Dear Milton,

This letter is with regard to our recent conversations surrounding the proper application of the"Special Pay Differential" provided for pursuant to Article XV of our 1996 BNSF/BLET On- Property Agreement (former BN). As we have discussed, Article XV created two (2) SPD values, $27.00 for through freight service and $18.00 for all other service. In addition, Article XV stipulated that the $18.00 SPD payment for other than through freight service, as well as the first $18.00 of the $27.00 through freight SPD, would be payable over and above, or without offset to any extra board guarantee due. As a result, the $9.00 difference between the two payments, or one third of the through freight SPD became the only portion of the through freight SPD that could be used to offset extra board guarantee. Although the two SPD values have changed over the years with the application of General Wage Increases, the parties continued to utilize the difference between the two SPD payments as the offset value for extra board engineers receiving the through freight SPD.

With the implementation of Trip Rate portion of the 2003 BLET National Agreement, SPD payments, through freight and other, have been rolled into certain trip rates by agreement between the parties. Initially following implementation of those trip rates, the entire through freight SPD was used as an offset against guarantee payments to extra board engineers receiving the involved trip rates. When the Organization notified BNSF of this improper offset, BNSF discontinued the SPD offset in full until the parties could develop the proper methodology to determine proper offset.

As part of a pilot settlement, BNSF re-programmed the SPD monies included in two particular trip rates, separating the trip rate SPD value into a 113 (PD) and 213 (PX) values, with only the 113 value of the "PD" payment used as an offset. As part of our discussions this date, it is understood that this application will be applied in all through freight pools where the SPD was averaged into the trip rate. In pools and on assignments where the "through freight" SPD was averaged into the trip rate, 213's of the resulting averaged SPD value will be identified as "PX" and this payment will not be used as an offset to extra board guarantee. 113 of the resulting averaged SPD value will be identified as "PD" and will be used to offset extra board guarantee. In pools or assignments where the"other than through freight" SPD was averaged into the trip rate, the entire resulting averaged SPD payment will be identified as "PX" and that payment will not be used to offset extra board guarantee.

If is further understood that as subsequent GWl's and COLA's are applied to the average SPD values within any given trip rate, the above noted methodology continue so that one third of the resulting through freight SPD will continue to be used as an offset to extra board guarantee.

In the application of subsequent Cost-of-Living increases to averaged SPD values within any given trip rate, the following methodology will be used:

Through Freight SPD- Divide daily COLA value by the minimum through freight rate (pre COLA) to calculate the corresponding "COLA percentage value" to be applied to the SPD.

Local, Road Switcher, Yard SPD- Divide daily COLA value by the minimum five day yard rate (pre COLA) to calculate the corresponding "COLA percentage value" to be applied to the SPD.

It is also understood that all engineers who work as engineer pilots (former BN territories) will be allowed the appropriate SPD payment based upon the class of service that they are piloting in.