Exhibit 10.46

 

BURLINGTON NORTHERN SANTA FE CORPORATION

 

DESCRIPTION OF EXECUTIVE OFFICER CASH COMPENSATION

 

FOR 2006

 

Annual Cash Compensation

 

Base Salary – Set forth below are the base salaries of the Chief Executive
Officer and each of the four most highly compensated executive officers in 2005
and their increased annual base salaries effective February 16, 2006. The
Company considers various factors in assigning executive officers to specific
salary ranges, including job content, level of responsibility, accountability,
and the competitive compensation market. On an annual basis, all executive
officers’ salaries are reviewed and adjusted to reflect individual performance
and position within their respective ranges.

 

Incentive Compensation Plan (ICP) Target – Executive officers are eligible for
annual performance-based awards under the Company’s ICP, as are all salaried
employees. If the Company attains its targeted performance goals, cash
compensation levels (base salary plus annual incentives) will approximate the
50th percentile of companies from general industry with revenue comparable to
the Company (“comparison group”). At the 2006 annual meeting, shareholders will
consider amending the ICP to qualify performance-based compensation under
Section 162(m) of the Internal Revenue Code. Contingent on that approval, the
2006 ICP goal for the CEO and executive vice presidents will be weighted 100
percent upon achievement of the targeted level of cash flow (from operations).
The Compensation and Development Committee of the Board (the “Committee”) has
the authority to reduce the amount of the awards for the CEO and executive vice
presidents based on those factors the Committee determines to be relevant. For
all other participants, including all other executive officers, the Company’s
goals will be weighted 55 percent, 30 percent and 15 percent upon achievement of
targeted levels of earnings per share, velocity and safety, respectively.
Performance against these annual goals, which are consistent with the Company’s
long-term objectives and aligned with shareholder returns, will be among the
factors that the Committee will consider in determining any reductions to the
awards for the CEO and the executive vice presidents.

 

Long-Term Incentives – Opportunities provided to executive officers under
long-term incentive programs are targeted to approximate the 60th percentile of
the comparison group for total direct compensation (cash plus long-term
incentives).

 

Incentive Bonus Stock Program – To encourage individual stock ownership,
executive officers had previously been given the opportunity to exchange up to
100 percent of their ICP cash awards for a grant of restricted stock.
Participants electing the exchange received a restricted stock grant equal to
150 percent of the ICP award foregone. Shares vested three years after grant. On
February 28, 2005, the Committee amended the Program to provide that the maximum
which could be exchanged from the 2005 ICP award was 100 percent of the
individual’s target ICP award, and that the restricted stock grant would be
equal to 135 percent of the ICP award foregone. On September 14, 2005, the
Committee amended the Program so that no exchanges are permitted beyond those
for ICP awards earned in 2005. See Exhibits 10.8 and 10.38 to this Form 10-K.

 

Salary Exchange Option Program – To reinforce the link between stock price
performance and executive compensation, executive officers have had the
opportunity to elect to exchange up to 25 percent of their base salary each year
for a grant of non-qualified stock options with an exercise price equal to the
fair market value of the Company’s common stock on the date of grant and with a
term of up to ten years from the date of grant. Participants received 450
non-qualified stock options for each $1,000 of base salary exchanged and may
have elected salary exchanges for up to three consecutive years at one time.
Options vest on the anniversary of the date of grant following the year for
which the base salary was exchanged. On February 28, 2005, the Compensation and
Development Committee amended the Program to provide that no elections are
permitted beyond that date. See Exhibits 10.18 and 10.33 to this Form 10-K.

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Stock Options, Restricted Stock, Restricted Stock Units and Performance Stock –
Under the Stock Plan, the Company makes periodic grants of stock options,
restricted stock or restricted stock units and performance stock to executive
officers. Stock options cannot be issued with an exercise price below the fair
market value of the Company common stock on the date of grant, thus ensuring
that recipients will benefit only when the price of the Company’s stock
appreciates, and they vest pro rata over three years. Stock options granted to
executive officers prior to February 28, 2005, may have also included a reload
feature that encourages them to exercise their options using previously acquired
shares of the Company’s common stock and helps them achieve their stock
ownership goals; reload grants of options vest in six months but expire under
the terms of the original option grant. Grants of restricted stock or restricted
stock units provide for vesting in three years after grant; vesting may also be
contingent on achievement of Company performance goals. Awards of performance
stock vest three years after award date, contingent on achievement of Company
performance goals. See Exhibits 10.21, 10.31, 10.32, 10.33, 10.34, 10.35 and
10.38 to this Form 10-K.

 

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Matthew Rose

Chairman, President and Chief Executive Officer

 

     Base

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2005

   $ 1,100,000

2006

   $ 1,100,000

 

Thomas Hund

Executive Vice President and Chief Financial Officer

 

     Base

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2005

   $ 473,500

2006*

   $ 487,700

 

Carl Ice

Executive Vice President and Chief Operations Officer

 

     Base

--------------------------------------------------------------------------------

2005

   $ 520,000

2006*

   $ 535,600

 

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John Lanigan

Executive Vice President and Chief Marketing Officer

 

     Base

--------------------------------------------------------------------------------

2005

   $ 500,000

2006*

   $ 515,000

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Jeffrey Moreland

Executive Vice President Law & Government Affairs and Secretary

 

     Base

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2005

   $ 455,000

2006*

   $ 468,700

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* Salary increases from 2005 levels are effective February 16, 2006