March 25, 2005

Debra Grabelle
Chief Negotiators
AFSCME, Local 3299, AFL-CIO
2201 Broadway, Suite 715
Oakland, CA 94612

RE: Laboratory Revised Last, Best and Final Performance Based Proposal, FY 2005 Local Wage Agreement

Dear Debra:

On behalf of the Laboratory Bargaining Team, the enclosed offer is proposed to conclude local wage negotiations. The basic elements of this proposed FY 2005 local wage agreement encompass the following:

1. Base-building individual performance based adjustment of 3.00% to each eligible employee who was rated "exceeds" expectations and 2.55% to each employee who was rated "meets" expectations for the period commencing July 1, 2003 and ending June, 30, 2004, to be paid within 90 days of the ratification of this wage agreement. Such wage adjustment will be retroactive to October 1, 2004. In order to be eligible for the FY 2005 salary increase, an employee must be in the SX bargaining unit on October 1, 2004; be eligible for performance evaluation; and continue to be in the bargaining unit on the date payroll distribution is processed in HRIS. No separate paychecks will be issued. In addition, the attached side letter outlines the transition from the current P2R to a performance appraisal instrument specifically designed for SX employees through FY 2007.

2. An amount of up to 0.50% will be available for posted promotions, individual equity adjustments and reclassifications.

3. Effective FY 2006, a joint Lab pay for performance rating review committee will be formed that will consist of 2 members from management and 2 members from the SX unit and with a fifth member selected by mutual agreement of the parties, that will function to review disputed individual employee performance ratings and to provide an advisory recommendation to the parties designed to facilitate resolution of any disagreements in this regard.

4. Any salary range adjustments will be at the Lab's sole discretion. The Lab will provide the Union thirty (30) days advance notice regarding whether salary ranges will be adjusted and, if so, the amount of the adjustment. At the Union's request, the Lab will schedule a meeting to discuss the Union's concerns relative to the basis for such decision.

5. Employees who have reached the maximum of their ranges or who are "red-circled" will be eligible to receive increases in the form of a non base-building lumps sum payment .

This offer represents a fair and equitable wage proposal that meets the needs of both parties. It would allow the Laboratory to establish a pay for performance process that will be tailored to SX employees in a fashion that Local 3299 ought to be able to support because a review board will be established to address any disagreements in performance ratings on an advisory basis.

Please be advised that this offer is hereby extended until 5:00pm, P.S.T. March 28, 2005 at which time it will expire and be "off the table," unless tentative agreement is reached by the parties.

Respectfully yours,

Bill Elkins