,040 | | | | 25,630 | | | | 1,659,120 | | | | | | | | | | | 25,459 | | | | 1,293,546 | | | | | | | | | | | | | | 13,068 | | | | 506,111 | | | | | | | | | | | | | | | D. H. Butler | | | 0 | | | | 0 | | | | 20,380 | | | | 1,271,131 | | | | | | | J. A. Hixon | | | 5,459 | | | | 281,029 | | | | 25,630 | | | | 1,659,120 | | | | | | 5,000 | | | | 258,001 | | | | | | | | | | | | | | 5,000 | | | | 262,400 | | | | | | | | | | | | | | 10,000 | | | | 519,800 | | | | | | | | | | | | | | 4,541 | | | | 184,819 | | | | | | | | | | | | | | | M. D. Manion | | | 0 | | | | 0 | | | | 25,630 | | | | 1,659,120 | | | | | | | D. W. Seale | | | 4,541 | | | | 252,116 | | | | 25,630 | | | | 1,659,120 | | | | | | 25,459 | | | | 1,308,661 | | | | | | | | | | | | | | | J. A. Squires | | | 3,095 | | | | 120,086 | | | | 21,380 | | | | 1,345,034 | |
| EXECUTIVE COMPENSATION | | |
____________________ 1Represents the difference between the average of the high and low of the market price(s)price of the underlying common stock on the day of exercise and the exercise price of the option(s). 2Represents the aggregate number of (1) restricted stock units that vested and were distributed during fiscal 2012,2014, multiplied by the average of the high and low of the market price of the underlying shares on the vesting date, and (2) performance share units that vested during fiscal 2012,2014, which shares were distributed on January 29, 2015, multiplied by the average of the high and low of the market price of the underlying shares on the vesting date of December 31, 2012,2014, and which shares were distributed on January 24, 2013. Retirement Benefits29, 2015.
RETIREMENT BENEFITS 20122014 Pension Benefits Table
The following table shows, as of December 31, 2012,2014, each Named Executive Officer’s years of credited service, present value of accumulated benefit and benefits received, if any, under each of (i) the tax-qualified Retirement Plan of Norfolk Southern Corporation and Participating Subsidiary Companies (the “Retirement Plan”) and (ii) the non-qualifiednonqualified Supplemental Benefit Plan of Norfolk Southern Corporation and Participating Subsidiary Companies (the “SERP”). | Name
(a) | | Plan Name
(b) | Number of
Years Credited
Service
(#)
(c) | Present Value of
Accumulated
Benefit
($)
(d) | Payments During
Last Fiscal Year
($)
(e) | | | Charles W. Moorman, IV | | Retirement Plan | 40 | | 2,379,976 | | 0 | | SERP | 40 | | 19,837,228 | | 0 | | James A. Squires | | Retirement Plan | 23 | | 889,943 | | 0 | | SERP | 23 | | 3,898,205 | | 0 | | Marta R. Stewart | | Retirement Plan | 31 | | 1,285,047 | | 0 | | SERP | 31 | | 1,991,098 | | 0 | | Deborah H. Butler | | Retirement | 37 | | 1,721,639 | | 0 | | SERP | 37 | | 7,337,741 | | 0 | | Mark D. Manion | | Retirement Plan | 40 | | 1,896,304 | | 0 | | SERP | 40 | | 7,683,525 | | 0 |
| | | | | | | | | | | Name (a)
| | Plan Name
(b)
| | Number of
Years Credited
Service
(#)
(c)
| | Present Value of
Accumulated
Benefit
($)
(d)
| | | Payments During
Last Fiscal Year
($)
(e)
| Charles W. Moorman, IV | | Retirement Plan | | 40 | | | 2,379,169 | | | 0 | | | | SERP | | 40 | | | 18,047,620 | | | 0 | | | | | | John P. Rathbone | | Retirement Plan | | 32 | | | 1,543,025 | | | 0 | | | | SERP | | 32 | | | 5,068,016 | | | 0 | | | | | | Deborah H. Butler | | Retirement Plan | | 35 | | | 1,415,549 | | | 0 | | | | SERP | | 35 | | | 4,762,835 | | | 0 | | | | | | James A. Hixon | | Retirement Plan | | 28 | | | 1,384,222 | | | 0 | | | | SERP | | 28 | | | 4,523,612 | | | 0 | | | | | | Mark D. Manion | | Retirement Plan | | 38 | | | 1,772,782 | | | 0 | | | | SERP | | 38 | | | 6,345,245 | | | 0 | | | | | | Donald W. Seale | | Retirement Plan | | 37 | | | 1,877,364 | | | 0 | | | | SERP | | 37 | | | 6,143,651 | | | 0 | | | | | | James A. Squires | | Retirement Plan | | 21 | | | 720,510 | | | 0 | | | | SERP | | 21 | | | 2,301,446 | | | 0 |
Narrative to Pension Benefits Table The above table shows the number of years of credited service and the actuarial present value of each Named Executive Officer’s accumulated benefits under our defined benefit plans as of December 31, 2012,2014, which is the pension plan measurement date we use for financial reporting purposes. We assume a retirement age of 60 for purposes of the table for Ms. Butler, Mr. HixonStewart and Mr. Squires, since that is the earliest age at which a participant may retire under the plans without an age-based benefit reduction, and they had not reached that age as of December 31, 2012.2014. For a discussion of the other material assumptions applied in quantifying the present values of the above accrued benefits, see note 11 to our financial statements included with our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.2014. The benefits shown are in addition to amounts payable under the U.S. Railroad Retirement Act. Under the Retirement Plan and the SERP, except as noted above or in the event of a change in control (see below), each Named Executive Officer can expect to receive an annual retirement benefit equal to average annual compensation for the five most highly compensated years out of the last ten years of creditable service multiplied by a percentage equal to 1.5% times total years of creditable service, but not in excess of 40 years of creditable service (which would be equivalent to a maximum of 60% of such average compensation), less an offset for the annual Railroad Retirement Act annuity. Average compensation includes salary (including any pre-tax contributions the Named Executive Officer makes to our: (i) 401(k) plan; (ii) ChoicePlus Benefits Plan (for medical, dental and similar coverages); and (iii) pre-tax transportation plan), awards under the Executive Management Incentive Plan and unused vacation amounts paid upon severance from
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Table of Contents | | EXECUTIVE COMPENSATION |
employment. Under the Retirement Plan and the SERP, annual retirement benefits will be payable to each Named Executive Officer upon retirement (although there may be a six-month delay in payment of benefits that accrued under the SERP after January 1, 2005 if required by Section 409A of the Internal Revenue Code) and, upon the Named Executive Officer’s death, to his or her spouse on a joint-and-survivor-annuity basis. Messrs.Mr. Moorman, Rathbone,Ms. Butler and Mr. Manion and Seale are eligible for full retirement benefits without any benefit reduction due to age. Ms. Butler and Mr. Hixon areStewart is eligible for early retirement since they have
she has reached age 55 and havehas 10 years of creditable service. If Ms. Butler and Mr. Hixon chooseStewart chooses to retire prior to age 60, theirher benefits will be reduced by 1/360th for each month they areshe is under age 60 at the time of retirement. We have no policy with regard to granting extra years of credited service. However, our Board has in certain circumstances credited executives with additional years of service. In addition, as described below, our change-in-control agreements provide for additional years of credited service in limited circumstances.
Deferred CompensationDEFERRED COMPENSATION
Our Named Executive Officers may have deferred the receipt of portions of their compensation under two separate deferred compensation plans: the Officers’ Deferred Compensation Plan (“ODCP”) and the Executives’ Deferred Compensation Plan (“EDCP”). The table and narrative below describe the material elements of these plans. 20122014 Nonqualified Deferred Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | Name (a)
| | Plan
| | | Executive Contributions in Last FY ($)1 (b)
| | | Registrant Contributions in Last FY ($) (c)
| | | Aggregate Earnings in Last FY ($)2 (d)
| | | Aggregate Withdrawals/ Distributions ($) (e)
| | | Aggregate
Balance at Last FYE ($)3 (f)
| | Charles W. Moorman, IV | | | ODCP | | | | 0 | | | | 0 | | | | 54,746 | | | | 0 | | | | 633,507 | | | | | | EDCP | | | | 0 | | | | 0 | | | | 34,924 | | | | 0 | | | | 263,691 | | | | | | | | | John P. Rathbone | | | ODCP | | | | 0 | | | | 0 | | | | 203,473 | | | | 0 | | | | 2,033,213 | | | | | | EDCP | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | Deborah H. Butler | | | ODCP | | | | 0 | | | | 0 | | | | 41,389 | | | | 0 | | | | 495,718 | | | | | | EDCP | | | | 0 | | | | 0 | | | | 130,460 | | | | 0 | | | | 1,479,798 | | | | | | | | | James A. Hixon | | | ODCP | | | | 0 | | | | 0 | | | | 58,234 | | | | 0 | | | | 697,930 | | | | | | EDCP | | | | 0 | | | | 0 | | | | 111,553 | | | | 0 | | | | 860,737 | | | | | | | | | Mark D. Manion | | | ODCP | | | | 0 | | | | 0 | | | | 191,776 | | | | 0 | | | | 1,925,275 | | | | | | EDCP | | | | 0 | | | | 0 | | | | 203,417 | | | | 0 | | | | 1,372,817 | | | | | | | | | Donald W. Seale | | | ODCP | | | | 0 | | | | 0 | | | | 298,272 | | | | 0 | | | | 3,356,804 | | | | | | EDCP | | | | 228,600 | | | | 0 | | | | 341,446 | | | | 0 | | | | 2,353,467 | | | | | | | | | James A. Squires | | | ODCP | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | EDCP | | | | 168,600 | | | | 0 | | | | 152,151 | | | | 0 | | | | 1,255,252 | |
Name
(a) | | Plan | Executive
Contributions in
Last FY
($)1
(b) | Registrant
Contributions in
Last FY
($)
(c) | Aggregate
Earnings
in Last FY
($)2
(d) | Aggregate
Withdrawals/
Distributions
($)
(e) | Aggregate
Balance
at Last FYE
($)3
(f) | | Charles W. Moorman, IV | | ODCP | 0 | 0 | 65,758 | 0 | 759,259 | | EDCP | 0 | 0 | 19,700 | 0 | 348,132 | | James A. Squires | | ODCP | 0 | 0 | 0 | 0 | 0 | | EDCP | 75,000 | 0 | 60,798 | 0 | 1,896,368 | | Marta R. Stewart | | ODCP | 0 | 0 | 14,999 | 0 | 229,275 | | EDCP | 0 | 0 | 0 | 0 | 0 | | Deborah H. Butler | | ODCP | 0 | 0 | 49,459 | 0 | 590,416 | | EDCP | 0 | 0 | 116,654 | 0 | 1,799,612 | | Mark D. Manion | | ODCP | 0 | 0 | 237,970 | 0 | 2,376,832 | | EDCP | 0 | 0 | 76,140 | 0 | 1,875,188 |
____________________ 1Amounts in this column are included in the “Salary” and/or “Non-Equity Incentive Plan Compensation” column(s) of the Summary Compensation Table. 2Of these amounts, the following amounts are included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table and represent the extent to which 20122014 interest accrued on salary and bonusesannual incentives deferred under the Officers’ Deferred Compensation Plan exceeded 120% of the applicable Federal long-term rate provided in Section 1274(d) of the Internal Revenue Code: Mr. Moorman, $11,570;$14,000; Mr. Rathbone, $43,899;Squires, $0; Ms. Stewart $0; Ms. Butler, $7,792; Mr. Hixon, $9,808;$9,429; and Mr. Manion, $43,233; Mr. Seale, $58,401; and Mr. Squires, $0.$54,122. 3Of these amounts, the following amounts have been previously reported as compensation to the Named Executive Officer in our Summary Compensation Tables beginning with the fiscal year ended December 31, 2000 and ending with the fiscal year ended December 31, 2011:2013: Mr. Moorman, $338,147;$362,444; Mr. Rathbone, $133,601;Squires, $997,607; Ms. Stewart $0; Ms. Butler, $24,700; Mr. Hixon, $214,294;$41,063; and Mr. Manion, $1,089,904; Mr. Seale, $1,434,513; and Mr. Squires, $639,364.$1,180,506. | | 71 | | NORFOLK SOUTHERN CORPORATION | | 2015 Proxy Statement |
Table of Contents | EXECUTIVE COMPENSATION | | |
Narrative to Nonqualified Deferred Compensation Table The 20122014 Nonqualified Deferred Compensation table presents amounts deferred under (i) the Officers’ Deferred Compensation Plan and (ii) the Executives’ Deferred Compensation Plan. Amounts deferred are credited to a separate memorandum account maintained in the name of each participant. We do not make contributions to participants’ accounts. Amounts deferred before January 1, 2001, were deferred under the Officers’ Deferred Compensation Plan and earn a fixed rate of interest, which is credited to the account at the beginning of each quarter. In general, the fixed interest rate is determined on the basis of the participant’s age at the time of the deferral. The total amount so credited for amounts deferred before January 1, 2001 (including interest earned thereon) is distributed in five or ten annual installments determined on the basis of the participant’s age at the time of deferral, beginning in the year following the year in which the participant retires. Amounts deferred on or after January 1, 2001, have been deferred under the Executives’ Deferred Compensation Plan. Participants may defer up to 50% of base salary and 100% of EMIP bonusannual incentive payments and are credited with variable earnings and/or losses based on the performance of hypothetical investment options selected by the participant. The hypothetical investment options include various mutual funds as crediting indices. With respect to each deferral, participants may choose to receive a distribution at the earliest of separation from service, disability, or a date that is at least five years but not more than 15 years after the deferral year has ended. The total amount credited to a participant will be distributed, in accordance with the participant’s elected distribution option, in one lump sum or a stream of annual cash payments. Our commitment to accrue and pay interest and/or earnings on amounts deferred is facilitated by the purchase of corporate-owned life insurance with executive officers as insureds under the policies. If the Board of Directors determines at any time that changes in the law affect our ability to recover the cost of providing the benefits payable under the Executives’ Deferred Compensation Plan and the Officers’ Deferred Compensation Plan, the Board, in its discretion, may reduce the interest and/or earnings on deferrals. With respect to the Officers’ Deferred Compensation Plan, the adjusted rate of interest may not be less than one-half the rate otherwise provided for in the plan. For the Executives’ Deferred Compensation Plan, the adjusted rate may not be less than the lesser of (a) one-half the rate of earnings otherwise provided for in the Executives’ Deferred Compensation Plan or (b) 7%. Potential Payments Upon a Change in Control or Other Termination of EmploymentPOTENTIAL PAYMENTS UPON A CHANGE IN CONTROL OR OTHER TERMINATION OF EMPLOYMENT
We have entered into certain agreements and maintain certain plans that will require us to provide compensation to our Named Executive Officers in the event of a termination of their employment with our company. Each
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Table of the circumstances that would require us to pay post-employment benefits is discussed below. Change-in-Control AgreementsContents
Generally
We have entered into change-in-control agreements with a number of key executives, including our Named Executive Officers. A Named Executive Officer will only receive the benefits provided under these agreements if:
| | · | | a change in control of Norfolk Southern occurs,andEXECUTIVE COMPENSATION
|
| · | | within two years of the change in control, we terminate the Named Executive Officer’s employment for any reason other than for “cause,” death, total disability or mandatory retirement, or the Named Executive Officer terminates his or her employment with us for “good reason.”
|
Definition of Change in ControlPost Employment Benefits
Generally, under these agreements, a change in control is defined as:
| · | | a merger, sale of all or substantially all of our assets or similar fundamental transaction which results in our stockholders holding less than 80% of the voting power of the combined company;
|
| · | | a stockholder-approved consolidation or dissolution pursuant to a recommendation of our Board of Directors;
|
| · | | a change in the composition of the Board of Directors that results in less than a majority of Board members having either (i) served on the Board for at least two years or (ii) been nominated or elected to be a director by at least two-thirds of directors who had at least two years of service at the time of the director’s nomination or election;
|
| · | | any person or organization acquires more than 20% of our voting stock; or
|
| · | | a determination by the Board that an event similar to those listed above has occurred or is imminent.
|
As noted below, the Named Executive Officers are entitled to accelerated payouts of amounts deferred under the Officers’ Deferred Compensation Plan and the Executives’ Deferred Compensation Plan (“EDCP”) upon a change in control. For amounts deferred after 2004 under the EDCP, only events described above that also constitute a change in control as defined in the regulations to Section 409A of the Internal Revenue Code will result in accelerated distribution of those amounts.
Benefits Payable Upon Termination Following a Change in Control
Under our change-in-control agreements, the Named Executive Officers who become entitled to the benefits under those agreements are generally entitled to receive:
| · | | three times their annual base salary plus incentive pay;
|
| · | | accrued but unpaid compensation;
|
| · | | a cash payment for unearned performance share units awarded and as to which the performance cycle has not been completed;
|
| · | | all dividend equivalents to which they would have been entitled had their employment not been terminated;
|
| · | | early payout of compensation that was deferred under our non-qualified deferred compensation plans and a cash payment equal to the present value of the deferred compensation that would have been payable if the participant retired at age 65, as provided by the change in control agreements;
|
| · | | accrued pension benefits, as modified by years of service and average final compensation enhancements provided by the change-in-control agreements;
|
| · | | unused vacation for the year of termination, plus vacation for the following year;
|
| · | | continued payment of premiums on the Named Executive Officer’s life insurance policy under our Executive Life Insurance Plan; and
|
| · | | continued medical and dental benefits, and $50,000 in group-term life insurance coverage, for a specified number of years but subject to termination if the Named Executive Officer receives substantially similar benefits from another employer after the termination of employment.
|
During 2012, the Named Executive Officers were generally entitled to receive a payment in an amount sufficient to make them whole for any Federal excise tax on excess parachute payments. In January 2013, the Corporation entered into amendments to its change-in-control agreements with the Named Executive Officers to eliminate this excise tax gross-up.
The benefits to be provided to our Named Executive Officers underin the change-in-control agreementsevent of a termination due to retirement, involuntary separation, death, disability or a change in control are quantified in the table below. If we had terminated the Named Executive Officer’s employment for reasons described below under “Events Triggering Change in Control Payments,” these benefits would generally have been payable in a lump sum within ten business daysAs of termination. However, any Severance Pay, Performance Share Unit equivalent, Accelerated Dividend equivalent, Vacation Pay and Prorata Incentive Pay would have been payable no earlier than six months after the Named Executive Officer’s termination date if the Named Executive Officer was a “Specified Employee” on his or her termination date and if the change in controlDecember 31, 2014, Mr. Squires was not eligible to retire under our retirement plans, so figures listed for Mr. Squires under Retirement assume a change in controlvoluntary separation as defined in the regulations to Section 409A of the Internal Revenue Code. A “Specified Employee” is, generally speaking, one of the 50 most highly compensated employees, and the term is defined within the change in control agreement. If payment of any amounts were delayed because the Named Executive Officer was a Specified Employee, the delayed payment would have been credited with interest during the period from the termination date until the benefit was distributed at 120% of the short term Applicable Federal Rate determined under section 1274(d) of the Internal Revenue Code that was in effect on the Named Executive Officer’s termination date. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Benefits and Payments Upon Change in Control | |
| Charles W.
Moorman, IV1 |
| |
| John P.
Rathbone1 |
| |
| Deborah H.
Butler1 |
| |
| James A.
Hixon1 |
| |
| Mark D.
Manion1 |
| |
| Donald W.
Seale1 |
| |
| James A.
Squires1 |
| Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Severance Pay2 | | $ | 10,500,000 | | | $ | 4,410,000 | | | $ | 4,410,000 | | | $ | 4,410,000 | | | $ | 4,410,000 | | | $ | 4,410,000 | | | $ | 4,410,000 | | Long Term Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Share Units | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2011-2013 (performance period)3 | | $ | 3,845,953 | | | $ | 919,684 | | | $ | 919,684 | | | $ | 919,684 | | | $ | 919,684 | | | $ | 919,684 | | | $ | 919,684 | | 2012-2014 (performance period)3 | | $ | 3,218,896 | | | $ | 752,469 | | | $ | 752,469 | | | $ | 752,469 | | | $ | 752,469 | | | $ | 752,469 | | | $ | 752,469 | | Stock Options4 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Accelerated Dividends | | $ | 1,334,000 | | | $ | 315,000 | | | $ | 315,000 | | | $ | 315,000 | | | $ | 315,000 | | | $ | 315,000 | | | $ | 315,000 | | Restricted Stock5 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Deferred Compensation6* | | $ | 294,137 | | | $ | 923,902 | | | $ | 1,013,719 | | | $ | 653,390 | | | $ | 1,586,842 | | | $ | 2,230,836 | | | $ | 1,285,904 | | | | | | | | | | Benefits and Perquisites | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incremental Non-Qualified Pension7* | | $ | 19,732,000 | | | $ | 7,373,000 | | | $ | 8,379,000 | | | $ | 6,493,000 | | | $ | 8,998,000 | | | $ | 9,656,000 | | | $ | 6,006,000 | | Post-retirement health and welfare benefits* | | $ | 25,209 | | | $ | 25,209 | | | $ | 25,209 | | | $ | 25,209 | | | $ | 16,806 | | | $ | 25,209 | | | $ | 25,209 | | Life Insurance Proceeds | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Disability Benefits | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Vacation Pay | | $ | 96,154 | | | $ | 57,692 | | | $ | 57,692 | | | $ | 57,692 | | | $ | 57,692 | | | $ | 57,692 | | | $ | 57,692 | | Post-retirement life insurance8 | | $ | 0 | | | $ | 8,501 | | | $ | 16,135 | | | $ | 15,729 | | | $ | 9,555 | | | $ | 8,201 | | | $ | 7,399 | | Prorata Incentive Pay | | $ | 0 | | | $ | | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Excise Tax Gross-up on Severance Benefits9 | | $ | 18,602,267 | | | $ | 6,747,148 | | | $ | 8,904,907 | | | $ | 5,723,855 | | | $ | 8,305,448 | | | $ | 9,095,640 | | | $ | 7,424,044 | | | | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| Total | | $ | 57,648,616 | | | $ | 21,532,605 | | | $ | 24,793,815 | | | $ | 19,366,028 | | | $ | 25,371,496 | | | $ | 27,470,731 | | | $ | 21,203,401 | |
*Payable in accordance with the applicable plan.
1This analysis assumes that on December 31, 2012,2014,
| ● | For a Retirement, the executive retired as of that date; | | ● | For an Involuntary Separation, the executive’s employment was terminated as of that date due to the executive’s position being abolished in connection with a downsizing or internal restructuring (and the executive elected to retire if he or she is retirement eligible); | | ● | For a Death, the executive dies on that date; | | ● | For a Disability, the executive became disabled on that date; and | | ● | For a Change in Control, (i) a change in control of our company occurred, as defined in the applicable change in control agreements, and (ii) each of the above Named Executive Officer’s employment with us was terminated without cause. |
| Retirement | Involuntary
Separation | Death | Disability | Change in
Control | | | Charles W. Moorman, IV | | | | | | | | Severance Pay | | $1,538,462 | | | $10,500,000 | | | Performance Share Units | $9,395,550 | $9,395,550 | $9,395,550 | $9,395,550 | $10,694,092 | | | Unvested Stock Options | $10,567,075 | $10,567,075 | $10,567,075 | $10,567,075 | | | | Accelerated Dividends | | | | | $1,530,883 | | | Restricted Stock Units | $7,612,415 | $7,612,415 | $7,612,415 | $7,612,415 | | | | Deferred Compensation Equivalent | | | | | $213,740 | | | Pension Enhancement | | | | | $19,784,088 | | | Health and welfare benefits | $63,104 | $63,104 | $22,496 | $63,104 | $40,248 | | | Life Insurance Proceeds | | | $3,000,000 | | | | | Disability Benefits | | | | $500,000 | | | | Vacation Pay | $96,154 | $96,154 | $96,154 | $96,154 | $96,154 | | | Post retirement life insurance | | | | | | | | Excise Tax Gross-up on Severance Benefits | | | | | | | | TOTAL | $27,734,298 | $29,272,760 | $30,693,690 | $28,234,298 | $42,859,205 | | | James A. Squires | | | | | | | | Severance Pay | | $663,462 | | | $5,962,500 | | | Performance Share Units | | | $2,540,760 | $2,540,760 | $2,953,540 | | | Unvested Stock Options | | | $2,465,615 | $2,465,615 | | | | Accelerated Dividends | | | | | $435,001 | | | Restricted Stock Units | | | $1,970,788 | $1,970,788 | | | | Deferred Compensation Equivalent | | | | | $1,568,369 | | | Pension Enhancement | | | | | $8,339,976 | | | Health and welfare benefits | | $19,212 | $107,151 | $217,986 | $57,636 | | | Life Insurance Proceeds | | | $2,250,000 | | | | | Disability Benefits | | | | $375,000 | | | | Vacation Pay | $72,115 | $72,115 | $72,115 | $72,115 | $72,115 | | | Post retirement life insurance | | | | | | | | Excise Tax Gross-up on Severance Benefits | | | | | | | | TOTAL | $72,115 | $754,789 | $9,406,429 | $7,642,264 | $19,389,137 | |
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Table of Contents | EXECUTIVE COMPENSATION | | |
| Retirement | Involuntary
Separation | Death | Disability | Change in
Control | | Marta R. Stewart | | | | | | | Severance Pay | | $596,154 | | | $3,675,000 | | Performance Share Units | $917,545 | $917,545 | $917,545 | $917,545 | $1,131,453 | | Unvested Stock Options | $523,272 | $523,272 | $523,272 | $523,272 | | | Accelerated Dividends | | | | | $178,570 | | Restricted Stock Units | $726,714 | $726,714 | $726,714 | $726,714 | | | Deferred Compensation Equivalent | | | | | $60,955 | | Pension Enhancement | | | | | $4,001,033 | | Health and welfare benefits | $182,420 | $182,420 | $94,559 | $182,420 | $57,636 | | Life Insurance Proceeds | | | $1,500,000 | | | | Disability Benefits | | | | $250,000 | | | Vacation Pay | $48,077 | $48,077 | $48,077 | $48,077 | $48,077 | | Post retirement life insurance | | | | | | | Excise Tax Gross-up on Severance Benefits | | | | | | | TOTAL | $2,398,028 | $2,994,182 | $3,810,167 | $2,648,028 | $9,152,724 | | Deborah H. Butler | | | | | | | Severance Pay | | $853,846 | | | $4,410,000 | | Performance Share Units | $1,987,887 | $1,987,887 | $1,987,887 | $1,987,887 | $2,238,239 | | Unvested Stock Options | $2,465,615 | $2,465,615 | $2,465,615 | $2,465,615 | | | Accelerated Dividends | | | | | $330,874 | | Restricted Stock Units | $1,778,970 | $1,778,970 | $1,778,970 | $1,778,970 | | | Deferred Compensation Equivalent | | | | | $953,922 | | Pension Enhancement | | | | | $9,418,944 | | Health and welfare benefits | $91,282 | $91,282 | $22,735 | $91,282 | $28,656 | | Life Insurance Proceeds | | | $1,800,000 | | | | Disability Benefits | | | | $300,000 | | | Vacation Pay | $57,692 | $57,692 | $57,692 | $57,692 | $57,692 | | Post retirement life insurance | $6,621 | $6,621 | | $6,621 | $6,621 | | Excise Tax Gross-up on Severance Benefits | | | | | | | TOTAL | $6,388,067 | $7,241,913 | $8,112,899 | $6,688,067 | $17,444,948 | | Mark D. Manion | | | | | | | Severance Pay | | $923,077 | | | $4,410,000 | | Performance Share Units | $2,239,113 | $2,239,113 | $2,239,113 | $2,239,113 | $2,563,319 | | Unvested Stock Options | $2,465,615 | $2,465,615 | $2,465,615 | $2,465,615 | | | Accelerated Dividends | | | | | $378,252 | | Restricted Stock Units | $1,866,658 | $1,866,658 | $1,866,658 | $1,866,658 | | | Deferred Compensation Equivalent | | | | | $1,270,969 | | Pension Enhancement | | | | | $8,676,045 | | Health and welfare benefits | $118,724 | $118,724 | $69,954 | $118,724 | $26,952 | | Life Insurance Proceeds | | | $1,800,000 | | | | Disability Benefits | | | | $300,000 | | | Vacation Pay | $57,692 | $57,692 | $57,692 | $57,692 | $57,692 | | Post retirement life insurance | $4,984 | $4,984 | | $4,984 | $4,984 | | Excise Tax Gross-up on Severance Benefits | | | | | | | TOTAL | $6,752,786 | $7,675,863 | $8,499,032 | $7,052,786 | $17,388,213 |
Severance Pay
For an Involuntary Separation, these amounts represent two weeks of the above Named Executive Officer’s employment with us was terminated without cause.executive’s annual base salary for each year of service up to a maximum of 80 weeks (but not in excess of twice the annual amount of the executive’s salary payable in the 12-month period preceding the executive’s severance date). | 74 | | | | 2015 Proxy Statement |
| NORFOLK SOUTHERN CORPORATION |
2Table of Contents
| | EXECUTIVE COMPENSATION |
TheseFor a Change-in-Control, these amounts represent three times the sum of each Named Executive Officer’s base salary plus Executive Management Incentive Plan (“EMIP”)EMIP incentive pay. If the Named Executive Officer had elected to defer either a portion of salary or bonusannual incentive under the Executives’ Deferred Compensation Plan, then a corresponding portion of this amount would have been deferred and subsequently paid in accordance with the Named Executive Officer’s original deferral election rather than distributed in a lump sum.3Performance Share Units
TheseFor Retirement, Death or Disability, these amounts represent benefitsthe estimated dollar value of performance share units to be earned during the performance cycles ending December 31, 2015, and December 31, 2016, assuming an earnout of 55.8% for the grants of performance share units made in 2013 and 44.6% for the grants of performance share units made in 2014, and in each case based on the $109.61 closing market price of our common stock on December 31, 2014. Because the number of performance share units earned is determined based on a three-year performance period for each cycle, these percentages represent (i) the actual percentage achieved for each completed year in the performance cycle for the Return on Average Invested Capital and Operating Ratio metrics, where applicable, and the 50% target percentage achievement for each of these metrics for each uncompleted year in the performance period, and (ii) a 40% achievement for the Total Shareholder Return metric over the entire three-year performance period, reflecting the earnout if Norfolk Southern’s total stockholder return exceeds the median total stockholder return of the S&P 500 over the three-year performance cycle. Estimated amounts for the performance cycles ending December 31, 2014, and December 31, 2015, are also included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would forfeit these awards but for retirement or death benefit provisions under LTIP, we have included these awards here as well. If a participant retires, dies or becomes disabled before the end of the performance period, the awards are calculated and earned at the end of the performance period as if the participant had not retired or died; however, these awards are subject to forfeiture in the event the participant “engages in competing employment” following retirement and before the end of the performance period.
For Involuntary Separation, each of the named executive officers other than Mr. Squires was eligible to retire as of December 31, 2014; accordingly, had their employment been terminated by us or them on that date, each would have been entitled to the retirement benefit provisions under LTIP for their performance share units. For a Change in Control, these amounts represent a cash payment to which the Named Executive Officer would not otherwise be entitled absent a change in control. Values based on (i) the $61.84$109.61 closing market price of our common stock on December 30, 2012,31, 2014, and (ii) the average earnout for performance share units for the two most recently completed cycles (67.6%)of 57.7%, which is the assumed earnout required under the change-in-control agreements. See the Outstanding Equity Awards at Fiscal Year-End Table for each Named Executive Officer’s outstanding performance share unit awards. Performance share units are earned over a three-year cycle ending each December 31. SEC rules require that we assume a change in control occurred on the last day of our fiscal year. Therefore, our Named Executive Officers were fully vested in their performance share unit awards for the performance cycle ended December 31, 2012,2014, and these awards are excluded from the above amounts. Unvested Stock Options
For Retirement, Death and Disability, these amounts represent the value of the outstanding 2011, 2012 and 2013 unvested stock options for the Named Executive Officer for which vesting is accelerated to the date of his or her retirement, death, or disability. The value shown equals the difference between the exercise price of each option and the $109.61 closing market price of our common stock on December 31, 2014. Amounts in this column do not include the value of unexercised stock options held by the Named Executive Officers for which vesting would not be accelerated as a result of his or her retirement, death or disability. See the Outstanding Equity Awards at Fiscal Year-End Table for a complete list of each Named Executive Officer’s vested unexercised options. Under the retirement, death and disability benefit provisions contained in the LTIP, each option held by the Named Executive Officers will expire at the end of the term for which the option was granted. But for these provisions, all of their options would expire at the close of business on their last day of employment with us. For Involuntary Separation, each of the named executive officers other than Mr. Squires was eligible to retire as of December 31, 2014; accordingly, had their employment been terminated by us or them on that date, each would have been entitled to the retirement benefit provisions under LTIP for their unvested stock options. | | 75 | | NORFOLK SOUTHERN CORPORATION | | 2015 Proxy Statement |
4Table of ContentsExcludes
| EXECUTIVE COMPENSATION | | |
For a Change in Control, this table does not report the value of vested options held by each Named Executive Officer as of December 31, 2012.2014. Under each Named Executive Officer’s change-in-control agreement, in the event his or her employment with us is terminated in connection with a change in control, we are required to pay him or her the then current spread value of his or her vested options rather than require him or her to exercise them and sell the underlying shares. Based on the $61.84$109.61 closing market price of our common stock on December 30, 2012,31, 2014, the values of those options were as follows: Mr. Moorman, $5,102,550;$23,950,339; Mr. Rathbone, $1,305,546;Squires, $4,262,510; Ms. Stewart, $608,372; Ms. Butler, $377,400; Mr. Hixon, $1,487,230;$4,262,510; and Mr. Manion, $1,487,230; Mr. Seale, $1,487,230; and Mr. Squires, $650,040.$4,378,484. See the Outstanding Equity Awards at Fiscal Year-End Table for more information regarding these options. Unvested options do not provide for accelerated vesting at the time of a change in control and would be forfeited upon termination of their employment. Accordingly, options which were unvested as of December 31, 2012,2014, are excluded from these amounts. Restricted Stock Units
For Retirement, Death and Disability, these amounts represent the dollar value of restricted stock units based on the $109.61 closing market price of our common stock on December 31, 2014. These amounts are also included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would forfeit these awards but for retirement, death or disability benefit provisions of LTIP and their LTIP award agreements, we have included these amounts here as well. If a participant retires, dies or becomes disabled before the end of the restriction period, the awards are delivered at the end of the restriction period as if the participant had not retired, died or become disabled; however, these awards are subject to forfeiture in the event the participant “engages in competing employment” following retirement and before the end of the restriction period. For Involuntary Separation, each of the Named Executive Officers other than Mr. Squires was eligible to retire as of December 31, 2014; accordingly, had their employment been terminated by us or them on that date, each would have been entitled to the retirement benefit provisions under LTIP for their restricted stock units. 5TheFor a Change in Control, the change-in-control agreements do not provide for the acceleration of any unvested restricted shares or restricted stock units held by Named Executive Officers at the time their employment with us is terminated or upon a change in control. Under the terms of the Long-Term Incentive Plan (“LTIP”),LTIP, they will forfeit any unvested restricted shares and restricted stock units if their employment is terminated for any reason other than Retirement, Disability or death. The Committee has the authority under LTIP to waive any restrictions on restricted shares and restricted stock units.
6Deferred Compensation Equivalent
AmountFor a Change in Control, these amounts represent the cash payment that would have been payable when the participant reached age 65, as provided in the change in control agreements. This amount does not include the aggregate balance of the Named Executive Officer’s deferred compensation account as of December 31, 2012,2014, in which the Named Executive Officer is currently vested. See column (f) of the Nonqualified Deferred Compensation Table for this amount. If the change in control was not a change in control as defined in the regulations to Section 409A of the Internal Revenue Code, then any portion of the deferred compensation that was subject to Section 409A would have been payable at the time and in the form provided under the terms of the plan under which the Named Executive Officer earned the benefit, without any acceleration or other alteration in the time and form of payment as a result of the change in control.
7Pension Enhancement
RepresentsFor a Change in Control, these amounts represent the amount by which the Named Executive Officer’s pension benefit, as enhanced by the change-in-control agreement, exceeds the actuarial present value of his or her accumulated pension benefits as of December 31, 2012.2014. Amount does not include the actuarial present value of the Named Executive Officer’s accumulated pension benefits as of December 31, 2012.2014. See the Pension Benefits Table for a description of the pension benefits to which the Named Executive Officers are entitled upon their retirement.
Health and Welfare Benefits
For Retirement, Disability or a Change in Control, these amounts represent estimated medical benefits for the Named Executive Officers and their eligible dependents. For Involuntary Separation, each of the Named Executive Officers other than Mr. Squires was eligible to retire as of December 31, 2014; accordingly, each of them other than Mr. Squires could | 76 | | | | 2015 Proxy Statement |
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elect to retire and receive the same benefits as under the “Retirement” column. For involuntary separation for Mr. Squires, these amounts represent cost of one year of medical coverage for Mr. Squires and his eligible dependents to be paid by the Corporation in accordance with the Involuntary Separation Plan. For Death, these amounts represent estimated medical benefits for the eligible dependents of the Named Executive Officer. For a Change in Control, these amounts represent medical and dental benefits for a fixed period of time specified in the change in control agreements. Life Insurance Proceeds
These amounts represent the life insurance proceeds payable upon the death of the executive officer. In addition to the amounts listed in the table, if a Named Executive Officer died or was totally and permanently disabled for at least 12 months, in either case as a result of an accident that was covered under the insurance policy that provides benefits under the Executive Accident Plan, then the Named Executive Officer (in the case of disability) or his or her beneficiary (in the case of death) would receive a $400,000 lump sum payment from the insurance company. 8Post-Retirement Life Insurance
These amounts represent the remaining premiums required to be paid to fully fund each Named Executive Officer’s Life Insurance policy under our Executive Life Insurance Plan in the minimum number of level annual premiums allowable without causing the policy to violate Section 7702 of the Internal Revenue Code. The policy amounts are as follows: Mr. Moorman, $565,000; Ms. Stewart, $103,400; Ms. Butler, $300,000; and Mr. Manion, $410,000. In addition, each Named Executive Officer would be eligible for retiree life insurance coverage under the Corporation’s group life insurance program in the following amounts: Mr. Moorman and Mr. Squires $5,000; and Ms. Stewart, Ms. Butler and Mr. Manion, $50,000.
For a Change in Control, the change-in-control agreements obligate us to pay the premiums on the Named Executive Officers’ life insurance policies as if the Named Executive Officer terminated due to retirement under the Executive Life Insurance Plan. These No Excise Tax Gross-Up
In 2013, Norfolk Southern entered into amendments to its change-in-control agreements with the Named Executive Officers to eliminate the tax gross-ups that would have been payable on any Federal excise taxes on excess parachute payments. Each Named Executive Officer appointed since that time has signed an amendment agreeing to the elimination of this tax gross-up. | | 77 | | NORFOLK SOUTHERN CORPORATION | | 2015 Proxy Statement |
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Change-in-Control Agreements Generally We have entered into change-in-control agreements with a number of key executives, including our Named Executive Officers. A Named Executive Officer will only receive the benefits provided under these agreements if: | ● | a change in control of Norfolk Southern occurs,and
| | ● | within two years of the change in control, we terminate the Named Executive Officer’s employment for any reason other than for “cause,” death, total disability or mandatory retirement, or the Named Executive Officer terminates his or her employment with us for “good reason.” |
Definition of Change in Control Generally, under these agreements, a change in control is defined as: | ● | a merger, sale of all or substantially all of our assets or similar fundamental transaction which results in our stockholders holding less than 80% of the voting power of the combined company;
| | ● | a stockholder-approved consolidation or dissolution pursuant to a recommendation of our Board of Directors;
| | ● | a change in the composition of the Board of Directors that results in less than a majority of Board members having either (i) served on the Board for at least two years or (ii) been nominated or elected to be a director by at least two-thirds of directors who had at least two years of service at the time of the director’s nomination or election;
| | ● | any person or organization acquires more than 20% of our voting stock; or
| | ● | a determination by the Board that an event similar to those listed above has occurred or is imminent. |
As noted below, the Named Executive Officers are entitled to accelerated payouts of amounts representdeferred under the remaining premiums required to be paid to fully fund each policyOfficers’ Deferred Compensation Plan and the Executives’ Deferred Compensation Plan (“EDCP”) upon a change in control. For amounts deferred after 2004 under the EDCP, only events described above that also constitute a change in control as defined in the minimum number of level annual premiums allowable without causing the policyregulations to violate Section 7702409A of the Internal Revenue Code.Code will result in accelerated distribution of those amounts. Benefits Payable Upon Termination Following a Change in Control Under our change-in-control agreements, the Named Executive Officers who become entitled to the benefits under those agreements are generally entitled to receive: | ● | three times their annual base salary plus incentive pay;
| | ● | accrued but unpaid compensation;
| | ● | a cash payment for unearned performance share units awarded and as to which the performance cycle has not been completed;
| | ● | all dividend equivalents to which they would have been entitled had their employment not been terminated;
| | ● | early payout of compensation that was deferred under our nonqualified deferred compensation plans and a cash payment equal to the present value of the deferred compensation that would have been payable if the participant retired at age 65, as provided by the change in control agreements;
| | ● | accrued pension benefits, as modified by years of service and average final compensation enhancements provided by the change-in-control agreements;
| | ● | unused vacation for the year of termination, plus vacation for the following year;
| | ● | continued payment of premiums on the Named Executive Officer’s life insurance policy under our Executive Life Insurance Plan; and
| | ● | continued medical and dental benefits, and $50,000 in group-term life insurance coverage, for a specified number of years but subject to termination if the Named Executive Officer receives substantially similar benefits from another employer after the termination of employment. |
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9These amounts are payable as and when the tax is imposed and paid. These amounts do not take into account potential mitigation of our excise tax gross-up obligations for those portions of the above compensation that may be determinedPrior to be reasonable compensation or are being paid in consideration of the non-competition covenants contained in the change-in-control agreements. During 2012,2013, the Named Executive Officers were generally entitled to receive a payment in an amount sufficient to make them whole taxes attributable tofor any Federal excise tax on excess parachute payments. In January 2013, the CorporationNorfolk Southern entered into amendments to its change-in-controlchange-incontrol agreements with the Named Executive Officers to eliminate this excise tax gross-up.
If we had terminated the Named Executive Officer’s employment for reasons described below under “Events Triggering Change in Control Payments,” these benefits would generally have been payable in a lump sum within ten business days of termination. However, any Severance Pay, Performance Share Unit Equivalent, Accelerated Dividend Equivalent, Vacation Pay and Prorata Incentive Pay would have been payable no earlier than six months after the Named Executive Officer’s termination date if the Named Executive Officer was a “Specified Employee” on his or her termination date and if the change in control was not a change in control as defined in the regulations to Section 409A of the Internal Revenue Code. A “Specified Employee” is one of the 50 most highly compensated employees, as defined within the change in control agreement. If payment of any amounts were delayed because the Named Executive Officer was a Specified Employee, the delayed payment would have been credited with interest during the period from the termination date until the benefit was distributed at 120% of the short term Applicable Federal Rate determined under section 1274(d) of the Internal Revenue Code that was in effect on the Named Executive Officer’s termination date. Events Triggering Change in Control Payments If we terminate a Named Executive Officer’s employment with us for “cause,” we will not be required to pay the benefits provided under his or her change-in-control agreement. “Cause” is defined as any of the following if the result of the same is materially harmful to us: | ● | · | | an intentional act of fraud, embezzlement or theft in connection with the executive’s duties or in the course of his or her employment with us;
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| ● | · | | intentional wrongful damage to our property;
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| ● | · | | intentional wrongful disclosure of secret processes or of our confidential information; or
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| ● | · | | intentional violation of our Code of Ethics. |
In addition, if a Named Executive Officer terminates employment with us within two years of a change in control for any of the following “good reasons,” we are required to pay the Named Executive Officer the benefits provided under his or her change-in-control agreement: | ● | · | | the Named Executive Officer is not elected or reelected to the office held immediately prior to the change in control, or—if serving as a director—he or she is removed as a director;
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| ● | · | | the Named Executive Officer’s salary or bonus opportunity is materially reduced below the amounts in effect prior to the change in control;
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| ● | · | | we terminate or materially reduce the value or scope of the Named Executive Officer’s perquisites, benefits and service credit for benefits provided under any employee retirement income or welfare benefit policies, plans, programs or arrangements in which he or she is participating immediately prior to the change in control and which have substantial value;
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| ● | · | | the Named Executive Officer determines in good faith that following the change in control, he or she has been rendered substantially unable to carry out or has suffered a substantial reduction in any of the substantial authorities, powers, functions, responsibilities or duties attached to the position he or she held immediately prior to the change in control;
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| ● | · | | the successor to the change in control does not assume all of our duties and obligations under the change-in-control agreement;
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| ● | · | | we require that the Named Executive Officer relocate his or her principal location of work in excess of 50 miles from his or her employment location immediately prior to the change in control, or that the Named Executive Officer travel away from his or her office significantly more than was required immediately prior to the change in control; or
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| ● | · | | there is any material breach of the change-in-control agreement by us or our successor. |
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Requirement Not to Compete In exchange for the benefits provided under the change-in-control agreements and to help encourage management continuity, the Named Executive Officers agreed not to engage in competing employment for a period of three years from the date they originally executed the agreements and, if they accept benefits payable or provided under the agreements, they may not engage in competing employment for a period of one year from the date they are terminated following the change in control. “Competing employment” for this purpose is the provision of services of any type, kind or nature and in any capacity to any organization or person that is, that controls, that is controlled by, or one of whose significant customers or clients is (i) a Class I railroad operating in the United States, Canada or Mexico, (ii) an interstate trucking company operating in the United States, Canada or Mexico or (iii) a provider or arranger of intermodal services of any kind or nature, any portion of which services is provided or arranged in the United States. Retirement As of December 31, 2012,2014, all Named Executive Officers other than Mr. Squires were of retirement age under our retirement plans. See “Termination for Any Other Reason” below for a discussion of the benefits to which Mr. Squires would have been entitled had he retired as of December 31, 2012.2014. Messrs. Moorman Rathbone,and Manion and SealeMs. Butler were eligible to retire as of December 31, 2012,2014, with unreduced pension benefits under our retirement plans. Ms. Butler and Mr. Hixon wereStewart was eligible to retire and choose to receive either (i) a temporary retirement benefit not to exceed $500 per month until reaching age 60, and thereafter the full amount of the accrued pension benefits disclosed in the Pension Benefits Table, or (ii) a reduced amount of the pension benefits disclosed in the Pension Benefits Table. Assuming each of the Named Executive Officers other than Mr. Squires retired as of December 31, 2012, inIn addition to these pension benefits, andeach Named Executive Officer would have been entitled to receive the deferred compensation amounts disclosed in the Nonqualified Deferred Compensation Table, each of them would have been eligible for the following benefits:Table. | | | | | | | | | | | | | | | | | | | | | | | | | Name
| | Accelerated Vesting
of Stock Options1
| | | Restricted
Stock Units2
| | | Performance
Share Units3
| | | Medical Benefits4
| | | Life Insurance5
| | | Total
| | Charles W. Moorman, IV | | $ | 4,765,063 | | | $ | 6,740,560 | | | $ | 5,858,412 | | | $ | 182,506 | | | $ | 0 | | | $ | 17,546,541 | | John P. Rathbone | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 101,893 | | | $ | 8,501 | | | $ | 4,396,755 | | Deborah H. Butler | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 154,656 | | | $ | 16,135 | | | $ | 4,457,152 | | James A. Hixon | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 118,410 | | | $ | 15,729 | | | $ | 4,420,500 | | Mark D. Manion | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 222,001 | | | $ | 9,555 | | | $ | 4,517,917 | | Donald W. Seale | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 248,781 | | | $ | 8,201 | | | $ | 4,543,343 | |
1Represents the value of the outstanding 2009 and 2010 unvested stock options for the Named Executive Officer for which vesting is accelerated to the date of his or her retirement. The value shown equals the difference between the exercise price of each option and the $61.84 closing market price of our common stock on December 31, 2012. No value was attributed to accelerated vesting of the stock options granted in 2011 since their exercise price was greater than $61.84. Amounts in this column do not include the value of unexercised stock options held by the Named Executive Officers for which vesting would not be accelerated as a result of his or her retirement. See the Outstanding Equity Awards at Fiscal Year-End Table for a complete list of each Named Executive Officer’s vested unexercised options. Under the retirement provisions contained in the LTIP, each option held by the Named Executive Officers will expire at the end of the term for which the option was granted. But for these retirement provisions, all of their options would expire at the close of business on their last day of employment with us.
2Represents the dollar value of restricted stock units based on the $61.84 closing market price of our common stock on December 30, 2012. These amounts are also included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would forfeit these awards but for retirement provisions of LTIP and their LTIP award agreements, we have
included these amounts here as well. If a participant retires before the end of the restriction period, the awards are delivered at the end of the restriction period as if the participant had not retired; however, these awards are subject to forfeiture in the event the participant “engages in competing employment” following retirement and before the end of the restriction period.
3Represents the estimated dollar value of performance share units to be earned during the performance cycles ending December 31, 2013, and December 31, 2014, assuming an earnout of 59.2% for the grants of performance share units made in 2011 and 52.3% for the grants of performance share units made in 2012, and in each case based on the $61.84 closing market price of our common stock on December 31, 2012. Because the number of performance share units earned is determined based on a three-year performance period for each cycle, these percentages represent (i) the actual percentage achieved for each completed year in the performance cycle for the Return on Average Invested Capital and Operating Ratio metrics, and the 50% target percentage achievement for each of these metrics for each uncompleted year in the performance period, and (ii) a 40% achievement for the Total Shareholder Return metric over the entire three-year performance period, reflecting the earnout if Norfolk Southern’s total stockholder return exceeds the median total stockholder return of the S&P 500 over the three-year performance cycle. Estimated amounts for the performance cycles ending December 31, 2012, and December 31, 2013, are also included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would forfeit these awards but for retirement provisions under LTIP, we have included these awards here as well. If a participant retires before the end of the performance period, the awards are calculated and earned at the end of the performance period as if the participant had not retired; however, these awards are subject to forfeiture in the event the participant “engages in competing employment” following retirement and before the end of the performance period.
4Represents estimated retiree medical benefits for the Named Executive Officers and their eligible dependents.
5Represents the remaining cost of individually owned executive life insurance policies as of December 31, 2012, which policy amounts are as follows: Mr. Moorman, $565,000; Ms. Butler, $300,000; Mr. Hixon, $570,000; Mr. Manion, $410,000; Mr. Rathbone, $500,000; and Mr. Seale, $550,000. In addition, each Named Executive Officer would be eligible for retiree life insurance coverage under the Corporation’s group life insurance program in the following amounts: Mr. Moorman, $5,000, Ms. Butler and Messrs. Hixon, Manion, Rathbone and Seale, $50,000.
Death or Disability Death Death
If any of the Named Executive Officers had died on December 31, 2012,2014, that Named Executive Officer’s spouse would have been eligible for the pension benefits disclosed in the Pension Benefit Table (reduced on account of the Named Executive Officer’s death) and the Named Executive Officer’s designated beneficiaries would have been eligible for the deferred compensation benefits disclosed in the Non-QualifiedNonqualified Deferred Compensation Table. In addition, each Named Executive Officer’s spouse and/or designated beneficiaries would have been eligible for the following benefits: | | | | | | | | | | | | | | | | | | | | | | | | | Name
| | Accelerated
Vesting of Stock
Options1
| | | Restricted
Stock Units2
| | | Performance
Share Units3
| | | Medical Benefits
| | | Life Insurance
Proceeds
| | | Total4
| | Charles W. Moorman, IV | | $ | 4,765,063 | | | $ | 6,740,560 | | | $ | 5,858,412 | | | $ | 80,614 | | | $ | 3,000,000 | | | $ | 20,444,649 | | John P. Rathbone | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 0 | | | $ | 1,800,000 | | | $ | 6,086,361 | | Deborah H. Butler | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 23,000 | | | $ | 1,800,000 | | | $ | 6,109,361 | | James A. Hixon | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 4,000 | | | $ | 1,800,000 | | | $ | 6,090,361 | | Mark D. Manion | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 113,814 | | | $ | 1,800,000 | | | $ | 6,200,175 | | Donald W. Seale | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 140,592 | | | $ | 1,800,000 | | | $ | 6,226,953 | | James A. Squires | | $ | 1,229,115 | | | $ | 1,669,680 | | | $ | 1,387,566 | | | $ | 153,525 | | | $ | 1,800,000 | | | $ | 6,239,886 | |
1DisabilityRepresents the value of the outstanding 2009 and 2010 unvested stock options for the Named Executive Officer for which vesting is accelerated to the date of his or her death. The value shown equals the difference between the exercise price of each option and the $61.84 closing market price of our common stock on December 31, 2012. No value was attributed to accelerated vesting of the stock options granted in 2011 since their exercise price was greater than $61.84. Amounts in this column do not include the value of unexercised stock options held by the Named Executive Officers for which vesting would not be accelerated as a result of his or her death. See the Outstanding Equity Awards at Fiscal Year-End Table for a complete list of each Named Executive Officer’s vested unexercised options. Under the death benefit provisions contained in the LTIP agreements, each option held by the Named Executive Officers will expire at the end of the term for which the option was granted. But for these death benefit provisions, all of their options would expire at the close of business on their last day of employment with us.
2Represents the dollar value of restricted stock units based on the $61.84 closing market price of our common stock on December 30, 2012. These amounts are also included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would forfeit these awards but for death benefit provisions of LTIP and their LTIP award agreements, we have included these amounts here as well. If a participant dies before the end of the restriction period, the awards are delivered at the end of the restriction period as if the participant had not died.
3Represents the estimated dollar value of performance share units to be earned during the performance cycles ending December 31, 2013, and December 31, 2014, assuming an earnout of 59.2% for the grants of performance share units made in 2011 and 52.3% for the grants of performance share units made in 2012, and in each case based on the $61.84 closing market price of our common stock on December 31, 2012. Because the number of performance share units earned is determined based on a three-year performance period for each cycle, these percentages represent (i) the actual percentage achieved for each completed year in the performance cycle for the Return on Average Invested Capital and Operating Ratio metrics, and the 50% target percentage achievement for each of these metrics for each uncompleted year in the performance period, and (ii) a 40% achievement for the Total Shareholder Return metric over the entire three-year performance period, reflecting the earnout if Norfolk Southern’s total stockholder return exceeds the median total stockholder return of the S&P 500 over the three-year performance cycle. Estimated amounts for the performance cycles ending December 31, 2012, and December 31, 2013, are also included in the Outstanding Equity Awards at Fiscal Year-End Table. However, because the Named Executive Officers would forfeit these awards but for death benefit provisions under LTIP and their LTIP award agreements, we have included these awards here as well. If a participant dies before the end of the performance period, the awards are calculated and earned at the end of the performance period as if the participant had not died.
4In addition to the amounts listed in the table, if a Named Executive Officer died or was totally and permanently disabled for at least 12 months, in either case as a result of an accident that was covered under the insurance policy that provides benefits under the Executive Accident Plan, then the Named Executive Officer (in the case of disability) or his or her beneficiary (in the case of death) would receive a $400,000 lump sum payment from the insurance company.
Disability
If the Named Executive Officers had become disabled on December 31, 2012,2014, each of them other than Mr. Squires could elect to retire and receive the benefits set forth above under “Retirement—Current Executive Officers.“Retirement.” For Mr. Squires and any other Named Executive Officer electing not to retire, each would be entitled to disability benefits in an amount equal to one-half of the Named Executive Officer’s base salary. Under disability benefit provisions contained in LTIP and the LTIP agreements, each option held by the Named Executive Officers would expire at the end of the term for which the option was granted and the restrictions on each restricted share and restricted stock unit held by the Named Executive Officers would lapse upon the expiration of the applicable restriction period; but for these disability benefit provisions, the Named Executive Officers would forfeit all unexercised options and unvested restricted shares and restricted stock units. See the Outstanding Equity Awards at Fiscal Year-End Table for a complete list of options, restricted shares and restricted stock units held by the Named Executive Officers.
Termination for Any Other Reason As noted above, each of the Named Executive Officers other than Mr. Squires was eligible to retire as of December 31, 2012;2014; accordingly, had their employment been terminated by us or by them as of that date, each would have been entitled to the benefits set forth above under “Retirement—Current Executive Officers.“Retirement.” Because Mr. Squires had at least 20 years of service as of December 31, 2012,2014, had he terminated employment as of that date, he would have been eligible for either (i) the full amount of his accrued pension benefit disclosed in the Pension Benefits Table beginning at age 60, or (ii) the pension benefit disclosed in the Pension Benefits Table reduced by 1/360th for each month he was under age 60 at the time of retirement, with benefits beginning at the earliest upon Mr. Squires reaching age 55. In addition to these pension benefits, each Named Executive Officer would have been entitled to receive the deferred compensation benefits fully disclosed in the Nonqualified Deferred Compensation Table. We also have a Severance Pay Plan. Under the Severance Pay Plan, if a Named Executive Officer’s employment had been terminated as of December 31, 2012,2014, due to the executive’s position being abolished in connection with downsizing or internal restructuring, the Named Executive Officer would have been entitled to the following benefits: | ● | · | | two weeks of the executive’s annual base salary for each year of service up to a maximum of 80 weeks (but not in excess of twice the annual amount of the executive’s salary payable in the 12-month period preceding the executive’s severance date); |
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Table of Contents | | · | EXECUTIVE COMPENSATION |
| ● | continued health care benefits for the executive and the executive’s eligible dependents until the earlier of (a) 12 months from the severance date, or (b) until those health care benefits would otherwise terminate under the continuation of coverage provisions of the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (COBRA); and
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| ● | · | | outplacement assistance for up to 90 days. |
If the Named Executive Officer’s employment had been terminated by us for a reason other than as described above, then the Named Executive Officer would have been entitled to one week of the executive’s annual base salary for each year of service up to a maximum of 26 weeks, with the amount capped at two times the executive’s salary paid in the 12-month period preceding the executive’s severance date. The Named Executive Officer would not have been entitled to Severance Pay Plan benefits if terminated for reasons including, without limitation, the following: indictment, conviction of, or entering a plea ofnolo contendere to any felony; commission of theft, fraud, or embezzlement, resulting in gain or personal enrichment; failure or refusal to substantially perform his or her duties for the Corporation;Norfolk Southern; conduct deemed so detrimental to the interests of the CorporationNorfolk Southern that, in the judgment of the Plan Administrator, it should result in the termination not being deemed a severance; being unable to substantially perform his or her duties because of a physical or mental condition, including a condition that entitles him or her to benefits under any sick pay or disability income policy or program; refusing to transfer to another nonagreement position in the same department; or refusing to transfer to another nonagreement position in a different department assigned to a pay band with the same or higher bonus opportunity. Directors’ Charitable Award Program Benefit In addition to the benefits described above, Mr. Moorman continues to beand Mr. Squires are entitled to nominate one or more tax-exempt institutions to receive up to $500,000 from Norfolk Southern following histheir death. We continue to pay the life insurance premiums we use to partly fund this program. See “Narrative to Non-Employee Director Compensation Table—Directors’ Charitable Award Program” above for more information regarding this program. Non-Competition In addition to restrictions imposed under our change-in-control agreements, awards under LTIP were—beginning in 2006—made subject to forfeiture in the event the Named Executive Officer “engages in competing employment” for a period of time following termination. For these purposes, “engages in competing employment” means working for or providing services to any of our competitors in North American markets in which we compete. Future Severance Benefits Policy In 2002, our Board of Directors agreed to abide by a stockholder approved proposal that future severance agreements with senior executives that exceed 2.99 times the sum of the executive’s base salary plus bonus require stockholder approval. COMPENSATION POLICY
RISK ASSESSMENT
The Committee assessed the risks arising from Norfolk Southern’s compensation policies and practices for all employees to determine whether such policies or practices are reasonably likely to have a material adverse effect on the company. As part of this assessment, in 2013,2015, the Committee engaged Pay Governance to conduct a compensation risk analysis and report its findings to the Committee. Based on the observations and findings of Pay Governance observed that because Norfolk Southern’s compensation policies and practices use performance metrics that correlate to long-term creation of shareholder value and that are applied consistently to all nonagreement employees, the actions of any individual or business unit are not likely to significantly affect the performance metrics or result in risks or rewards that vary significantly from the overall risk and reward structure of Norfolk Southern. For this reason,Governance’s assessment, as well as its own considerations, the Committee determined that Norfolk Southern’s compensation policies and practices are not reasonably likely to have a material adverse effect on the company.
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Table of Contents | STOCKHOLDER PROPOSAL DEADLINES | | |
COMPENSATION COMMITTEE REPORT The Compensation Committee of our Board of Directors oversees our compensation program on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this proxy statement. In reliance on the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our annual reportAnnual Report on Form 10-K for the fiscal year ended December 31, 2012,2014, and our proxy statement to be filed in connection with our 20132015 Annual Meeting of Stockholders, each of which will be filed with the SEC. | 2014 Members of the Compensation Committee | | Daniel A. Carp,Chair
Thomas D. Bell, Jr.,Member
Erskine B. Bowles,Member
Wesley G. Bush,Member
Steven F. Leer,Member |
2012 Members of the Compensation Committee
Daniel A. Carp, ChairGerald L. Baliles, Member
Erskine B. Bowles,Member
Wesley G. Bush, Member*
Alston D. Correll, Member
Steven F. Leer, Member
* Joined the Committee effective February 27, 2012
STOCKHOLDER PROPOSALSPROPOSAL DEADLINES Stockholders are entitled to submit proposals on matters appropriate for stockholder action consistent with SEC regulations and with our Bylaws. Any such proposal for the 20142016 Annual Meeting of Stockholders must comply with applicable regulations and bereceived by the Corporate Secretary, Norfolk Southern Corporation, Three Commercial Place, 13th Floor, Norfolk, Virginia 23510-9219, as follows: To be eligible for inclusion in our proxy statement and form of proxy, itstockholder proposals must be received no later than November 20, 2013;26, 2015; or to be eligible to be presented from the floor for vote at the meeting (but not intended for inclusion in our proxy materials), itstockholder proposals must be received during the period that begins November 30, 2013December 6, 2015, and ends February 8, 2014.14, 2016. | By order of the Board of Directors, | | HOWARD D. McFADDEN
| | DENISE W. HUTSON | | | Corporate Secretary | |
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Table of Contents Norfolk Southern Corporation Our Vision
Be the safest,
most customer-focused and successful
transportation company in the world
2014 Annual Report 
2015 Proxy Shareholder Online Voting
(Registered Stockholders) 
2015 Proxy Shareholder Online Voting
(Beneficial Stockholders) 
Table of Contents APPENDIXAppendix A
NORFOLK SOUTHERN CORPORATION
EXECUTIVE MANAGEMENT INCENTIVE PLAN
AS AMENDED SUBJECT TO SHAREHOLDER APPROVAL Article I, Section 2I. PURPOSE OF THE PLAN
It is the purpose of the Norfolk Southern Corporation Bylaws is replaced in its entiretyExecutive Management Incentive Plan (“Plan”) to enhance increased profitability for Norfolk Southern Corporation (“Corporation”) by rewarding certain officers elected by the following: ARTICLE I
Stockholders’ Meetings
SECTION 2. Special Meetings. Special meetingsBoard of Directors of Norfolk Southern Corporation and its affiliates with a bonus for collectively striving to attain and surpass financial objectives. The Corporation intends that the Plan comply with the requirements of Section 162(m) of the stockholdersInternal Revenue Code of 1986, as amended (“Code”) and intends that compensation paid under the Plan qualify as performance-based compensation under Code Section 162(m). Notwithstanding the preceding sentence, the Corporation reserves the right to pay compensation under the Plan that does not qualify as performance-based compensation under Code Section 162(m), as circumstances may warrant.
Section II. ADMINISTRATION OF THE PLAN The Compensation Committee or any other committee of the Board of Directors of Norfolk Southern Corporation which is authorized to determine bonus awards under the Plan (“Committee”) shall administer and interpret this Plan and, from time to time, adopt such rules and regulations and make such recommendations to the Board of Directors concerning Plan changes as are deemed necessary to insure effective implementation of this Plan. It is intended that each member of the Committee qualify as an Outside Directors (as defined in Treasury Regulation § 1.162-27(e)(3)) and as an “independent director” under the rules of the New York Stock Exchange. No executive may simultaneously participate in more than one Norfolk Southern Corporation Incentive Group. An executive must reside in the United States or Canada in order to participate in the Plan. Section III. ESTABLISHMENT OF PERFORMANCE STANDARDS Not later than the first 90 days of an incentive year, the Committee shall establish: | A. | The Incentive Groups for the incentive year, which Groups shall consist of Board-elected officers at the level of Vice President and above, | | | | | B. | The bonus level for each Incentive Group for the incentive year, and | | | | C. | The performance standard or standards for the Corporation for the incentive year, the outcome of which must be substantially uncertain at the time the standard or standards are established. The performance standards shall be based on one or more, or any combination, of the following business criteria, selected by the Committee, which may be applied on a corporate, department or division level, which may be measured on an absolute or relative basis, or established as a measure of growth: earnings measures (including net income, earnings per share, income from continuing operations, income before income taxes, income from railway operations); return measures (including net income divided by total assets, return on shareholder equity, return on average invested capital); service measures (including connection performance, train performance, plan adherence); cash flow measures (including operating cash flow, free cash flow); productivity measures (including total operating expense per thousand gross ton miles or revenue ton miles, total operating revenue per employee, total operating expense per employee, gross ton miles or revenue ton miles per employee, carloads per employee, revenue ton miles per mile of road operated, total operating expense per carload, revenue ton miles per carload, gross ton miles or revenue ton miles per train hour, percent of loaded-to-total car miles, |
Table of Contents | | network performance); fair market value of shares of the Corporation's Common Stock; revenue measures; expense measures; operating ratio measures; customer satisfaction measures; working capital measures; cost control measures; economic value added measures; and safety measures. If the Committee establishes performance standards using more than one of the aforesaid business criteria, the Committee shall assign a weighting percentage to each business criterion or combination thereof; the sum of the weighting percentages shall equal 100%. | | | | | | The Committee may establish performance standards solely with respect to the Corporation’s performance without regard to the performance of other Corporations or indices, or by comparison of the Corporation’s performance to the performance of a published or special index deemed applicable by the Committee including but not limited to, the Standard & Poor's 500 Stock Index or an index based on a group of comparative companies. |
Section IV. TYPE OF INCENTIVE BONUS On or before a date which shall not be later than the date that is six months prior to the last day of the incentive year to which the performance standards established pursuant to Section III apply for any incentive bonus that is performance-based compensation, as defined in Code Section 409A, and which shall not be later than the last day of the year prior to the incentive year to which the performance standards established pursuant to Section III apply for any incentive bonus that is not performance-based compensation, as defined in Code Section 409A, each participant must elect to receive any incentive bonus which may be awarded to him or her for the incentive year either 100% cash or deferred in whole or in part. If the participant elects to receive 100% cash, the entire amount of the bonus for the incentive year shall be helddistributed to the participant, or to his or her estate in the event of the participant’s death, on or before March 1 of the year following the incentive year. If deferred in whole or in part, the amount deferred shall be allocated to the Norfolk Southern Corporation Executives’ Deferred Compensation Plan (and such deferrals will be governed by the provisions of that plan) on or before March 1 of the year following the incentive year and the remainder, if any, shall be distributed in cash to the participant, or to his or her estate in the event of the participant’s death, on or before March 2 of the year following the incentive year. Failure on the part of the participant to elect a deferral by the date specified, either in whole or in part for the incentive year, shall be deemed to constitute an election by such participant to receive the entire incentive bonus for the incentive year as a cash bonus. Section V. BONUS AWARDS At the end of the incentive year, the Committee shall certify in writing to what extent the performance standards established pursuant to Section III have been achieved during the incentive year and shall determine the Corporate Performance Factor based on such achievement. In determining the Corporate Performance Factor, special charges and restructuring charges, and unusual or infrequent accounting adjustments which are significant, and restatements or reclassifications, all as determined in accordance with Generally Accepted Accounting Principles, which would have the effect of reducing the Corporate Performance Factor shall be excluded, and which would have the effect of increasing the Corporate Performance Factor shall be included, unless the Committee shall determine otherwise. The Committee shall further have the discretion, in determining whether the Corporate Performance Factor has been achieved, to include or exclude the any of the following events: (a) whenever calledlitigation, claims, judgments, settlements or loss contingencies, (b) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, or (c) accruals of any amounts for payment under this Plan or any other compensation arrangement maintained by the Corporation. Each participant shall be eligible to receive a bonus award equal to the product of the Corporate Performance Factor times the participant’s bonus level times the participant’s total salary paid during the incentive year. The Committee may review the performance of any of the Corporation’s Covered Employees, as defined in Code Section 162(m), and may, at its discretion, reduce the bonus award that is paid to any such
Table of Contents Covered Employee. The Corporation’s chief executive officer may review the performance of any participant who is not a Covered Employee and may, at his discretion, reduce or increase the bonus award that is paid to any such participant, provided that any increase shall not exceed 25 percent of the amount calculated under the first sentence of this paragraph. The bonus award payable to a participant for an incentive year shall not exceed the lesser of: (1) three tenths of one percent (0.3%) of the Corporation’s income from railway operations for the incentive year; or (2) $10,000,000. If the employment of a participant who is employed by Norfolk Southern Corporation or its affiliates during the incentive year terminates prior to the end of such year by reason of (1) death, or (2) normal retirement, early retirement or total disability under applicable Norfolk Southern Corporation plans and policies, then the phrase "total salary paid during the incentive year" means base salary paid to the participant during that portion of such year of employment prior to his or her termination and through the end of the calendar month or payroll period in which employment terminates but excludes any cash paid with respect to such participant's unused vacation. No incentive bonus for any incentive year shall be awarded or paid to any participant whose employment with Norfolk Southern Corporation and all its affiliates terminates before the end of such incentive year for a reason other than one of those specifically stated in the preceding sentence. If a participant becomes eligible for the Plan during the year or becomes eligible for a different Incentive Group, then the amount of the award shall be adjusted proportionally to reflect such changes. Section VI. REIMBURSEMENT OF EXCESS BONUS TO CORPORATION The Board of Directors may require reimbursement of all or any portion of an excess bonus paid under the Plan if (a) financial results are restated due to the material noncompliance of the Corporation with any financial reporting requirement under the securities laws, and (b) an excess bonus was distributed within the three-year period prior to the date the applicable restatement was disclosed. For this purpose, “excess bonus” means the positive difference, if any, between (i) the bonus paid to the participant and (ii) the bonus that would have been paid to the participant had the bonus been calculated on the correct Corporate Performance Factor using the restated financial results. The Corporation will not be required to award an additional bonus to a participant if a restated Corporate Performance Factor would result in a higher bonus payment. Any bonus to a participant under this Plan is subject to reduction, forfeiture, or recoupment to the extent provided under Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or as may be provided under any other applicable law. Section VII. NO GUARANTEE OF CONTINUANCE OF EMPLOYMENT Nothing contained in this Plan or in any designation of a participant hereunder shall constitute or be deemed to constitute any evidence of an agreement or obligation on the part of Norfolk Southern Corporation or its affiliates to continue to employ any such participant for any period whatsoever. Section VIII. AMENDMENT TO AND TERMINATION OF PLAN This Plan may be amended by written action of the chief executive officer of the Corporation to effect changes which are, in his or her sole judgment and discretion, ministerial, substantively administrative, or necessary to comply with statutory or other legally mandated requirements, and the implementation of which does not result in a material cost to the Corporation. All other amendments to this Plan shall be made by resolution duly adopted by the Board of Directors. This Plan may be amended in any manner or terminated at any time, except that no such amendment or termination shall deprive a participant of any rights hereunder theretofore legally accrued, and no such termination shall be effective for the year in which the Board of Directors adopts a resolution terminating this Plan.
Table of Contents Section IX. FUNDING SOURCE All amounts that are payable under this Plan shall be paid for from the general assets of the Corporation. There is no trust or other fund from which amounts under this Plan shall be paid. Section X. GOVERNING LAW This Plan shall be construed, administered and enforced according to the laws of the Commonwealth of Virginia, to the extent not superseded by the Code or other federal law. Section XI. NON-ASSIGNABILITY OF BENEFITS A participant’s right to receive a payment hereunder is not subject in any manner to anticipation, allocation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to accomplish any of these acts shall be void.
Table of Contents Appendix B NORFOLK SOUTHERN CORPORATION
LONG-TERM INCENTIVE PLAN
AS AMENDED SUBJECT TO SHAREHOLDER APPROVAL Section 1. PURPOSE The purpose of the Long-Term Incentive Plan (“Plan”), as amended, is to promote the success of Norfolk Southern Corporation (the “Corporation”) and to provide an opportunity for non-employee directors, officers and other employees of the Corporation and its Subsidiary Companies (as hereinafter defined) to acquire or increase a proprietary interest in the Corporation and thereby to provide an additional incentive to devote their maximum efforts and skills to the advancement, betterment, and prosperity of the Corporation and its stockholders. The Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, performance share units, performance shares, restricted shares, and restricted stock units, in accordance with the terms and conditions set forth below. The Corporation intends that the Plan comply with the requirements of Internal Revenue Code Section 162(m) and applicable treasury regulations thereunder and intends that compensation paid under the Plan qualify as performance-based compensation under Code Section 162(m). Notwithstanding the preceding sentence, the Corporation reserves the right to pay compensation under the Plan that does not qualify as performance-based compensation under Code Section 162(m), as circumstances may warrant. The Plan, as amended, is intended, and shall be construed, to comply with the requirements of Code Section 409A. Section 2. DEFINITIONS The terms used herein shall have the following meanings unless otherwise specified or unless a different meaning is clearly required by the context: | Award | Any one or more of the following: Incentive Stock Option; Non-qualified Stock Option; Stock Appreciation Right; Restricted Shares; Restricted Stock Units; Performance Share Units; and Performance Shares. | | | Award Agreement | A written agreement, made in a form approved by the Committee and consistent with the terms of the Plan, that specifies the terms, conditions and limitations of each Award. | | | Award Date | The later of the date on which the Committee or the chief executive officer (to the extent as may be delegated by the Committee) grants an Award or, if granted during a blackout period, the first day of the subsequent trading window during which officers of the Corporation and Subsidiary Companies are permitted to trade in Norfolk Southern Corporation Common Stock under the Corporation’s insider trading policy. | | | Beneficiary | The person or persons designated in writing by the Participant as his Beneficiary in respect of Awards or, in the absence of such a designation or if the designated person or persons predecease the Participant, the person or persons who shall acquire the Participant’s rights in respect of Awards by bequest or inheritance in accordance with the applicable laws of descent and distribution. In order to be effective, a Participant’s designation of a Beneficiary must be on file with the Corporation before the Participant’s death. Any such designation may be revoked and a new designation substituted for the revoked designation by the Participant at any time before his death without the consent of the previously designated Beneficiary. |
Table of Contents Board of
Directors | The Board of Directors of the Corporation. | | | Cash-Settled Stock
Appreciation Rights | Stock Appreciation Rights settled in cash. | | | Code | The Internal Revenue Code of 1986, as amended from time to time. | | | Committee | The Compensation Committee or any other committee of the Board of Directors which is authorized to grant Awards under this Plan. It is intended that each member of the Committee shall qualify as (a) a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, (b) an “outside director” under Code Section 162(m), and (c) an “independent director” under the rules of the New York Stock Exchange. If it is later determined that one or more members of the Committee do not qualify as a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, actions taken by the Committee prior to such determination shall be valid despite such failure to qualify. | | | Common Stock | The Common Stock of the Corporation. | | | Disability | A disability that has enabled the Participant to receive a disability benefit under the Long-Term Disability Plan of the Corporation or a long-term disability plan of a Subsidiary Company (whichever is applicable), as amended from time to time, for a period of at least three months. For a Participant who is a non-employee director, “Disability” means any medically determinable physical or mental impairment that is expected to result in death or to last for a continuous period of not less than 12 months and which prevents a Participant from continuing to serve as a non-employee director. | | | Dividend Equivalent | An amount equal to the regular quarterly dividend paid in accordance with the Corporation’s normal dividend payment practice as may be determined by the Committee, in its sole discretion, and granted pursuant to Section 13 of the Plan. | | | Executive Officers | Officers designated by the Board of Directors as “Executive Officers” for purposes of Section 16 of the Securities Exchange Act of 1934. | | | Exercise Gain Shares | With respect to a Stock Appreciation Right, all of the shares of Common Stock received upon exercise of the Stock Appreciation Right. With respect to an Option, the portion of the shares of Common Stock received upon exercise of the Option equal to the excess of the Fair Market Value, as of the exercise date, over the Option price, multiplied by the number of shares purchased under the Option on the exercise date, divided by such Fair Market Value, and rounded down to the nearest whole number of shares. | | | Fair Market Value | The value of Common Stock on a particular date as measured by the mean of the high and low prices at which it is traded on such date as reported in the Composite Transactions for such date by Bloomberg L.P., or its successor, on its internet-based service, or, if Common Stock was not traded on such date, on the next preceding day on which Common Stock was traded. | | | Incentive Stock
Option | An Option that complies with the terms and conditions set forth in Section 422(b) of the Code and is designated by the Committee as an Incentive Stock Option. |
Table of Contents Non-Qualified Stock
Option | An Option granted under the Plan other than an Incentive Stock Option. | | | Option | Any option to purchase Common Stock granted pursuant to the provisions of Section 6 or Section 7 of the Plan. | | | Optionee | A Participant who is the holder of an Option. | | | Participant | A person eligible to participate in the Plan who is granted and accepts an Award under the Plan. | | | Performance Cycle | The period of time, designated by the Committee but not less than one year, over which Performance Shares may be earned. | | | Performance
Criteria | One or more, or any combination, of the following business criteria, selected by the Committee, which may be applied on a corporate, department or division level, and which may be measured on an absolute or relative basis, or established as a measure of growth: earnings measures (including net income, earnings per share, income from continuing operations, income before income taxes, income from railway operations); return measures (including net income divided by total assets, return on shareholder equity, return on average invested capital); cash flow measures (including operating cash flow and free cash flow); productivity measures (including total operating expense per thousand gross ton miles or revenue ton miles, total operating revenue per employee, total operating expense per employee, gross ton miles or revenue ton miles per employee, carloads per employee, revenue ton miles per mile of road operated, total operating expense per carload, revenue ton miles per carload, gross ton miles or revenue ton miles per train hour, percent of loaded-to-total car miles, network performance); fair market value of shares of the Corporation’s Common Stock; revenue measures; expense measures; operating ratio measures; customer satisfaction measures; working capital measures; cost control measures; total shareholder return measures; economic value added measures; and safety measures. | | | Performance
Criteria Weighting
Percentage | The percentage weighting accorded to each Performance Criterion (or each combination thereof) selected by the Committee. The total of the Performance Criteria Weighting Percentages for any type of Award shall equal one hundred percent (100%). | | | Performance Goal | The specific target set by the Committee for each selected Performance Criterion (or each combination thereof) the outcome of which must be substantially uncertain at the time it is established. A Performance Goal may be set solely with respect to the Corporation’s performance, or as compared to the performance of a published or special index deemed applicable by the Committee, including but not limited to the Standard & Poor’s 500 Stock Index or an index based on a group of comparative companies. If a Performance Goal is based on the Corporation’s common stock, then in the event of a recapitalization, stock split, stock dividend, exchange, combination, or reclassification of shares, merger, consolidation, reorganization, or other change in or affecting the capital structure or capital stock of the Corporation (other than a normal cash dividend), the Committee shall make or provide for such adjustments in performance goals as the Committee in its sole discretion may in good faith determine to be equitably required in order to prevent dilution or enlargement of the rights of participants. |
Table of Contents Performance Shares | Shares of Common Stock granted pursuant to Section 11 of the Plan, which may be made subject to the restrictions and other terms and conditions prescribed in Section 11 of the Plan. | Performance Share
Units | Contingent rights to receive Performance Shares pursuant to Section 11 of the Plan. | Restricted Shares | Shares of Common Stock granted pursuant to Section 9 of the Plan and subject to the restrictions and other terms and conditions set forth therein. | Restricted Stock
Unit | Contingent rights, granted pursuant to Section 10 of the Plan, to receive Restricted Stock Unit Shares or cash payment for the Fair Market Value of shares of Common Stock, subject to the restrictions and other conditions set forth herein. Each Restricted Stock Unit shall equal the Fair Market Value of one share of Common Stock. | Restricted Stock
Unit Shares | Shares of Common Stock issued as payment for Restricted Stock Units pursuant to Section 10 of the Plan, which may be made subject to the restrictions and other terms and conditions prescribed in Section 10 of the Plan. | Restriction Period | A period of time of not less than thirty-six (36) months for officers or employees, or not less than twelve (12) months for non-employee directors, in either case to be determined within those limits by the Committee in its sole discretion, commencing on the Award Date, during which the restrictions imposed by paragraphs (b) and (c) of Section 9 or paragraphs (b) and (c) of Section 10 of the Plan shall apply. At the time that the Restricted Shares or Restricted Stock Units are granted, the Committee shall impose a Restriction Period and determine the length of the Restriction Period. Such Restriction Period, if any, shall be incorporated in the Award Agreement setting forth the grant. Under Sections 9 and 10 of this Plan, the Committee may, in its discretion, specify when the Award is granted that the Restriction Period shall expire upon the earlier achievement of Performance Goals. | Retention
Agreement | An agreement entered into pursuant to Section 12 of the Plan. | Retirement | Retirement from the Corporation and all Subsidiary Companies pursuant to the provisions of the Retirement Plan of the Corporation or a retirement plan of a Subsidiary Company (whichever is applicable), as amended from time to time. | | For a Participant who is a non-employee director, “Retirement” means termination of service as a director of the Corporation. | Stock Appreciation
Right | The right, granted pursuant to the provisions of Section 8 of the Plan, to receive Exercise Gain Shares or a cash payment equal to the excess, if any, of the Fair Market Value of Common Stock on the exercise date over the Fair Market Value of the Common Stock on the Award Date, as specified in Section 8 of the Plan. | Stock-Settled Stock
Appreciation Rights | Stock Appreciation Rights paid out in Exercise Gain Shares. | Subsidiary Company | A corporation of which at least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote is owned, directly or indirectly, by the Corporation. |
Table of Contents Section 3. ADMINISTRATION The Plan shall be administered by the Committee, which, subject to the limitations set forth herein, shall have the full and complete authority and sole discretion, except as may be delegated to the Corporation’s chief executive officer as provided herein, to construe and interpret the Plan; to select the Participants who shall be granted Awards under the Plan; to determine the type, size, terms, and conditions of the Award or Awards to be granted to each such Participant; to authorize the grant of such Awards pursuant to the Plan; in connection with the merger or consolidation of the Corporation (and subject to any applicable requirements of Code Section 409A), to give a Participant an election to surrender an Award in exchange for the grant of a new Award; to adopt, amend and rescind rules and regulations relating to the Plan; and to make all other determinations and take all other actions it may deem necessary or advisable for the implementation and administration of the Plan. If the Committee makes an Award to non-employee directors in a calendar year, and after such Award is made and in the same year an individual is elected by the Board to be a non-employee director of the Corporation, then the newly appointed director shall automatically be granted an Award under the same terms as was granted to the other non-employee directors earlier that year. The Award granted to the newly appointed director shall be prorated based on the number of days remaining in the calendar year of the individual’s appointment as a director, and effective as of the date the individual became a director or, if the individual became a director during a blackout period, effective on the first day of the subsequent trading window during which officers of the Corporation and Subsidiary Companies are permitted to trade in Norfolk Southern Corporation Common Stock under the Corporation’s insider trading policy. The Committee in its sole discretion may delegate authority to the Corporation’s chief executive officer to select as Participants the officers and employees who shall be granted Awards under the Plan (provided, however, that only the Committee shall grant Awards to the chief executive officer and Executive Officers); to determine the type, size, terms, and conditions of the Award or Awards to be granted to each such Participant; and to authorize the grant of such Awards pursuant to the Plan. The Committee, or the chief executive officer to the extent as may be delegated by the Committee (hereinafter, the term “Committee” shall include reference to the chief executive officer to the extent of any such delegation), may authorize the grant of more than one type of Award, and Awards subject to differing terms and conditions, to any eligible Participant. The Committee’s decision to authorize the grant of an Award to a Participant at any time shall not require the Committee to authorize the grant of an Award to that Participant at any other time or to any other Participant at any time; nor shall its determination with respect to the size, type, or terms and conditions of the Award to be granted to a Participant at any time require it to authorize the grant of an Award of the same type or size or with the same terms and conditions to that Participant at any other time or to any other Participant at any time. The Committee shall not be precluded from authorizing the grant of an Award to any eligible Participant solely because the Participant previously may have been granted an Award of any kind under the Plan. All determinations of the Committee shall be by a majority of its members and shall be final, conclusive and binding. Each member of the directorsCommittee, while serving as such, shall be considered to be acting in his capacity as a director of the Corporation, and no member of the Committee shall be liable for any action taken or decision made in good faith with respect to the implementation or administration of the Plan. Section 4. ELIGIBILITY To be eligible to be a Participant in the Plan, an individual must on the date on which the Award is made be a full-time nonagreement officer or employee who is a participant in the Norfolk Southern Corporation Executive Management Incentive Plan or Management Incentive Plan, or a full-time nonagreement employee of the Corporation or of a Subsidiary Company who can make an appreciable contribution to the attainment of the Corporation’s overall business objectives as determined in the sole discretion of the Committee, and must reside in the United States or Canada. A non-employee director shall be eligible to participate in the Plan if he or she is a director of the Corporation and is not a full-time salaried employee of the Corporation or a Subsidiary Company.
Table of Contents Section 5. SHARES AVAILABLE Since the Plan’s establishment in 1983, up to a maximum of 82,978,604 shares of Common Stock have been authorized for issuance under the Plan. Subject to approval of the Plan, as hereby amended, by the separate vote of the holders of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of the stockholders of the Corporation, at which a quorum for the proposal is present, an additional 8,000,000 shares of Common Stock are approved for issuance pursuant to the Plan as of May 14, 2015. Awards that are made in a form other than Options or Stock-Settled Stock Appreciation Rights and that are granted under the Plan after May 13, 2010, shall be counted against the share limit set forth in the previous sentence as 1.61 shares for every one share issued in connection with such Award. Such shares shall be provided from shares of Common Stock authorized but not issued. Stock-Settled Stock Appreciation Rights shall be counted in full against the number of shares available for award under the Plan, regardless of the number of Exercise Gain Shares issued upon settlement of the Stock Appreciation Right. If any shares of Common Stock subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Participant (including by reason of such Award being settled in cash), the shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan; provided, however, in the case of a stock-based Award that is not an Option or Stock Appreciation Right and that was made after May 13, 2010, 1.61 shares for each share underlying such Award shall again be available for Awards under the Plan. Notwithstanding the foregoing, the following shares of Common Stock may not again be made available for award under the Plan: (i) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding Stock Appreciation Right or Option; (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an outstanding award, or (iii) shares of Common Stock repurchased on the open market with proceeds of an Option exercise. Notwithstanding any other provision to the contrary, no Participant may be awarded a grant in any one year, which, when added to any other grant of Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units and Performance Share Units in the same year, shall exceed 1,000,000 shares of Common Stock. A Stock Appreciation Right granted in connection with an option is treated as a single Award for purpose of the preceding sentence. If an Option is canceled, the canceled Option continues to count against the maximum number of shares for which Options may be granted to a Participant in any year. Notwithstanding the foregoing, the aggregate grant date fair value of shares of Common Stock that may be granted during any year to any non-employee director shall not exceed $500,000. Section 6. INCENTIVE STOCK OPTIONS (a)General – The Committee may authorize the grant of Incentive Stock Options subject to the terms and conditions set forth in this Section 6. The grant of an Incentive Stock Option shall be evidenced by a written Award Agreement between the Corporation and the Optionee, setting forth the number of shares of Common Stock subject to the Incentive Stock Option evidenced thereby and the terms, conditions, and restrictions applicable thereto. The issuance of shares of Common Stock pursuant to an Incentive Stock Option also shall be subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan. Except for adjustments pursuant to Section 15 of the Plan, the Option Price for any outstanding Option granted under the Plan may not be decreased after the date the Option is granted, nor may an outstanding Option be modified or replaced if the effect would be to reduce the Option Price, nor may an outstanding Option be cancelled in exchange for cash or another Award, unless such repricing, modification or replacement is approved by the vote of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of the stockholders of the Corporation at which a quorum is present.
Table of Contents (b)Option Price - The Committee shall determine the Option price for each share of Common Stock purchased under an Option, but, subject to the provisions of Section 15 of the Plan, in no event shall the Option price be less than the greater of (i) one hundred percent (100%) of the Fair Market Value of the Common Stock on the Award Date, or (ii) the price at which the Corporation’s Common Stock was last sold in the principal United States market for such Common Stock on the Award Date. (c)Duration of Options - The Committee shall fix the term or duration of Options, provided that such term shall not exceed ten (10) years from the Award Date, and that such term shall be subject to earlier termination pursuant to the provisions of paragraph (g) of this Section 6. (d)Non-Transferability of Options - Options may be exercised during the lifetime of the Optionee only by him, and following his death only by his Beneficiary. If a Beneficiary dies after the Optionee, but before the Option is exercised and before such rights expire, such rights shall become assets of such Beneficiary’s estate. Except as provided in this paragraph, Options may not be assigned or alienated, whether voluntarily or involuntarily. (e)Exercise of Options - The Committee shall determine the time or times at which Options may be exercised; provided that such time or times shall not occur before the latest of: (i) the first anniversary of the Award Date; and (ii) the effectiveness of any registration statement required to be filed under the Securities Act of 1933 for the registration of the Common Stock to be issued upon exercise of the Option. (f)Payment of Option Price - The purchase price of Common Stock upon exercise of an Option shall be paid in full to the Corporation at the time of the exercise of the Option in cash or, at the discretion of the Committee and subject to any limitations or requirements that the Committee may adopt, by the surrender to the Corporation of shares of previously acquired Common Stock, which have been held by the Optionee for at least six (6) months and which shall be valued at Fair Market Value on the date that the Option is exercised, or, at the discretion of the Committee, by a combination of cash and such Common Stock. (g)Termination of Options - No Option shall be exercisable after it expires. Each Option shall expire upon the earliest of: (i) the expiration of the term for which the Option was granted; (ii) (A) Except as otherwise provided by the Committee in the Award Agreement, in the case of an Optionee whose employment with the Corporation or a Subsidiary Company is terminated due to Retirement, Disability or death, the expiration of the term for which the Option was granted, or (B) in the case of an Optionee whose employment with the Corporation or a Subsidiary Company is terminated for any reason other than Retirement, Disability, or death, at the close of business on the last day of active service by the Optionee with the Corporation or a Subsidiary Company, or (C) in the case of an Optionee who is granted a leave of absence, if the Optionee’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence, at the close of business on the last day of employment with the Corporation or a Subsidiary Company, or (iii) in connection with a merger or consolidation of the Corporation, with the Optionee’s consent, the grant of a new Award to replace the Option. (h)Limitation on Exercisability - The aggregate Fair Market Value (determined as of the Award Date) of the Common Stock with respect to which Incentive Stock Options (granted on or after January 1, 1987) are exercisable for the first time by the Optionee during any calendar year shall not exceed $100,000, as adjusted under Code Section 422(d)(1) and corresponding Treasury Regulations.
Table of Contents Section 7. NON-QUALIFIED STOCK OPTIONS The Committee may authorize the grant of Non-Qualified Stock Options subject to the terms and conditions specified in this Section 7. The grant of a Non-Qualified Stock Option shall be evidenced by a written Award Agreement between the Corporation and the Optionee, setting forth the number of shares of Common Stock subject to the Non-Qualified Stock Option evidenced thereby and the terms, conditions, and restrictions applicable thereto. Non-Qualified Stock Options granted pursuant to the provisions of this Section 2,7 shall be subject to the terms, conditions, and restrictions set forth in paragraphs (a) through (g) of Section 6 of the Plan. The limitations set forth in paragraph (h) of Section 6 of the Plan shall not apply to Non-Qualified Stock Options. The issuance of shares of Common Stock pursuant to a Non-Qualified Stock Option also shall be subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan. Section 8. STOCK APPRECIATION RIGHTS (a)General - The Committee may grant a Stock Appreciation Right to a Participant in connection with an Option, or portion thereof, or on a stand alone basis, as determined by the Committee, subject to the terms and conditions set forth in this Section 8. If granted in connection with an Option, the Stock Appreciation Right may be granted at the time of grant of the related Option and shall be subject to the same terms and conditions as the related Option, except as this Section 8 may otherwise provide. If granted in connection with an Option, the Stock Appreciation Right shall be evidenced by provisions in the Award Agreement evidencing or identifying the related Option, specifying the number of shares of Common Stock subject thereto and setting forth the terms and conditions applicable to the Stock Appreciation Right. If granted on a stand alone basis, the Stock Appreciation Right shall be evidenced by provisions of a written Award Agreement between the Corporation and the Participant. The Committee may grant Cash-Settled Stock Appreciation Rights or Stock-Settled Stock Appreciation Rights as shall be set forth in an Award Agreement. Except for adjustments pursuant to Section 15 of the Plan, the terms of an outstanding Stock Appreciation Right may not be amended to reduce the exercise price of the Stock Appreciation Right, nor may an outstanding Stock Appreciation Right be modified or replaced if the effect would be to reduce the exercise price, nor may an outstanding Stock Appreciation Right be cancelled in exchange for cash or another Award, unless such repricing, modification or replacement is approved by the vote of a majority of the shares of Common Stock present or represented and entitled to vote at a meeting of the stockholders of the Corporation at which a quorum is present. (b)Exercise Price and Duration - The Committee shall determine the exercise price for any Stock Appreciation Right granted on a stand alone basis but, subject to the provisions of Section 15 of the Plan, in no event shall the exercise price be less than the greater of (i) one hundred percent (100%) of the Fair Market Value of the Common Stock on the Award Date, or (ii) the price at which the Corporation’s Common Stock was last sold in the principal United States market for such Common Stock on the Award Date. The Committee shall fix the term or duration of Stock Appreciation Rights, provided that such term shall not exceed ten (10) years from the Award Date, and that such term shall be subject to earlier termination pursuant to the provisions of paragraph (e) of this Section 8. (c)Exercise – If granted in connection with an Option, a Stock Appreciation Right shall be exercisable only at such time or times, to such extent, and by such persons, as the Option to which it relates shall be exercisable. If granted on a stand alone basis, a Stock Appreciation Right shall be exercisable only at such time or times, to such extent, and by such persons, as shall be set forth in the Award Agreement.
Table of Contents Stock Appreciation Rights shall be subject to the following restrictions: (i) the Stock Appreciation Right may not be exercised before the expiration of one (1) year from the Award Date; provided, however, that this subparagraph (i) shall not apply if the death or Disability of the Optionee occurs within one (1) year after the Award Date; and, (ii) a Stock Appreciation Right granted in connection with an Incentive Stock Option may not be exercised on any date on which the Fair Market Value of a share of Common Stock is less than or equal to the Option price per share under the related Incentive Stock Option. A Stock Appreciation Right shall be exercised by providing the Corporation with a written notice in such form and containing such information (including the number of shares of Common Stock with respect to which the Stock Appreciation Right is being exercised) as the Committee may specify. If the Stock Appreciation Right was granted in connection with an Option, the Participant must surrender the related Option, or the portion thereof pertaining to the shares with respect to which the Stock Appreciation Right is exercised, and the date on which the Corporation receives such notice shall be the date on which the related Option, or portion thereof, shall be deemed surrendered and the Stock Appreciation Right shall be deemed exercised. (d)Payment - Upon the proper exercise of a Stock-Settled Stock Appreciation Right granted on a stand alone basis, a Participant shall be entitled to receive Exercise Gain Shares equal to the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the exercise price for the Stock Appreciation Right established on the Award Date, multiplied by the number of Stock-Settled Stock Appreciation Rights surrendered in connection with the exercise of the Stock Appreciation Right. Upon the proper exercise of a Stock-Settled Stock Appreciation Right granted in connection with an Option, an Optionee shall be entitled to receive Exercise Gain Shares equal to the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the Option price per share of the related Option, multiplied by the number of shares covered by the related Option, or portion thereof, surrendered in connection with the exercise of the Stock Appreciation Right. The Exercise Gain Shares shall be subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan. Upon the proper exercise of a Cash-Settled Stock Appreciation Right granted on a stand alone basis, a Participant shall be entitled to receive cash equal to the value of the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the exercise price for the Stock Appreciation Right established on the Award Date, multiplied by the number of Cash-Settled Stock Appreciation Rights surrendered for settlement. Upon the proper exercise of a Cash-Settled Stock Appreciation Right granted in connection with an Option, an Optionee shall be entitled to receive cash equal to the value of the number of shares of Common Stock that have an aggregate Fair Market Value on the exercise date equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the Option price per share of the related Option, multiplied by the number of shares covered by the related Option, or portion thereof, surrendered in connection with the exercise of the Stock Appreciation Right. (e)Termination of Right - A Stock Appreciation Right granted in connection with an Option shall expire, unless previously exercised or canceled, upon the expiration of an Option to which it relates, or upon such time as may be set forth in an Award Agreement. A Stock Appreciation Right granted on a stand alone basis shall be subject to the termination provisions set forth in paragraph (g) of Section 6 for Options and shall expire, unless previously exercised or cancelled, at such time as may be set forth in an Award Agreement. (f)Effect of Exercise - A Stock Appreciation Right shall be canceled when, and to the extent that, it or a related Option is exercised, and an Option shall be canceled when, and to the extent that, the Option is surrendered to the Corporation upon the exercise of a related Stock Appreciation Right.
Table of Contents Section 9. RESTRICTED SHARES (a)General - The Committee, in its sole discretion, may from time to time authorize the grant of Restricted Shares to a Participant pursuant to an Award Agreement. A certificate or certificates representing the number of Restricted Shares granted shall be registered in the name of the Participant or held in uncertificated form through a direct registration system or the number of Restricted Shares shall be delivered by electronic delivery to a brokerage account established for the Participant’s benefit at a financial/brokerage firm selected by the Corporation. Until the expiration of the Restriction Period or the lapse of restrictions in the manner provided in paragraph (g) of this Section 9, any certificate or certificates shall be held by the Corporation for the account of the Participant, and any Restricted Shares held through direct registration or in a brokerage account shall be blocked from sale or transfer. Restricted Shares shall be subject to such restrictions as the Committee may establish in the Award Agreement (including, without limitation, any limitation on the right to vote Restricted Shares or the right to receive any dividend or other right), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate; provided that dividends on Restricted Shares subject to a specified Performance Goal or Goals shall be payable only to the extent the Performance Goal(s) are achieved with respect to such Restricted Shares. (b)Performance Goal Requirement – The Committee may determine, in its sole discretion, that a Participant’s entitlement to Restricted Shares shall be subject to achievement of a specified Performance Goal or Goals during the Restriction Period. If so, the Committee shall select the Performance Criterion or each combination thereof, the Performance Goal for each Performance Criterion or each combination thereof, and the Performance Criteria Weighting Percentage for each Performance Criterion or each combination thereof within ninety (90) days of the commencement of the Restriction Period. The Committee may also determine that the Restriction Period shall expire upon achievement of established Performance Goals prior to the established end of the Restriction Period. In determining whether Performance Goals have been achieved, special charges, restructuring charges and unusual or infrequent accounting adjustments which are significant, and restatements or reclassifications, all as determined in accordance with Generally Accepted Accounting Principles, which would have the effect of reducing the percentage of Performance Goals achieved shall be excluded, and which would have the effect of increasing the percentage of Performance Goals achieved shall be included, unless the Committee, in its discretion, determines otherwise. At such time as the Committee certifies that the Performance Goals have been achieved, the Committee shall authorize delivery of Restricted Shares (or such percentage of the Restricted Shares as equal the Percentage of Performance Goals that have been achieved) for which the Restriction Period has expired. If the Restricted Shares are subject to the achievement of Performance Goals, such Restricted Shares shall be forfeited to the extent Performance Goals are not achieved before the established end of the Restriction Period. (c)Restrictions – Until the expiration of the Restriction Period or the lapse of restrictions in the manner provided in paragraph (g) of this Section 9, Restricted Shares shall be subject to the following restrictions and any additional restrictions that the Committee, in its sole discretion, may from time to time deem desirable in furtherance of the objectives of the Plan: (i) the Participant shall not be entitled to receive the certificate or certificates representing the Restricted Shares, or exercise any ownership over any Restricted Shares held through direct registration or in a brokerage account; (ii) the Restricted Shares may not be sold, transferred, assigned, pledged, conveyed, hypothecated, or otherwise disposed of; and (iii) the Restricted Shares may be forfeited as provided in paragraphs (b) or (e) of this Section 9, subject to the provisions of paragraph (f) and (g) of this Section 9. (d)Distribution of Restricted Shares – If a Participant to whom Restricted Shares have been granted remains in the continuous employment of the Corporation or a Subsidiary Company during the entire Restriction Period, or, in the case of a Participant who is a non-employee director, who remains a non-employee
Table of Contents director during the entire Restriction Period, upon the expiration of the Restriction Period all restrictions applicable to the Restricted Shares shall lapse. When the restrictions applicable to the Restricted Shares lapse, either: (i) the certificate or certificates representing the shares of Common Stock that were earned pursuant to paragraph (b) of this Section 9 shall be delivered to the Participant or, (ii) if the shares were delivered by electronic delivery to a brokerage account established for the Participant’s benefit or by direct registration and held in uncertificated form, the restrictions on the sale or transfer of any shares that were earned pursuant to paragraph (b) of this Section 9 shall lapse. (e)Termination of Employment - If the employment of a Participant is terminated for any reason other than the Retirement, Disability, or death of the Participant in service before the expiration of the Restriction Period, the Restricted Shares shall be forfeited immediately and all rights of the Participant with respect to such shares shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company. If the Participant is granted a leave of absence before the expiration of the Restriction Period, the Participant shall not forfeit any rights with respect to any Restricted Shares subject to the Restriction Period, unless the Participant’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence for any reason other than Retirement, Disability, or death, at which time the shares shall be forfeited immediately and all rights of the Participant with respect to such shares shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company. (f)Retirement, Disability or Death - If the Participant’s employment is terminated by reason of the Retirement or Disability of the Participant before the expiration of the Restriction Period and no Performance Goals have been imposed, the restrictions on the Restricted Shares shall lapse upon the expiration of the Restriction Period and delivery of the Restricted Shares shall be made to the Participant, as described in paragraph (d) of this Section 9; provided, however, that if the Participant dies after Retirement or Disability and before the expiration of the Restriction Period, the restrictions on the Restricted Shares shall lapse and delivery shall be made to the Participant’s Beneficiary. If the Participant’s employment is terminated by reason of the Participant’s death in service before the expiration of the Restriction Period, the restrictions on the Restricted Shares shall lapse and delivery of the Restricted Shares shall be made to the Participant’s Beneficiary. If the Participant’s employment is terminated by reason of the Retirement, Disability, or death of the Participant before the expiration of the Restriction Period and Performance Goals have been imposed, the restrictions on the Restricted Shares shall lapse upon the expiration of the Restriction Period and to the extent that the Committee certifies that Performance Goals have been achieved and delivery of the Restricted Shares shall be made to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death, in accordance with paragraphs (b) and (d) of this Section 9. (g)Waiver of Restrictions - The Committee, in its sole discretion, may waive any or all restrictions with respect to Restricted Shares. Section 10. RESTRICTED STOCK UNITS (a)General - The Committee, in its sole discretion, may from time to time authorize the grant of Restricted Stock Units (“Units”) to a Participant pursuant to an Award Agreement. Such Units shall be recorded in individual memorandum accounts maintained by the Committee or its agent. The grant of Restricted Stock Units shall entitle the Participant to payment in Restricted Stock Unit Shares or cash, as provided for in the Award Agreement. The Participant shall have no beneficial ownership interest in the Common Stock represented by the Units prior to expiration of the Restriction Period and achievement of any Performance Goals. The Participant shall have no right to vote the Common Stock represented by the Units or to receive dividends (except for any Dividend Equivalents which may be awarded by the Committee in connection with such Units) on the Common Stock represented by the Units. The grant of Units shall be evidenced by an Award Agreement between the Corporation or Subsidiary Company and the Participant, identifying the number of Units awarded, and setting forth the terms and conditions applicable sectionsto the Units.
Table of these Bylaws, whenever calledContents (b) Performance Goal Requirement – The Committee may determine, in its sole discretion, that a Participant’s entitlement to payment in cash or Restricted Stock Unit Shares for Restricted Stock Units shall be subject to achievement of a specified Performance Goal or Goals over the duration of the Restriction Period. If so, the Award shall specify when it is granted that the Participant’s entitlement to payment is subject to the achievement of the Performance Goal or Goals, and the Committee shall select the Performance Criterion or each combination thereof, the Performance Goals for each Performance Criterion or each combination thereof, and the Performance Criteria Weighting Percentage for each Performance Criterion or each combination thereof within ninety (90) days after the commencement of the Restriction Period. The Committee may specify, when the Award is granted, that the Restriction Period shall expire upon achievement of the established Performance Goals prior to the established end of the Restriction Period. In determining whether Performance Goals have been achieved, special charges, restructuring charges and unusual or infrequent accounting adjustments which are significant, and restatements or reclassifications, all as determined in accordance with Generally Accepted Accounting Principles, which would have the effect of reducing the percentage of Performance Goals achieved shall be excluded, and which would have the effect of increasing the percentage of Performance Goals achieved shall be included, unless the Committee, in its discretion, determines otherwise. For Restricted Stock Units subject to the achievement of Performance Goals, the Committee shall certify in writing the extent to which the Performance Goals have been achieved, and shall authorize settlement of Units in cash or Restricted Stock Unit Shares. The Units shall be settled within two and one half months after the end of the year in which the Performance Goals are achieved. Such settlement shall be based on the Fair Market Value on the date all applicable restrictions lapse (or such percentage of the value of the Restricted Stock Units as equal the percentage of Performance Goals that have been achieved) for which the Restriction Period has expired. If the settlement of Restricted Stock Units is subject to the achievement of Performance Goals, such Restricted Stock Units shall be forfeited to the extent Performance Goals are not achieved before the established end of the Restriction Period. (c) Restrictions - Until the expiration of the Restriction Period and the lapse of any Retention Agreement provided in Section 12, Units shall be subject to the following restrictions and any additional restrictions that the Committee, in its sole discretion, may from time to time deem desirable in furtherance of the objectives of the Plan: (i) the grant of Units to a Participant shall not entitle a Participant to receive cash payment or Restricted Stock Unit Shares; (ii) the Units may not be sold, transferred, assigned, pledged, conveyed, hypothecated, or otherwise disposed of; and, (iii) all or a portion of the Units may be forfeited immediately as provided in paragraph (b) or (e) of this Section 10, subject to the provisions of paragraphs (f) and (g) of this Section 10. (d) Distribution of Restricted Stock Units - If a Participant to whom Units have been granted remains in the continuous employment of the Corporation or a Subsidiary Company during the entire Restriction Period or, in the case of a Participant who is a non-employee director, who remains a non-employee director during the entire Restriction Period, upon the expiration of the Restriction Period and the further expiration of any Retention Agreement applicable to such Units, all restrictions applicable to the Units shall lapse, and the Units shall be settled in cash or in Restricted Stock Unit Shares, based on Fair Market Value on the later of the date all applicable restrictions lapse or any Retention Agreement lapses. Settlement in cash in a single sum or issuance of Restricted Stock Unit Shares shall be made within thirty (30) days following the later of the expiration of the Restriction Period or any Retention Agreement applicable to such Units. The Participant may not, directly or indirectly, designate the taxable year of the settlement. (e) Termination of Employment - If the employment of a Participant is terminated for any reason other than the Retirement, Disability, or death of the Participant in service before the expiration of the Restriction Period, the Units shall be forfeited immediately and all rights of the Participant with respect to such Units shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary
Table of Contents Company. If the Participant is granted a leave of absence before the expiration of the Restriction Period, the Participant shall not forfeit all rights with respect to any Units subject to the Restriction Period, unless the Participant’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence for any reason other than Retirement, Disability, or death, at which time all rights of the Participant with respect to such Units shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company. (f) Retirement, Disability or Death - If the Participant’s employment is terminated by reason of the Retirement or Disability of the Participant before the expiration of the Restriction Period and no Performance Goals have been imposed, the restrictions on the Restricted Stock Units shall lapse upon the expiration of the Restriction Period and settlement of Restricted Stock Units shall be made at the end of the Restriction Period to the Participant as described in paragraph (d) of this Section 10; provided, however, if the Participant dies after Retirement or Disability and before the expiration of the Restriction Period, the restrictions on the Restricted Stock Units shall lapse and delivery shall be made to the Participant’s Beneficiary. If the Participant’s employment is terminated by reason of the Participant’s death in service before the expiration of the Restriction Period, the restrictions on the Restricted Stock Units shall lapse and delivery of the Restricted Stock Units shall be made to the Participant’s Beneficiary. Settlement of the Restricted Stock Units shall be made within thirty (30) days following the expiration of the Restriction Period. The Participant or Beneficiary may not, directly or indirectly, designate the taxable year of the settlement. If the Participant’s employment is terminated by reason of the Retirement, Disability, or death of the Participant before the expiration of the Restriction Period and Performance Goals have been imposed, the restrictions on the Restricted Stock Units shall lapse if the Committee certifies that Performance Goals have been achieved, and settlement of the Restricted Stock Units shall be made to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death, in accordance with paragraphs (b) and (d) of this Section 10. (g) Waiver of Restrictions - The Committee, in its sole discretion, may waive any or all restrictions with respect to Units. If no Performance Goals have been imposed, settlement of the Units shall be made on the same settlement date that would have applied absent the waiver of restrictions. If Performance Goals have been imposed, settlement of the Units shall be made within two and one half months after the end of the year in which all restrictions are either waived or satisfied. Section 11. PERFORMANCE SHARES (a) General - The Committee, in its sole discretion, may from time to time authorize the grant of Performance Share Units to a Participant pursuant to an Award Agreement. Performance Share Units shall entitle the Participant to Performance Shares (or cash in lieu thereof) upon the achievement of Performance Goals. The Committee shall select the Performance Criteria, set the Performance Goals and assign Performance Criteria Weighting Percentages to each Performance Criterion or each combination thereof within ninety (90) days of the commencement of the Performance Cycle. Performance Share Units may not be sold, transferred, assigned, pledged, conveyed, or hypothecated. After the end of the Performance Cycle, the Committee shall certify in writing to what extent the Performance Goals have been achieved. In determining whether Performance Goals have been achieved, special charges, restructuring charges and unusual or infrequent accounting adjustments which are significant, and restatements or reclassifications, all as determined in accordance with Generally Accepted Accounting Principles, which would have the effect of reducing the percentage of Performance Goals achieved shall be excluded, and which would have the effect of increasing the percentage of Performance Goals achieved shall be included, unless the Committee, in its discretion, determines otherwise. The Committee shall thereafter authorize the payment of such percentage of the value of the Performance Share Units as equal the percentage of Performance Goals that have been achieved to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death after the end of the Performance Cycle, of (i) cash in lieu of Performance Shares, or (ii) either (1) the issuance of Performance Shares registered in the name of the Participant or (2) the electronic delivery of Performance Shares to a brokerage account established for the Participant’s benefit at a financial/
Table of Contents brokerage firm selected by the Corporation, subject to the provisions of any Retention Agreement that may be required by the Committee under Section 12 of the Plan, or (iii) both. Settlement in cash or issuance of Performance Shares shall be made within two and one half months after the end of the year in which the Performance Goals are achieved. (b) Distribution or Forfeiture of Performance Shares - If the Participant’s employment with the Corporation or a Subsidiary Company is terminated before the end of a Performance Cycle for any reason other than Retirement, Disability, or death, the Participant shall forfeit all rights with respect to any Performance Shares that were being earned during the Performance Cycle. If the Participant is granted a leave of absence before the end of a Performance Cycle, the Participant shall not forfeit all rights with respect to any Performance Shares that were being earned during the Performance Cycle, unless the Participant’s employment with the Corporation or a Subsidiary Company terminates at any time during or at the end of the leave of absence, at which time the Participant shall forfeit all rights with respect to any Performance Shares that were being earned during the Performance Cycle. If the Participant’s employment is terminated before the end of a Performance Cycle by reason of Retirement, Disability, or death, the Participant’s rights with respect to any Performance Shares being earned during the Performance Cycle shall, subject to the other provisions of this Section 11, continue as if the Participant’s employment had continued through the end of the Performance Cycle. Section 12. RETENTION AGREEMENTS (a) General - The Committee, in its sole discretion, may require as a condition of a grant, exercise, settlement or payment with respect to any Award under the Plan that the Participant and the Corporation enter into a Retention Agreement, which shall provide, (1) with respect to an Award of Restricted Stock Units, that the settlement of the Restricted Stock Units in Restricted Stock Unit Shares or cash shall not occur until the event specified in the Retention Agreement that is part of the Award, or (2) with respect to any portion of any Exercise Gain Shares, Restricted Shares, Restricted Stock Unit Shares, or Performance Shares, that (i) the certificate or certificates representing any such Awards, when issued, shall be held by the Secretary of the Corporation for the benefit of the Participant until such time as the retention period specified by the Retention Agreement has expired or has been waived by the Committee, whichever occurs first, or (ii) that any such Award, when delivered by electronic delivery to a brokerage account established for the Participant’s benefit at a financial/brokerage firm selected by the Corporation or by direct registration and held in uncertificated form, shall not be permitted to be transferred or sold until such time as the retention period specified by the Retention Agreement has expired or has been waived by the Committee, whichever occurs first. Any dividends payable on shares subject to a Retention Agreement shall be paid to the Participant in cash on the date declared by the Board of Directors. Each Retention Agreement may include some or all of the terms, conditions and restrictions set forth in paragraphs (b) through (e) of this Section 12. (b) Retention Period - Shares that are subject to the Retention Agreement may not be sold, transferred, assigned, pledged, conveyed, hypothecated or otherwise disposed of within such period of time of not less than twenty-four (24) months following the exercise date (in the case of Exercise Gain Shares) or the date of issuance (in the case of Restricted Shares, Restricted Stock Unit Shares, or Performance Shares), as shall be prescribed by the Committee. (c) Termination of Employment - If a Participant’s employment with the Corporation or a Subsidiary Company is terminated for any reason other than Retirement, Disability, or death, shares subject to the Retention Agreement shall continue to be held, following the Participant’s termination of employment, until the expiration of the retention period specified by the Retention Agreement. If the Participant’s employment is terminated by reason of Retirement or Disability, shares then held subject to the Retention Agreement shall continue to be held until the expiration of the applicable retention period following termination of employment, but any such retention period shall cease upon written request (a “Special Meeting Request”)the earlier of onethe Participant’s attainment of age 65 or the expiration of two (2) years after the Participant’s Retirement or Disability, if either of those events occurs before the expiration of the applicable retention period. If the Participant dies while shares are subject to a retention period under the Retention Agreement, such retention period shall expire immediately at the time of death.
Table of Contents (d) Leave of Absence - If a Participant is granted a leave of absence, shares subject to the Retention Agreement shall continue to be held during the leave of absence, until the expiration of the retention period specified by the Retention Agreement. (e) Change in Control - Upon a Change in Control, the retention periods specified by all Retention Agreements shall immediately expire; provided, however, that any such waiver shall not accelerate the settlement of any Restricted Stock Units in a manner that would violate the requirements of Code Section 409A. A Change in Control shall occur if: (i) any person, other than the Corporation or a Subsidiary Company or any employee benefit plan sponsored by the Corporation or a Subsidiary Company, shall become the beneficial owner of, or obtain voting control over, 20% or more recordof the Corporation’s outstanding Common Stock; (ii) (A) any consolidation or merger of the Corporation occurs in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of Common Stock would be converted into cash, securities, or other property, other than a merger of the Corporation in which holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as immediately before, or (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Corporation occurs; or (iii) there shall have been a change in the composition of the Board of Directors such that within any period of two (2) consecutive years or less individuals who at the beginning of such period constituted such Board, together with any new directors whose election, or nomination for election by the Corporation’s stockholders, was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of such period, shall for any reason no longer constitute a majority of the directors of the Corporation. (g) Waiver of Requirements - The Committee, in its sole discretion, may waive any or all retention periods or other restrictions in the Share Retention Agreement, provided that the waiver of restrictions does not accelerate the payment of any Restricted Stock Units in a manner that would violate the requirements of Code Section 409A. (f) Distribution of Shares and Restricted Stock Units - The Corporation shall cause the shares subject to a Retention Agreement to be distributed to the Participant, or the Participant’s Beneficiary in the event of the Participant’s death, upon expiration of the retention period or other termination or waiver of the restrictions under this Section 12. The Corporation shall cause the Restricted Stock Units subject to a Retention Agreement to be distributed to the Participant upon the expiration of the retention period or to the Participant’s Beneficiary in the event of the Participant’s death. Section 13. DIVIDEND EQUIVALENT PAYMENTS The Committee may authorize the immediate payment, in cash or in Common Stock, of Dividend Equivalents on some or all of the shares of Common Stock covered by Options or Stock Appreciation Rights, as specified in the Award Agreement required under Section 6(a), Section 7 or Section 8(a) of the Plan. Dividend Equivalents payable on options may be paid in cash or Common Stock, at the discretion of the Committee. The Committee may authorize the immediate or deferred payment of Dividend Equivalents on some or all of the shares of Common Stock covered by Restricted Stock Units that are not subject to Performance Goals, as specified in the Award Agreement required under Section 10 of the Plan. Dividend Equivalents payable on Restricted Stock Units may be paid in cash or converted to additional Restricted Stock Units, at the discretion of the Committee and as specified in the Award Agreement.
Table of Contents The Committee may authorize the deferred payment of Dividend Equivalents on some or all of the shares of Common Stock covered by Restricted Stock Units that are subject to Performance Goals, or by Performance Share Units, as specified in the Award Agreement described in Sections 10 or 11 of the Plan. Deferred Dividend Equivalents shall be paid only to the extent Performance Goals are achieved with respect to such Performance Share Units or Restricted Stock Units, and shall be distributed at the same time as the underlying Performance Shares, Restricted Stock Unit Shares, or cash equivalents thereto. Deferred Dividend Equivalents payable on Performance Share Units or on Restricted Stock Units that are subject to a Performance Goal may be paid in cash, or converted to additional Performance Shares or Restricted Stock Unit Shares (as applicable), at the discretion of the Committee and as specified in the Award Agreement. Notwithstanding the above, Dividend Equivalents shall not be made or accumulated during a Participant’s leave of absence. If Dividend Equivalents provided under this section are to be paid immediately, the Dividend Equivalents shall be paid in cash on the date declared by the Board of Directors for the payment of dividends on Common Stock. If Dividend Equivalents provided under this section are to be deferred, the deferred Dividend Equivalents shall be paid or forfeited when the underlying Award is paid or forfeited. Section 14. NON-COMPETE COVENANT The Committee, in its sole discretion, may require as a condition of a grant of any Award under the Plan that the Participant execute a non-compete, non-solicitation and confidentiality agreement, which agreement shall require that such individual (i) not Engage in Competing Employment (as defined in this Section 14 of the Plan) nor solicit any employee of the Corporation or a Subsidiary Company to Engage in Competing Employment for a specified term following termination of employment (including Retirement), (ii) not solicit customers of the Corporation or a Subsidiary Company for a specified term following termination of employment (including Retirement), and (iii) maintain the Corporation’s and each Subsidiary Company’s confidential information in strict confidence, in accordance with the provisions of the agreement. The Committee, in its sole discretion, may further require as a condition of a grant, exercise, settlement or payment with respect to any Award under the Plan that the Award shall be subject to immediate forfeiture, and all rights of the Participant to such Award shall terminate immediately without further obligation on the part of the Corporation or any Subsidiary Company, if the Participant Engages in Competing Employment for a specified period of time following termination of employment. The terms of such a non-compete covenant shall be as set forth in the agreement or grant providing the terms of an Award and are incorporated herein by reference. A non-compete covenant shall not apply to the settlement or payment of any Option (although it may apply to the grant or exercise of an Option). Settlement or payment of any other Award that is subject to a non-compete covenant shall occur upon the expiration of the Restriction Period, Performance Cycle, Retention Agreement, or other date upon which the Award would be settled and paid if the Participant had not terminated employment. For purposes of the provision, “Engages in Competing Employment” shall mean to work for or provide services for any Competitor, on the Participant’s own behalf or in the service of or on behalf of others, including, but not limited to, as a consultant, independent contractor, owner, officer, partner, joint venturer, or employee, at any time during the specified period commencing on the date of his or her termination of employment (including Retirement). “Competitor” shall mean any entity in the same line of business as the Corporation in North American markets in which the Corporation competes, including, but not limited to, any North American Class I rail carrier, any other rail carrier competing with the Corporation (including without limitation a holding or other company that controls or operates or is otherwise affiliated with any rail carrier competing with the Corporation), and any other provider of transportation services competing with Corporation, including motor and water carriers.
Table of Contents Section 15. CAPITAL ADJUSTMENTS In the event of a recapitalization, stock split, stock dividend, exchange, combination, or reclassification of shares, merger, consolidation, reorganization, or other change in or affecting the capital structure or capital stock of the Corporation, the Board of Directors, upon the recommendation of the Committee, may make appropriate adjustments in the number of shares of stockCommon Stock authorized for the Plan and in the annual limitation imposed by Section 5 of this Plan; and the Committee may make appropriate adjustments in the number of shares subject to outstanding Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units, or Performance Share Unit grants, and in the Option price of any then outstanding Options, as it deems equitable, in its absolute discretion, to prevent dilution or enlargement of the corporation representingrights of Participants. Section 16. REGULATORY APPROVALS The exercise of each Option and Stock Appreciation Right, and the grant or distribution of Restricted Shares, Restricted Stock Units and Performance Shares, shall be subject to the condition that if at any time the Corporation shall determine in its discretion that the satisfaction of withholding tax or other tax liabilities, or the listing, registration, or qualification of any shares of Common Stock upon any securities exchange or under any Federal or state law, or the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise, grant, or distribution, then in any such event such exercise, grant, or distribution shall not less than 20%be effective unless such liabilities have been satisfied or such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Corporation. Section 17. TERM OF THE PLAN Awards may be granted from time to time under the terms and conditions of the voting powerPlan, but no Incentive Stock Option may be granted after the expiration of all outstandingten (10) years from the date of adoption of the Plan, as amended on May 14, 2015, by the Board of Directors; provided, that any future amendment to the Plan that is approved by the stockholders of the Corporation in the manner provided under Section 18 of this Plan shall be regarded as creating a new Plan, and an Incentive Stock Option may be granted under such new Plan until the expiration of ten (10) years from the earlier of the approval by the Board of Directors, or the approval by the stockholders of the Corporation, of such new Plan. Incentive Stock Options theretofore granted may extend beyond the expiration of that ten-year period, and the terms and conditions of the Plan shall continue to apply thereto and to shares of all classesCommon Stock acquired upon the subsequent exercise of stockan Incentive Stock Option or related Stock Appreciation Right. Section 18. AMENDMENT OR TERMINATION OF THE PLAN The Corporation may at any time and from time to time alter or amend, in whole or in part, any or all of the corporationprovisions of the Plan, or may at any time suspend or terminate the Plan, through resolution of its Board of Directors, provided that no change in any Awards theretofore granted to any Participant may be made which would impair or diminish the rights of the Participant without the Participant’s consent, and provided further, that no alteration or amendment may be made without the approval of the holders of a majority of the Common Stock then outstanding and entitled to vote onif (a) such stockholder approval is necessary to comply with the matter(s) proposed to be voted on at such meeting (the “Requisite Percentage”). For purposesrequirements of thisany rules promulgated under Section 2(b) and for determining the Requisite Percentage, a beneficial owner shall be deemed to own the shares16 of stock of the corporation that such beneficial owner would be deemed to own pursuant to Rule 200(b) under the Securities Exchange Act of 1934 as amended. For purposes of determining the Requisite Percentage, the deemed ownership of any record holder or beneficial owner shall exclude any sharessuch other Federal or state laws or regulations as to which such record holder or beneficial owner, as the case may be doesapplicable, (b) the amendment materially increases the benefits accruing to Participants under the Plan, (c) materially increases the number of securities that may be issued under the Plan, or (d) materially modifies the requirements for participation in the Plan.
Table of Contents Section 19. FORFEITURE AND RECOUPMENT EVENTS The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Any Award to a Participant under this Plan is subject to reduction, forfeiture, or recoupment to the extent provided under Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or as may be provided under any other applicable law. Section 20. MISCELLANEOUS (a) Fractional Shares - The Corporation shall not be required to issue or deliver any fractional share of Common Stock upon the exercise of an Option or Stock Appreciation Right, the award of Performance Shares, the payment of a dividend equivalent in Common Stock pursuant to Section 13 of the Plan or the withholding of shares of Common Stock for payment of taxes required to be withheld, but may pay, in lieu thereof, an amount in cash equal to the Fair Market Value of such fractional share. (b) Withholding - The Corporation and its Subsidiary Companies shall have the right, to votethe extent permitted by law, to deduct from any payment of any kind otherwise due to a Participant any Federal, state or directlocal taxes of any kind required by law to be withheld with respect to Awards under the votePlan, and to the extent any such withholding requirements are not satisfied, each Participant shall pay to the Corporation any Federal, state or local taxes of any kind required by law to be withheld with respect to Awards under the Plan. The Corporation shall have the right to withhold shares of Common Stock, including fractional shares, from payment as necessary to satisfy any withholding obligations, but may only withhold the minimum number of shares necessary to do so. If fractional shares are withheld, any remaining fractional shares shall be paid in cash to the Participant as provided under paragraph (a) of this Section 20. The Participant or Beneficiary shall remain responsible at all times for paying any Federal, state or local taxes of any kind with respect to Awards under the special meeting.Plan. In no event shall the Corporation or the Committee be liable for any interest or penalty that a Participant or Beneficiary incurs by failing to make timely payments of tax. (c) Acceleration of Payments to Avoid Conflicts of Interest - To the extent permitted by Code Section 409A and not prohibited by Section 6(a) of the Plan, the Committee may, in its sole discretion and with the consent of a Participant or Beneficiary, accelerate the time or schedule of a payment under the Plan, or make a substitute cash payment upon cancellation of a Participant’s Award, in either case to the extent reasonably necessary for a Participant or Beneficiary to avoid the violation of an applicable Federal, state, local or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Participant or Beneficiary to participate in activities in the normal course of his or her position in which the Participant or Beneficiary would otherwise not be able to participate under an applicable rule). The Board of Directors shall determine in good faith whether all requirements set forthCorporation’s chief executive officer may exercise the authority granted to the Committee in this Section 2(b) have been satisfied and such determination shall be binding on the corporation and its stockholders. (i) A Special Meeting Request must be delivered by handparagraph with respect to any Participant or by registered U.S. mail, postage prepaid, return receipt requested,Beneficiary who is neither a current or courier service, postage prepaid, to the attentionformer director of the Secretary at the principal executive officesCorporation nor a current Executive Officer of the corporation (the date on which the Secretary receives the request is the “Delivery Date”). A Special Meeting RequestCorporation.
(d) Stockholder Rights - No person shall be valid only if it is signed and datedhave any rights of a stockholder by each record holder submitting the Special Meeting Request (“Requesting Stockholder”), and includes (A) a statementvirtue of the specific purpose(s)an Option, Stock Appreciation Right, or Performance Share Unit except with respect to shares of the special meeting (including the text of any resolution proposed for consideration)Common Stock actually issued to him, and the reasons for conducting such business at the special meeting; (B) in the case of any director nominations proposed to be presented at the special meeting, the information required by Section 7 of Article II; (C) in the case of any matter (other than a director nomination) proposed to be conducted at the special meeting, the information required by Section 9(c) of this Article I; (D) a representation that each Requesting Stockholder, or one or more representatives of each such stockholder, intends to appear in person at the special meeting to present the proposal(s) or business to be brought before the special meeting; (E) an agreement by the Requesting Stockholders to notify the corporation promptly in the event of any disposition prior to the record date for the special meetingissuance of shares of Common Stock shall confer no retroactive right to dividends. A Participant’s right to receive Dividend Equivalents shall not, by itself, confer upon the corpration ownedParticipant the rights or privileges of recorda stockholder. (e) No Contract of Employment - This Plan shall not be deemed to be an employment contract between the Corporation or beneficially;any Subsidiary Company and (F) documentary evidence thatany Participant or other employee. Nothing contained herein, or in any agreement, certificate or other document evidencing, providing for, or setting forth the Requesting Stockholders ownterms and conditions applicable to any Awards shall be deemed to confer upon any Participant or other employee a
Table of Contents right to continue in the Requisite Percentage asemployment of the Delivery Date;provided,however, that ifCorporation or any Subsidiary Company, or to interfere with the Requesting Stockholders are not the beneficial ownersright of the shares representingCorporation or any Subsidiary Company to terminate the Requisite Percentage, then to be valid, the Special Meeting Request must also include documentary evidence that the beneficial ownersemployment of such shares (i) join in the special meeting request and (ii) beneficially own the Requisite PercentageParticipant or employee at any time. (f) Unfunded Plan - Except as of the Delivery Date. In addition, the Requesting Stockholders shall: (1) notify the corporation of any inaccuracy or change (within two business days of becoming aware of such inaccuracy or change) in any information previouslymay otherwise be provided in the Special Meeting Request; and (2) promptly update and supplementPlan, the information provided inPlan shall be unfunded. Neither the Special Meeting Request, if necessary, so that the information provided orCorporation nor any Subsidiary Company shall be required to segregate any assets that may be provided shall be truerepresented by Options, Stock Appreciation Rights, Performance Share Units, or Restricted Stock Units, and complete as ofneither the record date for the special meeting, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the corporation not later than five business days after the record date.
(ii) A Special Meeting Request shall not be valid, and a special meeting requested by stockholders shall not be held, if: (A) the Special Meeting Request does not comply with these Bylaws; (B) the Special Meeting Request relates to an item of business that is not a proper subject for stockholder action or is otherwise unlawful; (C) the Special Meeting Request is delivered during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders and ending on the earlier of (x) the date of the next annual meeting and (y) 30 days after the first anniversary of the date of the previous annual meeting; (D) an identical or substantially similar item (as determined in good faith by the Board, a “Similar Item”), other than the election of directors, was included on the agenda atCorporation nor any annual or special meeting of stockholders held not more than 12 months before the Special Meeting Request is delivered; (E) a Similar Item is included in the corporation’s notice of meeting as an item of business to be brought before an annual or special meeting of stockholders called by the Board of Directors for a date – or was included on the agenda of such a meeting on a date – within 90 days of the Delivery Date (and, for purposes of this clause (E), the election or removal of directorsSubsidiary Company shall be deemed to be a “Similar Item”trustee of any amounts to be paid under an Option, Stock Appreciation Right, Performance Share Unit, or Restricted Stock Unit. Any liability of the Corporation to pay any Participant or Beneficiary with respect to all items of business involvingan Option, Stock Appreciation Right, Performance Share Unit, or Restricted Stock Unit shall be based solely upon any contractual obligations created pursuant to the election or removal of directors, changing the sizeprovisions of the BoardPlan; no such obligation shall be deemed to be secured by any pledge or encumbrance on any property of Directorsthe Corporation or a Subsidiary Company.
(g) Applicable Law - The Plan, its validity, interpretation, and administration, and the fillingrights and obligations of vacancies and/or newly created directorships resulting from any increaseall persons having an interest therein, shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, except to the extent that such laws may be preempted by Federal law. (h) Gender and Number - Wherever used in the authorized numberPlan, words in the masculine form shall be deemed to refer to females as well as to males, and words in the singular or plural shall be deemed to refer also to the plural or singular, respectively, as the context may require. (i) Code Section 409A - The Plan is intended, and shall be construed, to comply with the requirements of directors);Code Section 409A. The Corporation does not warrant that the Plan will comply with Code Section 409A with respect to any Participant or (F)with respect to any payment, however. In no event shall the Special Meeting Request was made inCorporation or the Committee be liable for any additional tax, interest, or penalty incurred by a manner that involvedParticipant or Beneficiary as a violationresult of Regulation 14A under the Securities Exchange ActPlan’s failure to satisfy the requirements of 1934,Code Section 409A, or as amended, ora result of the Plan’s failure to satisfy any other applicable law.requirements for the deferral of tax.
Table of Contents (iii) Special meetings of stockholders called pursuant to this Section 2(b) must be held within 120 days after the Delivery Date.
(iv) If none of the Requesting Stockholders appear or send a representative to present the business to be presented for consideration specified in the Special Meeting Request, the corporation need not present such business for a vote at the special meeting, notwithstanding that proxies in respect of such matter may have been received by the corporation.
ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS OF NORFOLK SOUTHERN CORPORATION May 9, 201314, 2015 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxymaterial, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. |
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement, proxy card and Annual Report to Stockholders
are available at http://www.astproxyportal.com/ast/17278/
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
 | Please detach along perforated line and mail in the envelope provided. | |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING ITEMS,
AND THIS PROXY CARD WILL BE VOTED ACCORDINGLY IF NO CHOICE IS SPECIFIED.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK
AS SHOWN HERE☒ |
| 1. | ELECTION OF THIRTEEN DIRECTORS. | | FOR | | AGAINST | | ABSTAIN | | 1.1 | | Thomas D. Bell, Jr. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.2 | | Erskine B. Bowles | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.3 | | Robert A. Bradway | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.4 | | Wesley G. Bush | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.5 | | Daniel A. Carp | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.6 | | Karen N. Horn | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.7 | | Steven F. Leer | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.8 | | Michael D. Lockhart | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.9 | | Amy E. Miles | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | | ☐ |
| | | FOR | | AGAINST | | ABSTAIN | | 1. | 10 Charles W. Moorman, IV | | ☐ | | ☐ | | ☐ | | | | | | | | | | 1. | 11 Martin H. Nesbitt | | ☐ | | ☐ | | ☐ | | | | | | | | | | 1. | 12 James A. Squires | | ☐ | | ☐ | | ☐ | | | | | | | | | | 1. | 13 John R. Thompson | | ☐ | | ☐ | | ☐ | | | | | | | | | | 2. | The ratification of the appointment of KPMG LLP, independent registered public accounting firm, as Norfolk Southern’s independent auditors for the year ending December 31, 2015. | | ☐ | | ☐ | | ☐ | | | | | | | | | | 3. | Approval of executive compensation as disclosed in the proxy statement for the 2015 Annual Meeting of Stockholders. | | ☐ | | ☐ | | ☐ | | | | | | | | | | 4. | Approval of the amended Executive Management Incentive Plan as disclosed in the proxy statement for the 2015 Annual Meeting of Stockholders. | | ☐ | | ☐ | | ☐ | | | | | | | | | | 5. | Approval of the amended Long-Term Incentive Plan as disclosed in the proxy statement for the 2015 Annual Meeting of Stockholders. | | ☐ | | ☐ | | ☐ | | | | | | | | |
In addition, in their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. | |
| Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | |
| Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | | |
Table of Contents PROXY VOTING INSTRUCTIONSANNUAL MEETING OF STOCKHOLDERS OF
NORFOLK SOUTHERN CORPORATION May 14, 2015 PROXY VOTING INSTRUCTIONS |
INTERNET-Access “www.voteproxy.com”“www.voteproxy.com” and follow the on- screen instructions.on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. TELEPHONE-Call toll -free 1- 800 -PROXIES (1- 800 -776 -9437)toll-free1-800-PROXIES(1-800-776-9437) in the United States or 1- 718 -921 -8500 1-718-921-8500from foreign countries from any touch -tonetouch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online /phoneonline/phone until 11:59 PM EDT May 8, 201313, 2015 the day before the meeting. MAIL-Sign, date and mail your proxy card in the envelope provided as soon as possible. IN PERSON IN-PERSON-You may vote your shares in person by attending the Annual Meeting.
COMPANY NUMBER
ACCOUNT NUMBER
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement, proxy card To be admitted, you must bring photo identification and Annual Report to Shareholders are available at http:// www. amstock .com /ProxyServicesNiewMaterial .asp ?CoNumber =17278
Please detach along perforated line and mail in the envelope provided IF- if you are not votinga beneficial owner of shares held in street name - proof of stock ownership.
GO GREEN-e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via telephone or the Internet. ifwww.amstock.com to enjoy online access. 
| COMPANY NUMBER | | ACCOUNT NUMBER | | | |
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement, proxy card and Annual Report to Stockholders
are available at http://www.astproxyportal.com/ast/17278/ |
| Please detach along perforated line and mail in the envelope providedIF you are not voting via telephone or the Internet. | |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING ITEMS,
AND THIS PROXY CARD WILL BE VOTED ACCORDINGLY IF NO CHOICE IS SPECIFIED.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK
AS SHOWN HERE☒ |
| 1. | ELECTION OF THIRTEEN DIRECTORS. | | FOR | | AGAINST | | ABSTAIN | | 1.1 | | Thomas D. Bell, Jr. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.2 | | Erskine B. Bowles | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.3 | | Robert A. Bradway | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.4 | | Wesley G. Bush | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.5 | | Daniel A. Carp | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.6 | | Karen N. Horn | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.7 | | Steven F. Leer | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.8 | | Michael D. Lockhart | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 1.9 | | Amy E. Miles | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | | ☐ |
| | | FOR | | AGAINST | | ABSTAIN | | 1. | 10 Charles W. Moorman, IV | | ☐ | | ☐ | | ☐ | | | | | | | | | | 1. | 11 Martin H. Nesbitt | | ☐ | | ☐ | | ☐ | | | | | | | | | | 1. | 12 James A. Squires | | ☐ | | ☐ | | ☐ | | | | | | | | | | 1. | 13 John R. Thompson | | ☐ | | ☐ | | ☐ | | | | | | | | | | 2. | The ratification of the appointment of KPMG LLP, independent registered public accounting firm, as Norfolk Southern’s independent auditors for the year ending December 31, 2015. | | ☐ | | ☐ | | ☐ | | | | | | | | | | 3. | Approval of executive compensation as disclosed in the proxy statement for the 2015 Annual Meeting of Stockholders. | | ☐ | | ☐ | | ☐ | | | | | | | | | | 4. | Approval of the amended Executive Management Incentive Plan as disclosed in the proxy statement for the 2015 Annual Meeting of Stockholders. | | ☐ | | ☐ | | ☐ | | | | | | | | | | 5. | Approval of the amended Long-Term Incentive Plan as disclosed in the proxy statement for the 2015 Annual Meeting of Stockholders. | | ☐ | | ☐ | | ☐ | | | | | | | | |
In addition, in their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. | |
| Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | |
| Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | | |
Table of Contents
PROXY 00033333333333333300 1 050913
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING ITEMS,
AND THIS PROXY CARD WILL BE VOTED ACCORDINGLY IF NO CHOICE IS SPECIFIED.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE e
In addition, in their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
1. ELECTION OF TWELVE DIRECTORS.
1.1 Thomas D. Bell, Jr
1.2 Erskine B. Bowles
1.3 Robert A. Bradway
1.4 Wesley G. Bush
1.5 Daniel A. Carp
1.6 Karen N. Horn
1.7 Burton M. Joyce
1.8 Steven F. Leer
1.9 Michael D. Lockhart
1.10 Charles W. Moorman
1.11 Martin H. Nesbitt
1.12 John R. Thompson
FOR AGAINST ABSTAIN
2. The ratification of the appointment of KPMG LLP, independent registered public accounting firm, as Norfolk Southem’s independent auditors for the year ending
December 31, 2013.
3. Approval of executive compensation as disclosed in the proxy statement for the 2013
Annual Meeting of Stockholders.
4. Approval of an amendment to the Norfolk Southern Bylaws giving stockholdersthe to call a special meeting.
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
Signature of Stockholder
Date:
Signature of Stockholder
Date:
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
PROXY
NORFOLK SOUTHERN CORPORATION THREE COMMERCIAL PLACE, NORFOLK, VIRGINIA 23510 PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 9, 2013 14, 2015
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints and authorizes James A. Nixon, Howard D. McFaddenHixon, Denise W. Hutson and Virginia K. Fogg, and each or any of them, proxy for the undersigned, with full power of substitution, to represent and vote all shares of Norfolk Southern Corporation common stock held by the undersigned with the same force and effect as the undersigned at the Annual Meeting of Stockholders of Norfolk Southern Corporation to be held at the Conference Center, Williamsburg Lodge, South England Street, Williamsburg, Virginia, on Thursday, May 9, 2013,14, 2015, at 10:008:30 A.M., Eastern Daylight Time, and at any adjournments, postponements or rescheduling thereof, upon the matters more fully set forth in the Proxy Statement, dated March 20, 2013,25, 2015, and to transact such other business as properly may come before such meeting(s). The undersigned acknowledges receipt of the Notice and Proxy Statement dated in each case March 20, 2013.25, 2015. All other proxies heretofore given by the undersigned to vote shares of Norfolk Southern Corporation common stock are expressly revoked hereby. 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 VOTEDFORTHE ELECTION OF DIRECTORS, RATIFICATION OF KPMG AS INDEPENDENT AUDITORS, APPROVAL OF EXECUTIVE COMPENSATION, AND APPROVAL OF EXECUTIVE COMPENSATION, THE AMENDMENT TO NS BYLAWS GIVING STOCKHOLDERS THE RIGHT TO
CALL A SPECIAL MEETING.AMENDED EXECUTIVE MANAGEMENT INCENTIVE PLAN AND AMENDED LONG-TERM INCENTIVE PLAN. THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH
RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURN-. MENTADJOURNMENT OR POSTPONEMENT THEREOF.
(Continued and to be signed on the reverse side.)14475
|
