Change-in-Control Agreements
Generally: We have entered into change-in-control agreements with a number of key executives, including our Named Executive Officers employed as of the end of the fiscal year. 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 shareholders holding less than 80% of the voting power of the combined company;
■ a shareholder-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.
Benefits Payable upon Termination Following a Change in Control: The change-in-control agreement provides senior executives with 2.99 times the sum of the executives’ base salary plus annual incentive.
Events Triggering Change-in-Control Payments: 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 the 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;
■ the Named Executive Officer’s salary or annual incentive opportunity is materially reduced below the amounts in effect prior to the change in control;
■ 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 is participating immediately prior to the change in control and which have substantial value;
■ the Named Executive Officer determines in good faith that following the change in control, he 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 held immediately prior to the change in control;
■ the successor to the change in control does not assume all of our duties and obligations under the change-in- control agreement;
■ we require that the Named Executive Officer relocate his principal location of work in excess of 50 miles from his employment location immediately prior to the change in control, or that the Named Executive Officer travel away from his office significantly more than was required immediately prior to the change in control; or
■ there is any material breach of the change-in-control agreement by us or our successor.
However, 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 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 employment with us;
■ intentional wrongful damage to our property;
■ intentional wrongful disclosure of secret processes or of our confidential information; or
■ intentional violation of The Thoroughbred Code of Ethics or, as applicable, our Code of Ethical Conduct for Senior Financial Officers.
