NORFOLK SOUTHERN CORPORATION
LONG-TERM INCENTIVE PLAN
AS AMENDED SUBJECT TO STOCKHOLDER APPROVAL
The terms of
this amended Long-Term Incentive Plan ("Plan"), as set forth below,
are subject to approval 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.
Section
1. PURPOSE
The purpose of
the Plan, as amended, is to promote the success of Norfolk Southern
Corporation (the "Corporation") and to provide an opportunity for
officers and other key 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 officers and other key employees
to devote their maximum efforts and skills to the advancement,
betterment, and prosperity of the Corporation and its shareholders.
The Plan provides for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, performance
share units, performance shares, shares of the Corporation's common
stock (restricted pursuant to the provisions of Section 9 of the
Plan) 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.
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:
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Award
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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.
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Beneficiary
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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
therefor by the Participant at any time before his death without
the consent of the previously designated Beneficiary.
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Board of
Directors
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The Board of
Directors of the Corporation.
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Cash- Settled
Stock Appreciation Rights
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Stock
Appreciation Rights settled in cash.
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Code
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The Internal
Revenue Code of 1986, as amended from time to time.
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Committee
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The
Compensation Committee or any other committee of the Board of
Directors which is authorized to grant Awards under this Plan. The
Committee must be composed solely of two or more outside directors,
as defined under Code Section 162(m) and applicable regulations
thereunder.
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Common Stock
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The Common
Stock of the Corporation.
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Disability
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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.
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Executive
Officers
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Officers
designated by the Board of Directors as "Executive Officers" for
purposes of Section 16 of the Securities Exchange Act of 1934.
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Exercise Gain
Shares
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With respect
to a Stock Appreciation Right, all of the shares of Common Stock
received upon exercise of the Stock Appreciation Right.
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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.
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Fair Market
Value
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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.
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Incentive
Stock
Option
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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.
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Non-Qualified
Stock Option
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An Option
granted under the Plan other than an Incentive Stock Option.
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Option
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Any option to
purchase Common Stock granted pursuant to the provisions of Section
6 or Section 7 of the Plan.
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Optionee
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A Participant
who is the holder of an Option.
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Participant
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Any officer or
key employee of the Corporation or a Subsidiary Company selected by
the Committee to participate in the Plan and any non-employee
director of the Corporation.
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Performance
Cycle
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The period of
time, designated by the Committee, over which Performance Shares
may be earned.
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Performance
Criteria
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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: 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); 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; and safety
measures.
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Performance
Criteria Weighting Percentage
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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%).
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Performance
Goal
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The specific
target set by the Committee for each selected Performance Criterion
(or each combination thereof). 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.
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Performance
Shares
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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.
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Performance
Share Units
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Contingent
rights to receive Performance Shares pursuant to Section 11 of the
Plan.
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Restricted
Shares
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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.
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Restricted
Stock Unit
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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.
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Restricted
Stock Unit Shares
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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.
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Restriction
Period
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A period of
time not less than thirty-six (36) nor more than sixty (60) months,
to be determined within those limits by the Committee in its sole
discretion, commencing on the date as of which Restricted Shares or
Restricted Stock Units are granted, 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. The Committee shall
determine whether to impose a Restriction Period and the length of
the Restriction Period at the time that the Restricted Shares or
Restricted Stock Units are granted. Such Restriction Period, if
any, shall be incorporated in the Restricted Share Agreement or
Restricted Stock Unit Agreement setting forth the grant. Under
Sections 9 and 10 of this Plan, the Committee may, in its
discretion, provide that the Restriction Period shall expire upon
the earlier achievement of Performance Goals.
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Retirement
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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.
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Share
Retention Agreement
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An agreement
entered into pursuant to Section 12 of the Plan.
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Stock
Appreciation Right
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The right,
granted pursuant to the provisions of Section 8 of the Plan, to
receive Exercise Gain Shares or a 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 grant date,
as specified in Section 8 of the Plan.
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Stock-
Settled Stock
Appreciation Rights
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Stock
Appreciation Rights paid out in Exercise Shares.
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Subsidiary
Company
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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.
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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, from time to time to
construe and interpret the Plan; to select the officers, key
employees and non-employee directors 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, 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. The Committee in its
sole discretion may delegate authority to the Corporation's chief
executive officer to select the officers and key 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, in which case the chief executive officer
shall have the full and complete authority to act on the
Committee's behalf to the extent so delegated. 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 Committee, 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
for selection by the Committee to participate in the Plan, an
individual must be a full-time salaried officer or key employee of
the Corporation, or of a Subsidiary Company, and must reside in the
United States or Canada, on the date on which the Committee
authorizes the grant to such individual of an Award. 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 on the date on
which the Committee authorizes the grant of an Award to
non-employee directors.
Section
5. SHARES AVAILABLE
Effective May
10, 2001, an additional 30,000,000 shares of Common Stock were
approved for issuance pursuant to the Plan, and no more than
6,000,000 of such additional shares could be awarded as Restricted
Shares or Performance Shares. 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, not more than 8,500,000
of the shares remaining available for issuance under the Plan on
the date of such approval may be awarded as Restricted Shares,
Performance Shares or Restricted Stock Unit Shares. Such shares
shall be provided from shares of Common Stock authorized but not
issued. Stock Appreciation Rights to be settled in shares of Common
Stock 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. Any shares of Common Stock which were subject
to an Option, a Performance Share Unit, or a Restricted Stock Unit
and which were not issued as Common Stock prior to the expiration
of the Award shall thereafter again be available for
award under
the Plan. Any shares of Common Stock which were subject to a Stock
Appreciation Right to be settled in shares of Common Stock shall
again be available for award under the Plan after expiration or
forfeiture of an Award. Upon the forfeiture of any Restricted
Shares, the forfeited shares of Common Stock shall thereafter be
available for award under the Plan. 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
1,500,000 shares of Common Stock. 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. The settlement in cash of Restricted Stock Units, Performance
Share Units and Stock Appreciation Rights shall not be counted
against the total number of shares available under this Section 5
for issuance under the Plan.
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 Stock Option
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 Share Retention Agreement that may be
required by the Committee under Section 12 of the Plan.
Except for adjustments pursuant to Section 14 of the Plan, the
Option Price for any outstanding Incentive Stock 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, 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) 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 14 of the Plan, in no event shall the Option price be less
than one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date the Option is granted.
(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 date the Option
is granted, and that such term shall be subject to earlier
termination pursuant to the provisions of paragraph (g) of this
Section 6 or paragraph (e) of Section 8 of the Plan.
(d) Non-Transferability of Options -
Options are not transferable other than by will or the applicable
laws of descent and distribution following the death of the
Optionee. Options may be exercised during the lifetime of the
Optionee only by him, and following his death only by his
Beneficiary.
(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 date on which the
Option was granted; 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 twelve (12)
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 case of an Optionee whose employment with the Corporation or
a Subsidiary Company is terminated due to Retirement, Disability or
death, the expiration of thirty-six (36) months after such
termination of employment, 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 time the Incentive Stock Option is
granted) 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.
(i) Order of Exercise - As used in paragraph (h)
of this Section 6, the term Incentive Stock Option shall mean an
option to purchase stock which is granted pursuant to the
provisions of this Plan or of any other plan of the Corporation or
of a parent or subsidiary corporation (as defined by Section 424(f)
of the Code) and which complies with the terms and conditions set
forth in Code Section 422(b).
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
Non-Qualified Stock Option 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 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 Share
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 either by provisions in the Stock Option Agreement
evidencing the related Option or by a written Stock Appreciation
Right Agreement between the Corporation and the Optionee,
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 Stock Appreciation Right
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
Option Agreement or Stock Appreciation Right Agreement.
Cash-Settled Stock Appreciation Rights shall be granted with fixed
payment dates.
(b) 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 Stock Appreciation Right Agreement.
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 date on which it was granted;
provided, however, that this subparagraph (i) shall not apply if
the death or Disability of the Optionee occurs within one (1) year
after the grant of the Stock Appreciation Right; 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.
(c) 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 o
