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REPORT PAGE3 Elimination of Container Royalty CAP During last year's Contract Extension negotiations, one of the issues that had to be addressed was the wage increase that was due the ILA in the last contract year of the 2004-2010 Master Contract. One of management's demands was to eliminate that increase in order to help the industry weather the economic storm that was taking place. We estimated that the amount of the wage increase would be $42 million. This was based on wage submissions for prior contract years and available economic forecasts. One of the ILA's bargaining demands was the elimination of the Container Royalty CAP program that had been in ef- fect for several prior contracts. The CAP had a tonnage escalation point in effect that increased the tonnage bench- mark by 5 million tons every two years. In the last year of the contract that was set to expire in 2010, the CAP benchmark would have been 73 million tons. By eliminat- ing the CAP program, the ILA would receive 100% of the Container Royalty 1 and 3 paid by the Carriers, instead of just receiving the amount up to the benchmark. The excess over the benchmark was distributed to local welfare funds, MILA, and a portion back to the Carriers. As the benchmark increased, the amount of the CAP return to the various entitities would decrease. The quidpro quo for the elimination of the wage increase was the elimination of the CR CAP. The final result of the nego- tiations was that the wage increase scheduled to go into effect on 10-1-09 would be paid, while the Carriers would recoup $42 million from CR1 and CR3 payments, which would cover the cost of the increase. The CAP program would then be eliminated going forward. A system was developed and implemented to achieve this deferral. Eliminating the CAP return presented two additional challenges. The first was the continued funding of the CAP excess, which had been distri- buted to the local ports. The other was the result of an agreement that had been made several years ago, whereby the Vacation and Holiday Funds for the South Atlantic and West Gulf were paid from the Carrier portion of the CAP refund. The final solution reached was the establishment of a new Container Royalty fund called CR5. The details of the funding of CR5 are explained in the Memorandum of Agreement. Please be reminded that CR1 and CR3 are distributed to longshore employees; CR2 and CR4 support MILA; and the new CR5 will be used to support local funds. PORT OF DISCOVERY (continued from Page 2) decision to the US Court of Appeals for the Third Circuit. On 7-29-09, Judge Hochberg denied the motion because Local 1804-1 failed to demonstrate to the court's satisfaction how it wo~ld g~ffer substantial hardship or unfairness if its appeal were delayed until resolution ofNYSA's second ~ause of action. Moreover, the court found that Local 1804-1 would not be prejudiced by the delay, since the procedures in the Arbitration Award are still in effect, enabling Local 1804-1 to track loaded containers with major damage and to assert grievances for violations, once the validity of the Arbitration Award and the liquidated-damages clause is resolved. In its 5-20-09 decision, the court allowed NYSA to renew its motion for summary judgment following limited fact discovery with regard to NYSA's liquidated-damages claim. Discovery was completed in October 2009. The parties filed cross-motions for summary judgment on 11-9-09. Answering and reply briefs and affidavits were submitted by both sides. A hearing on the parties' motions for summary judgment was held on 2-22-10, after which the court reserved decision. (see PORT OF DISCOVERY, Page 3)

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