mackin-bcrc board jan 2003 to jun 2004 redacted

7/30/2019 Mackin-BCRC Board Jan 2003 to Jun 2004 Redacted

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Obtained by Bob Mackin via Freedom of Information

[email protected]@bobmackin


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PLACE:

DATE:

TIME:

AGENDABRITISH COLUMBIA RAILWAY COMPANY

BOARD MEETING

BC Rail Executive Boardroom61h Floor, 221 West EsplanadeNorth Vancouver, British ColumbiaTuesday, January 14, 200310:00 a.m.


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PART A CORPORATE

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerP. Ballachey, Vice President Finance & Chief Financial Officer, BC RailC. Yaremko, Group Director of FinanceK. Mahoney, Vice President Corporate Affairs, BC RailJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC RailR. Pirooz, Iris Consulting LimitedB. Should ce, Borden Ladner GervaisAlan Wallace, Managing Director, CIBC World Markets

TAB# SECTION I PRELIMINARY MATTERS PRESENTERCall to Order ChairPart A - Excusals ChairChair's Comments Chair

TAB# SECTION II CORPORATE AGENDA PRESENTERAdopt Agenda Chair

1. Review and Approval of Sale Transaction fo r B. PhillipsCanadian Stevedoring Company Limited andCasco Terminals Ltd. (Directors' binders only)(resolution required)Business Arising from Agendaother Business

END CORPORATE AGENDA

TIME.

10:00

10:00 - 10:10TIME10:10

10:10- 11:00


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PART 8 POST IN-CAMERA

Attendees:DirectorsB. Phillips, Group President & Chief Executive Officer

TAB# POST MEETING IN-CAMERA SESSION PRESENTER TIMEDiscussion 11:00MEETING ADJOURNMENT Chair


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FUTURE BOARD MEETINGS:DATE TIME LOCATION

Tuesday, March 11, 2003 9:00 a.m. BC Rail Centre BoardroomThursday, May 1, 2003 9:00 a.m. BC Rail Centre BoardroomThursday, July 31, 2003 9:00 a.m. BC Rail Centre BoardroomThursday, October 30, 2003 9:00 a.m. BC Rail Centre Boardroom

FUTURE COMMITTEE MEETINGS:Audit, Finance and Risk Management Committee

DATE TIME LOCATIONTuesday, January 21, 2003 9:00 a.m. BC Rail Centre BoardroomFriday, February 28, 2003 9:00 a.m. BC Rail Centre BoardroomTuesday, April 22, 2003 9:00 a.m. BC Rail Centre BoardroomMonday, July 21, 2003 9:00 a.m. BC Rail Centre BoardroomMonday, October 20, 2003 9:00 a.m. BC Rail Centre Boardroom

Environment and Safety CommitteeDATE TIME LOCATION

Thursday, January 30, 2003 9:00 a.m. BC Rail Centre BoardroomWednesday, April 30, 2003 9:00 a.m. BC Rail Centre BoardroomWednesday, October 29, 2003 9:00 a.m. BC Rail Centre Boardroom

Human Resources, Governance and Nominating CommitteeDATE TIME LOCATION

TBA TBA


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BRITISH COLUMBIA RAILWAY COMPANYOFFICIAL MINUTES- BOARD OF DIRECTORS

TUESDAY, JANUARY 14, 2003, 10:00 A.M.6TH FLOOR EXECUTIVE BOARDROOM, BC RAIL CENTRE

221 WEST ESPLANADE. NORTH VANCOUVER. B.C.

PRESENT: John McLernonBev BriscoeBrian KenningLen MarchandPatrick RorisonJim ShepardAnne StewartJim YeatesIN ATTENDANCE: Bob PhillipsKevin MahoneyPeter BallacheyJohn LeightonCheryl YaremkoRobert PiroozBob ShouldiceAlan WallacePaul LangleyJim OslerDick Falconer

Chair(via teleconference)(via teleconference)(via teleconference)(via teleconference)(via teleconference)

(Iris Consulting Ltd.)(Borden Ladner Gervais LLP}(CIBC World Markets)(CIBC World Markets)(CIBC World Markets) - via teleconference(CIBC World Markets) - via teleconference

Due notice having been given and a quorum being present, the meeting was determined properlyconstituted and was called to order.CHAIR'SCOMMENTS1553-03ADOPT AGENDA1554-03

SALETRANSACTION forCANADIANSTEVEDORING andCASCOTERMINALS1555-03

Mr. McLernon provided welcoming and introductory remarks to the Board andother attendees.

ON A MOTION duly made and seconded,IT WAS RESOLVED that:the Agenda is approved and adopted.Mr. Bob Phillips summarized the background to the proposed transactioninvolving the sale of the businesses of Canadian Stevedoring (CS) and CascoTerminals (CT} to P&O Ports. He also summarized the principal terms of theproposed transaction as outlined in the transaction summary document preparedby Borden Ladner Gervais and provided to the Board.


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British Columbia Railway CompanyMinutes of Board Meeting 2 January 14, 2003

SALETRANSACTION forCANADIANSTEVEDORINGCOMPANY LIMITEDand CASCOTERMINALS LTO.1555-03continued

Mr, Jim Yeates inquired what would be the book value of the companies involvedin this transaction. Cheryl Yaremko responded that it will be in the range ofto Bob Phillips commented that a net gain of isanticipated on this transaction. [Subsequent to this January 14h meeting, revisedestimates placed book value at approx. with an anticipated net gain inthe range ofBob Phillips discussed issues relating to BCR Marine personnel. P&O hasindicated that they are impressed with the calibre of BCR Marine managementpersonnel and that, if they were acquiring the entire business, they would likelytake on the existing management. However, now that the transaction will notinclude Vancouver Wharves (VW), certain senior personnel will not be receivingoffers of employment from P&O. In the case of P&O made aspecific offer of employment within another part of its organization butelected not to accept the offer. has indicated to BCRCmanagement that he is willing to remain in his present role at VWL until suchtime disposition of that company is complete.As presently understood, have indicated that theywill accept offers of continued employment with P&O. will likelyaccept as well but will not receive an offer. willnot receive an offer from P&O but has indicated his willingness to remain in hispresent role at VWL until such time disposition of that company is complete. Allof the other remaining employees of CS and CT will receive offers to continueemployment under P&O ownership. Senior management employees will only beentitled to severance compensation based on the conditions of "constructivedismissal." The only two which are likely to be eligible for payments are

Bob Phillips provided the Board assurance that management of VWL will remainand continue to be effective until such time the sale of VWL is completed.Bob Phillips outlined some of the particular terms of the sale transaction to P&O.He commented that P&O have a positive outlook for the future of these twobusinesses. The Vancouver Port Authority (VPA) is also pleased with theinvolvement of P&O within the Port of Vancouver. The VPA have indicated thatthey will consent to assignment of the Casco lease.Bob Phillips advised that he briefed the Minister on the proposed transaction thismorning and would provide her further details prior to any public announcement.Any such public announcement will be coordinated between BCRC, P&O and theMinister's office.Mr. Alan Wallace of CIBC World Markets led the Board through the highlights ofthe presentation document on the sale transaction. He summarized the historyand sequence of events throughout the bid process. He commented that, in theopinion of CIBC World Markets, the entire process has been very thorough andcomplete. Ms. Bev Briscoe asked Mr. Wallace whether all of the bidders in theprocess will believe that they have been fairly treated in the process. Mr.Wallace stated his belief that all bidders have been treated fairly, although hecommented that one bidder may claim that it has not been treated fairly

Section 22

Section 17

Section 21


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SALETRANSACTION forCANADIANSTEVEDORINGCOMPANY LIMITEDand CASCOTERMINALS LTD.1555-03continued

Mr. Wallace commented that the final transaction multiples are favourable,especially com pared to those in the broader market.

Alan Wallace summarized the methodologies applied in the valuation analysis.The results indicate that the proposed purchase price falls at the higher end ofthe indicative value range and therefore represents good value. CIBC WorldMarkets will provide a formal "fairness opinion" on the transaction, believing theP&O proposal to be superior to any others.Mr. Brian Kenning asked

The Chair requested Bob Phillips to present BCR's position on negotiations withthe VPA regarding the PIL T and the potential financial risk. Bob Phillips pointedout that this issue would exist with any purchaser and that he does not see it as asignificant risk to the transaction with P&O. It was recommended that this issuenot be pursued further with P&O but must be concluded with the VPA.

Bob Phillips also assured the Board that any final agreement negotiated with theVPA will be brought back to the Board for final approval. This issue is technically

Section 14

Section 14

Section 14

Section 17


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SALETRANSACTION forCANADIANSTEVEDORINGCOMPANY LIMITEDand CASCOTERMINALS LTO.1555-03continued

separate from approving the proposed sale transaction with P&O Ports. TheBoard agreed to leave resolution of this matter with BCR management.Jim Shepard requested that the Board be provided with a formal "fairnessopinion" on the transaction. Bob Phillips and Alan Wallace advised that such aletter will be forthcoming from CIBC World Markets, inclusive of the resolution ofthe VPA issue.Mr. Jim Yeates (a member of the BCR Marine Sale Committee) commented thatthe value of the P&O bid is such that he recommends the Board proceed withclosing the P&O transaction as presented. Mr. Brian Kenning (also a member ofthe BCR Marine Sale Committee) concurred.Ms. Bev Briscoe requested to be provided a summary of the net proceeds of thetransaction on an accounting basis. Bob Phillips commented that the anticipatedpotential net gain is not including the PILT issue. AssumingBCR is not successful in settling the PILTissue with the VPA, the estimated gainon sale would be approx. above book value. [Subsequent to thisJanuary 141h meeting, revised estimates placed book value at approx.with an anticipated net gain in the range ofBrian Kenning requested that management bring forward a discussion of thefinancial and accounting details of the proposed sale transaction to the nextmeeting of the Audit & Finance Committee meeting on January 21, 2003.

ON A MOTION duly made and seconded,IT WAS RESOLVED that:1. the Transaction is hereby approved substantially on the terms described in

the Presentation with such changes thereto as may be approved by the twodirectors or officers of BCRC who execute and deliver the purchaseagreement governing the Transaction in accordance with paragraph 2(b)below, such approval to be conclusively evidenced by the execution anddelivery of the purchase agreement by such directors or officers.2. any two directors or officers of BCRC are hereby authorized, on behalf ofBCRC, to:

(a) negotiate the final terms of the Transaction;(b) settle the form of, and execute and deliver, all documents necessary tocomplete the Transaction including, without limitation, the purchaseagreement governing the Transaction; and(c) take all additional steps as may be necessary or advisable in order tocomplete the Transaction and give full effect to the foregoing resolutions.

In concluding discussion of this matter, Mr. Bob Phillips expressed hisappreciation for the excellent work and significant efforts performed by CIBCWorld Markets, Borden Ladner Gervais, Robert Pirooz and Cheryl Yaremko.

Section 17


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OTHER BUSINESS1556-03 Mr. Alan Wallace advised that CIBC World Markets will immediately re-start theprocess for the sale of Vancouver Wharves, undertaking a compressed format ofthe sale process. The issue of the environmental indemnity will be a primaryfocus.It was recommended that the BCR Marine Sale Committee remain in effect andcontinue to be involved in the VW sale process. It was agreed that the SaleCommittee will meet next week to review and discuss this process going forward.

There being no further business, the meeting then terminated at 11:25 PST.

Corporate Secretary


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BRITISH COLUMBIA RAILWAY COMPANYOFFICIAL MINUTES BOARD OF DIRECTORS

PRESENT:

WEDNESDAY, FEBRUARY 12, 2003, 11:00 A.M.MEETING ROOM 601, BC RAIL CENTRE


Brian KenningBev BriscoeLen MarchandJohn McLernonPat RorisonAnne Stewart

Chair (via teleconference)(via teleconference)(via teleconference)(via teleconference)- portion of meeting only(via teleconference)(via teleconference)IN ATTENDANCE: Bob PhillipsPeter BallacheyRichard Myhill-Janes - portion of the meeting onlyArnie Van Hattem - portion of the meeting onlyJohn LeightonABSENT: Jim ShepardJim Yeates

Due notice having been given and a quorum being present, the meeting was determined properlyconstituted and was called to order.

CHAIR'SCOMMENTS(1557-03)

REVIEW andAPPROVAL ofLEASEAGREEMENTBETWEEN BC RAILAND(1558-03)

Mr. Kenning provided welcoming and introductory remarks to the Directors.Mr. Kenning explained to the other Directors that he was asked to act as Chairfor this meeting by Mr. John McLernon who will not be participating for the matterconcerning approval of the lease transaction between BC Rail andThis is due to a potential conflict ofinterest due to the fact that Mr. McLernon's company, Colliers International, is theadvisor to the competing proponent for tenancy.Mr. Kenning asked Richard Myhill-Janes to provide a summary review of thebackground to the lease proposal.Mr. Myhill-Janes described background rationale for seeking alternateoffice space to its present location. specif ically identified that the natureof the floor space on the ground floor of BC Rail Centre had attributes attractiveto their changing needs. From BC Rail's perspective, this was advantageoussince the attributes of this lease space would not normally be attractive to otherpotential tenants.Part of the lease terms involve an inducement, in which BC Rail will effectivelyprovide lessor financing for the acquisition of office furnishings and equipment for

Section 16


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British Columbia Railway CompanyMinutes of Board Meeting 2 February 12, 2003

REVIEW andAPPROVAL ofLEASEAGREEMENTBETWEEN BC RAILAND(1558-03)continued

BCR MARINE SALEUPDATE(1559-03)

this office space. Richard advised that BC Rail would not normally undertakesuch a financing arrangement and that the only reason BC Rail took up thisrequest is because repayment (including interest) is guaranteed by the federalgovernment.Anne Stewart inquired whether this approach would be off-balance sheetfinancing for Peter Ballachey concluded that it probably would, l ikelybeing represented as an operating expense versus a capital expenditure.Brian Kenning questioned the magnitude of the $1.1 million inducement,commenting that it seemed higher than would be required for normal officeimprovements. Richard advised that much of that amount is for telephone andswitching equipment and related technical support.Bev Briscoe inquired whether this inducement was regarded as a commercialelement in the lease. Arnie assured that this was a commercial arrangement andexplained that present landlord was also willing to offer a similarinducement. Therefore, BC Rail believed it needed to respond with a similaroffer.Anne Stewart inquired about the potential risk of increased operating expensesand whether the lease rate would adequately accommodate such increases. Inparticular, discussion focused on insurance. expense. Richard advised thatinsurance costs were based on a 2004 baseline. It was concluded that thisbaseline fully captures the recent significant escalation in insurance rates andtherefore provides a good buffer for the future. It was believed that there wasvery limited exposure on other common area operating costs (excluding propertytaxes which the tenant is directly responsible for).The Directors concurred that BC Rail's offer to was an attractive leaseproposal and involved a good quality tenant.

ON A MOTION duly made and secondedIT WAS RESOLVED that:the lease agreement between BC Rail and based on the transactionterms presented to the Board in the attached memorandum, be approved, andthat BC Rail is authorized to proceed with expending the $1.207 millionpreviously approved as part of the 2003 capital budget to complete BC Rail'sobligations to the tenant.

Mr. Richard Myhiii-Jones and Mr. Arnie Van Hattem left the meeting.Mr. John McLernon joined the meeting via teleconference.Mr. Bob Phillips reported that the P&O sales transaction is moving along towardits targeted closing date of February 25, 2003. No impediments have beenidentified. All employees that have been offered employment have accepted.The Chair of P&O will be visiting in Vancouver one week ahead of the closingand will be hosted by BCRC for a portion of that visit.

Section 16

Section 16

Section 16


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BCR MARINE SALEUPDATE(1559-03)continued

CORE REVIEWUPDATE(1560-03)

OTHER BUSINESS1561-03

Bob Phillips further advised that there has been very positive response to theP&O purchase throughout the business and maritime sectors. The VancouverPort Authority is particularly pleased to have P&O's presence in the Port ofVancouver.Regarding the sale process for Vancouver Wharves, CIBCWM has issued therevised CIM to approximately twelve interested parties. It is hoped that theBoard may be advised at its March 11th meeting regarding the candidatesexpressing interest in round one before proceeding to round two.

Mr. Bob Phillips briefed the Board on pending government announcementsregarding the future of BC Rail, as referenced in the February 11th Speech fromthe Throne. Comments were made that indicated the government's intention toretain ownership of the railbed and right-of-way, and to develop an efficienteffective rail operation. II is expected that further high-level comments may bemade by the Premier during a televised address this evening.On February 13th, it is expected that the Minister of Transportation will be makingfurther announcements providing details on several major transportation projects.There may be further detail regarding intentions concerning BC Rail. It mayinclude an announcement of creating Mayors' and Shippers' councils that may beinvolved in an advisory capacity to any process going forward.Bob advised that the government's process going forward is not entirely clear butthat indications are that it is proceeding more-or-less along the lines anticipated.John Mclernon further commented that it appears that advancing the BC Railissue is lower priority for the government but that BC Rail is ready to proceedwhen so advised.Mr. Bob Phillips advised the Directors that one of the reasons for requesting thisBoard meeting was due to uncertainty regarding the scope of management'sfinancial authority related to authorizing real estate lease transactions. Thedecision to bring the matter of the HRDC to the Board was triggered by the termof the lease exceeding 5 years, since that is the lease term limit in place for railcar leases. At present the Financial Authorities Policy is silent on any scope ofauthority relating to real estate lease transactions.

Section 17


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OTHER BUSINESS1561-03)continuedRecognizing that BC Rail executes a large number of real estate leases eachyear, many of them with terms longer than the HRDC proposal, management willbe assessing the criteria and intends to propose amendments to the FinancialAuthorities Policy specifically pertaining to real estate revenue leases at theMarch 11 1h meeting of the Board. The objective will be to establish theappropriate thresholds of materiality for real estate revenue lease transactionsthat require approval by the Board but without unnecessarily burdening the Boardwith an excessive number of leases to be approved.


Corporate Secretary


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PLACE:

DATE:TIME:

AGENDA

BRITISH COLUMBIA RAILWAY COMPANYBOARD MEETING

BC Rail Executive Boardroom5th Floor, 221 West EsplanadeNorth Vancouver, British ColumbiaTuesday, March 11, 20038:30 a.m.


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PART A CORPORATE

Attendees:DirectorsHon. Judith Reid, Minister of Transportation, Province of B.C. (portion of agenda)B. Phillips, Group President & Chief Executive OfficerJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC Rail

IN-CAMERA SESSIONTAB# SECTION I - PRELIMINARY MATTERS PRESENTER

Call to Order ChairPart A - Excusals ChairChair's Comments ChairCore Review Update Hon. J. Reid

J. McLernonCEO's Comments B. PhillipsBCR Marine Sale Update B. Phillips

1. 0 Minutes of December 20, 2002 and January J. McLernon23, 2003 BCR Marine Sale Committeemeetings (Directors' binders only)2. Application of proceeds from sale, including B. Phillipsdefeasance of long-term debt.(resolution required)

Board Matters3. Memo: Updated Conflicts of Interest/Declared Business Activities J. Leighton

END IN-CAMERA SESSION

TIME8:30

8:30 - 8:358:35 - 9:05

9:05 - 9:159:15 - 9:30

9:30 - 9:35

9:35


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PART A CORPORATE continued

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerP. Ballachey, Vice President Finance & Chief Financial Officer, BC RailC. Yaremko, Director of FinanceK. Mahoney, Vice President Corporate Affairs, BC RailB. Weymark, President, BCR MarineM. Kaye, VP Finance, BCR MarineJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC Rail

TAB# SECTION II CORPORATE AGENDA PRESENTER

4.

Adopt Corporate AgendaApprove Previous Minutes (Directors' binders only)(resolution required)

December 12, 2002 January 14, 2003 February 12, 2003

Business Arising from Previous Meetings (seeattached Schedule A)Committee Reports I Pending Business I BusinessPresentations

ChairTIME9:35

9:35 9:45

Human Resources, Governance and A Stewart 9:45 - 10: 15Nominating Committee Report5. (i) Minutes of August 15, 2002, October 25,2002 and December 4, 2002 (Directors'binders only)

6. (ii) 2002 Bonuses and 2003 Targets(iii) Update on Labour Negotiations

7. (iv) Results of Board Assessment Forms(Directors' binders only) Environment and Safety Committee Report J. Shepard 10:15 - 10:35

8. (i) Minutes of January 30, 2003 (Directors'binders only) Audit, Finance and Risk Management B. Kenning 10:35 - 10:50Committee Report

9. (i) Minutes of December 9, 2002, January 21,2003 and February 3, 2003 (Directors'binders only)10. (ii) Revised estimates of recommendedEnvironmental Liability Reserves


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11.12.13.

14.15.

16.

(iii) 2002 Fourth Quarter and Year-EndFinancial Results(a) BCR Marine(b) BC Rail(c) BCRC consolidated(resolution required)(d) BCR Captive Insurance(resolution required)

(iv) BCR Marine operating and capital budgetsfor 2003(resolution required)(v) Approval of proposed amendment toFinancial Authorities Policy regarding realestate leases(resolution required)

Business Arising from AgendaOther BusinessEND CORPORATE AGENDA

f@l LUNCH BREAK

M. KayeP. BallacheyP. BallacheyP. Ballachey

10:50 - 11:40

M. Kaye 11:40 - 12:10

P. Ballachey 12:1 o - 12:20

12:20

12:20 - 12:40


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PART B BCR MARINE

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerP. Ballachey, Vice President Finance & Chief Financial Officer, BC RailC. Yaremko, Director of FinanceK. Mahoney, Vice President Corporate Affairs, BC RailB. Weymark, President & Chief Operating Officer, BCR MarineM. Kaye, Vice President Finance, BCR MarineJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC Rail

TAB# SECTION I - PRELIMINARY MATTERS PRESENTERPart B - ExcusalsChair's Comments

TAB# SECTION II - BCR MARINE AGENDAAdopt BCR Marine AgendaBusiness Arising from Previous Minutes (seeattached Schedule A)Pending Business I Business Presentations

ChairChair

PRESENTERChair

:TIME:12:40

12:40 - 12:45TIME12:45

17. BCR Marine President's Report B. Weymark 12:45 - 1:10Business Arising from AgendaOther BusinessEND BCR MARINE AGENDA 1:10


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PART C BC RAIL

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerP. Ballachey, Vice President Finance & Chief Financial Officer, BC RailC. Yaremko, Director of FinanceK. Mahoney, Vice President Corporate Affairs, BC RailL. Rivers, Director Aboriginal Affairs, BC RailJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC Rail

TAB# SECTION I - PRELIMINARY MATTERSPart C - ExcusalsChair's Comments

TAB# SECTION II - BC RAIL AGENDA

18.19.

20.

,_,

Adopt BC Rail AgendaBusiness Arising from Previous Minutes (seeattached Schedule A)Pending Business I Business Presentations

BC Rail President's Report Approval of Sale of Assets of Finlay NavigationLimited Partnership

(resolution required) Overview of Aboriginal Affairs

Business Arising from AgendaOther BusinessEND BC RAIL AGENDA

PRESENTER:'-' .ChairChair

PRESENTERChair

B. PhillipsP. Ballachey

L. Rivers

TIME1:10

1:10 1:15

TIME.

1:15

1:15 - 1:351:35 - 2:00

2:00 - 2:20

2:20


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PART D - POST IN-CAMERAAttendees:

DirectorsB. Phillips, Group President & Chief Executive Officer



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Thursday, May 1, 2003 9:00 a.m. BC Rail Centre BoardroomThursday, July 31, 2003 9:00 a.m. BC Rail Centre BoardroomThursday, October 30, 2003 9:00 a.m. BC Rail Centre Boardroom


DATE TIME LOCATIONTuesday, April 22, 2003 9:00 a.m. BC Rail Centre BoardroomMonday, July 21, 2003 9:00 a.m. BC Rail Centre BoardroomMonday, October 20, 2003 9:00 a.m. BC Rail Centre Boardroom


Wednesday, Apri130, 2003 9:00 a.m. BC Rail Centre BoardroomThursday, July 24, 2003 1:30 p.m. BC Rail Centre BoardroomWednesday, October 29, 2003 9:00 a.m. BC Rail Centre Boardroom



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SCHEDULE ABUSINESS ARISING FROM PREVIOUS MINUTES

CORPORATE1. Presentation on review of Director response to Board Evaluation A. Stewartforms.

(see Part A, Corporate Agenda)2. Revised estimate of recommended Environmental Liability Reserves B. Kenningfor BC Rail and Vancouver Wharves.

(see Part A, Corporate Agenda - Tab #8).

BCRMARINE

1. No business arising from previous minutes.

BC RAIL



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TAB NO.1.

2.

3,4.

5.

6.7.

8.9.

10.11'12.13.14.15.16.17.18.19.20.

SCHEDULE BSUMMARY OF ATTACHMENTS IN BOARD BINDER

March 11, 2003

ATTACHMENT ITEMMinutes of December 20, 2002 and January 23, 2003, BCR Marine Sale Committeemeeting. (Directors' binders only)Application of proceeds from BCR Marine sale, including defeasance of long-termdebt.Memo: Updated Conflicts of Interest I Declared Business Activities.Minutes of previous Board meetings for approval: (Directors' binders only) December 12, 2002 January 14, 2003

February 12, 2003HRG&N Committee, Minutes of August 15, 2002, October 25, 2002 and DecemberA,2002. (Directors' binders only)2002 Bonuses and 2003 TargetsResults of completed Board Assessment and Director Self-Assessment Forms(Directors' binders only)E&S Committee, Minutes of January 30, 2003 (Directors' binders only)AF&RM Committee, Minutes of December 9, 2002, January 21, 2003 and February 3,2003 (Directors' binders only)Revised estimates of Environmental Liability Reserves for BC Rail and VWL.BCR Marine: 2002 fourth quarter and year-end financial results.BC Rail: 2002 fourth quarter and year-end financial results.Draft audited 2002 consolidated financial statements for British Columbia RailwayCompany.Draft audited 2002 financial statements for BCR Captive Insurance Co. Ltd.BCR Marine 2003 Operating and Capital Budgets.Proposed amendment to Financial Authorities policy regarding real estate leases.BCR Marine President's Report.BC Rail President's Report.Approval of Sale of Assets of Finlay Navigation Limited Partnership.Overview presentation on Aboriginal Affairs.


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PRESENT:

BRITISH COLUMBIA RAILWAY COMPANYOFFICIAL MINUTES - BOARD OF DIRECTORS

TUESDAY, MARCH 11, 2003, 8:30A.M.5TH FLOOR EXECUTIVE BOARDROOM, BC RAIL CENTRE

221 WEST ESPLANADE, NORTH VANCOUVER. B.C.

John McLernonBrian KenningLen MarchandGerry OffetPat RorisonJim ShepardAnne StewartJim Yeates

Chair

IN ATTENDANCE: Hon. Judith ReidBob PhillipsPeter BallacheyKevin MahoneyCheryl YaremkoJohn LeightonBill WeymarkMichael KayePaul Brent

Ministilr of Transportation - portion of meeting only

Corporate Secretary- Corporate and Marine portion of meeting only- Corporate and Marine portion of meeting onlyBC Rail portion of meeting onlyBC Rail portion of meeting only- BC Rail portion of meeting only

ABSENT:

Norm HooperDennis LypkaAlan DeverLeonie RiversBev Briscoe

- portion of meeting onlyportion of meeting only

Due notice having been given and a quorum being present, the meeting was determined properlyconstituted and was called to order.CHAIR'SCOMMENTS(1562-03)

Mr. John McLernon provided welcoming and introductory remarks to the Directors,advising that Bev Briscoe was unable to attend the meeting. The Chair introducedthe Hon. Judith Reid, Minister ofTransportation and Minister Responsible for BritishColumbia Railway Company, who will address the Board later on the agenda.The Chair also welcomed Mr. Gerry Offet as a new Director on the Board, attendinghis first Board meeting. The Chair advised that each Director is expected to serve onone of the Board Committees and that he would like Mr. Offet to serve on theEnvironment & Safety Committee of the Board.ON A MOTION duly made and secondedIT WAS RESOLVED that Mr. Gerry Offet, Director, is appointed to serve on theEnvironment and Safety Committee of the Board.


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British Columbia Railway CompanyMinutes of Board Meeting 2 March 11, 2003

CORE REVIEWUPDATE(1563-03)The Chair summarized the work of BCRC and the government through the CoreReview Process over the past year, including major accomplishments to date. TheChair acknowledged the support of the Minister as management undertook majorchanges in restructuring the railway for improved performance. The Chair requestedBob Phillips to provide a brief summary of the Core Review Process so far, leadingup to the announcements by the Province on February 12

1h and 131h regarding theproposed restructuring of the railway.

Bob Phillips outlined the ultimate objectives of the government in completing arestructuring of the railway: to ensure a safe, efficient, reliable and sustainablerailway; to provide shippers with competitive service; and to realize value for theProvince. Bob summarized BCRC's general understanding of the government'sproposed restructuring plan. II is understood that the Province will retain ownershipof the rights-of-way and the roadbed lands. It is still an open question as to whetherthe Province may retain ownership of all or a portion of the !rack infrastructure. Thenature of the restructuring will be to achieve a partnership with a third-party railway tooperate the railway. Bob summarized the three main areas of value in the railway: the main freightrailway operation (including available tax pools}, the non-railway-related real estateholdings, and the Port Subdivision. The first stage of a proposed partnershiprestructuring process will only involve the first area of the above.

Bob outlined the basic steps in a proposed transaction. Title to the railway-relatedlands will be transferred to the parent Crown corporation (BCRC). The remainder ofnon-railway lands will be transferred to BCR Properties. A new third-party operatorwill acquire the shares of BC Rail Ltd. and the partnership interests of BC RailPartnership. The partnership transaction will be structured over a long-termtimeframe (likely 50 years) such that the operator will be able to achieve full valueand be motivated to sustain investment in the operation.

Bob emphasized that this railway restructuring project is not BCRC's initiative; that itis strictly the initiative of the Province and is the Minister's project. To support thegovernment on this project, an Evaluation Committee has been established,reporting to the Minister. Two members are from BCRC's Board (John Mclernonand Brian Kenning) and two members are from government (Chris Trumpy andDavid Morhart). II is intended to solicit proposals from interested railway operatorsthrough a RFP process. The proposals will be evaluated against the three majorobjectives of the government.The plan is for the Evaluation Committee to issue the RFP to a list of targeted railwayoperators. However, before the RFP can be released, it will pass through severallevels of review and consultation in addition to the Evaluation Committee and theMinister. II is intended that a high-level version of the RFP will be reviewed with aMayors' Council, comprised of all Mayors along BC Rail's system, inviting commentfrom that group. II is also intended to present the RFP to a Shippers' Council,

Section 17


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CORE REVIEWUPDATE(1563-03)continued

comprised of BC Rail's major shippers, for review and comment.According to the government's schedule, it is intended to pass enabling legislationfor the proposed transaction in April or May. First round expressions of interest,responding to the RFP, should be received in June. The second round process isanticipated to extend to August, including detailed due diligence review by bidders.After that, a single bidder will be recommended to the Minister to proceed with finalnegotiations. It is likely that the final negotiations and deal closing will continue tothe calendar year-end.The Chair turned the discussion over to the Minister to respond to Bob's summary ofthe Core Review process and to provide further comment on the intendedrestructuring transaction for the railway.Minister Reid commented that it is government's intention to allow competent Boardsto run and manage Crown Corporations, without government interference. Sheacknowledged the effectiveness of the Board in achieving substantial change at therailway and making some tough decisions over the past year.The Minister identified her evaluation of the importance of the railway in deliveringeffective service and to ensure sustainability of the northern B.C. shippers who relyon the freight railway. The first priority in pursuing a restructuring transaction hasbeen on "what is the public good that needs to be protected?" It has been concludedthat the "public good" requires protection of the rights-of-way for the long term. Thesecond priority is ensuring competitive, effective sustainable rail freight service fornorthern industries. Attaining value from the railway is the third priority - whileimportant, the government may not regard it as being as important as the first two.The Minister outlined the roles in the restructuring process. She identified that therestructuring is government's initiative, but that it will rely on sound input from theEvaluation Committee to ensure that the public good is protected in a process thathas high credibility. Government has recognized that there are concerns fromnorthern communities regarding involvement or engagement in the process andgovernment is seeking a way to address that. It has been concluded that the RFPprocess needs to be an open process. Communication with key stakeholdersthroughout the process is recognized as being very important.The government has concluded that the proposed transaction need not result inconsultation and negotiation with First Nations, because ownership of the land willremain with the Province, preserving First Nations' relationship with the Province onland issues. It has been concluded that communication with First Nations will be forinformation only.

The Minister acknowledged that thereremain some hurdles in helping northern communities understand the process andhelping them to understand that the outcome will be in their best interests. It has

Section 13


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been determined that an open process with the Mayors will be important and that apublic version of the RFP document be made available to them.Director Gerry Offet provided his comments based on a northern perspective. Hecommented that northern communities regard BC Rail as their railway and areconcerned about decisions being made by people in Victoria and the LowerMainland. He acknowledged that it is going to be a serious challenge in managingthis issue with the northern Mayors and communities. He commented that manynorthern business people do not share the perspective of the local elected officials.He recommended that the government and the process be widened to include someform of communication with the northern-based business sector to include their input.Mr. Jim Yeates asked what role the Minister s.ees for the Board and whether the roleis shifting more to responding to the requirements of the Shareholder versus theneeds of the Corporation, citing the nature of the recent appointment of Gerry Offetas a Director on the Board.

Considerable debate and discussion followed regarding the nature of the processfollowed by government in the latest Board appointment.

It will be essential that a high degree of trust exist between the Board and thegovernment, working through the Evaluation Committee. John emphasized the needto rely on sound commercial advice from the Directors throughout the process.

Anne further commented that theCompany values its employees and their continued contribution and requested thatthe process respect that. She also expressed her concern that all environmentalissues be adequately addressed.Pat Rorison commented that the northern Directors frequently receive questionsregarding the government's intent for the future of the railway and that it would bevery helpful to have clear direction and information with which they could respond.Len Marchand expressed confidence in the Board's ability to support the process.He expressed concern that the process to date has excluded the 25 First Nationcommunities along the railway system and that, in his opinion, this has been a majoroversight. While not aware of any specific concerns of First Nations, or whether theProvince retaining ownership of the land will be adequate to satisfy their concerns,he commented that the process needs to clearly delineate "communication" versusthe legal connotation of "consultation." The Minister inquired whether it would beadequate to include the First Nation communities with the Mayors' Council. The

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CEO'SCOMMENTS(1564-03)

BCR MARINESALE UPDATE(1565-03)

It was concluded that FirstNations need to be approached and asked if they would be interested in participatingwith the Mayors' Council or whether they believe they require a separate process forproviding their own input.Gerry Offet expressed concern that the proposed transaction may well result intriggering First Nation issues regarding consultation, notwithstanding the Province'sintent to retain ownership of the land.

The Minister left the meeting at 09:55.The Chair commented to the Board that he desires to keep the Board informed asthe partnership transaction process proceeds. Considering the speed with which theprocess may proceed, there will be a need for frequent dialogue and informationupdates with the entire Board. It was concluded that the Evaluation Committeemembers should keep the rest of the Board up to date with e-mail bulletins or, whennecessary, discussions by conference call. In addition, feedback or comments fromthe Board to the Evaluation Committee was requested.Mr. Bob Phillips confirmed that the proposed partnership transaction is thegovernment's initiative and will be run by the government. He affirmed that theprimary focus of management is to continue to run the railway.Bob advised the Board that BC Rail has always expressed its concerns regardingFirst Nation issues and their importance in the proposed transaction, particularlyconcerning the risk over the potential requirement for a full consultation process.Peter Ballachey and Cheryl Yaremko joined the meeting at 10:00.Bob reminded the Board that there should be no discussion regarding the pendingsale of Vancouver Wharves while Bill Weymark and Michael Kaye are in themeeting,The minutes of the BCR Marine Sale Committee meetings on December 20, 2002,and January 23, 2003, were presented.Bob confirmed that the P&O transaction closed on February 25, 2003, and reviewedthe resolution between BC Rail and the Vancouver Port Authority (VPA) regardingthe PILT issue. Bob also advised that it is understood that the potential municipalproperty tax will be deferred for at least one year.It is understood that all employees offered employment by P&O have accepted, andthat no one (or at most one or two people) lost employment as a result of thetransaction. Management personnel transferring to P&O include Cliff Stewart, AlexSmith and Darcy Clarkson. The Board wishes to record its acknowledgement of thevaluable contribution and dedication of those individuals to supporting the successfulsale process of Casco Terminals and Canadian Stevedoring.

Section 21

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BCRMARINESALE UPDATE(1565-03)continued

Bob Phillips presented to the Board a memo outlining the application of proceedsfrom the sale of Casco Terminals and Canadian Stevedoring against short-term andlong-term debt of British Columbia Railway Company. Defeasance of the long-termdebt results in an expense of $8.59 million, exceeding management's authority. As aresult, approval of this debt defeasance transaction is required by the Board ofDirectors.Anne Stewart inquired whether the stated sale transaction price includes the salestax. Peter Ballachey advised that the sales tax is included in the sale price receivedfrom P&O. Anne Stewart requested that the proceeds of the sale be restated in anamount net of the sales tax.ON A MOTION. duly made and secondedIT WAS RESOLVED that:the estimated expenditure of approximately $8.59 million is approved as an expenseassociated with the defeasance of the following two debt issues:

$44 million 8.0% note due August 2005 $24.49 million 10.99% note due August 2005Bob Phillips went on to describe the process now underway for the sale ofVancouver Wharves. Ten proposals were received from first-round bidders. TheSale Committee reviewed the proposals on March 101h and, subject to further reviewby CIBC World Markets (CIBCWM), it was decided that as many as nine of the tenbidders would proceed into the second round of bidding. II was noted that one ofthese bids is the "Raymond James bid" which includes a component of VWLmanagement as part of that bid.

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BOARDMATTERS(1566-03)

ADOPTCORPORATEAGENDA(1567-03)APPROVEPREVIOUSMINUTES(1568-03)

BUSINESSARISING FROMPREVIOUSMEETINGS(1569-03)HRG&NCOMMITTEEREPORT(1570-03)

Mr. John Leighton presented an updated memo which declares existing or potentialconflicts of interest and declared business activities of Directors. He noted that theonly updated item concerned Mr. Len Marchand and his involvement with propertyowners on Seton Lake in a matter which may also involve BC Rail.In addition to those items identified in the memo, Anne Stewart disclosed that sheand her company act for an indirect, minority shareholder of Great CanadianRailtours. Mr. Len Marchand also identified that his firm may act from time to timefor any one of several communities and/or First Nations along BC Rail's system, andthat his firm also acts for CN Rail from time to time. Further information will beforwarded to update the memo on potential conflicts of interest.ON A MOTION duly made and secondedIT WAS .RESOLVED that:the meeting agenda is approved and adopted.The previous minutes of Board meetings held on December 12, 2002, January 24,2003, and February 12, 2003, were reviewed.ON A MOTION duly made and seconded,IT WAS RESOLVED that:the minutes of the meetings of the Board of Directors held on December 12, 2002,January 14, 2003, and February 12, 2003 are verified as correct records.John Leighton advised that all business arising from previous meetings will be dealtwith through the balance of this meeting's agenda items.

Ms. Anne Stewart, Chair of the Human Resources, Governance & NominatingCommittee, distributed Minutes from meetings of August 15, 2002, October 25, 2002and December 4, 2002. She advised that the Committee met most recently onMarch 61h and 71h, 2003.Anne advised that the Committee had reviewed the proposed bonus compensationto BC Rail executive and management under the Incentive Plan based on 2002results. She reviewed the criteria which were established for 2002, based 50% onNet Operating Income and 50% on achievement of personal goals and targets. TheCommittee approved the amounts recommended by management, except in thecase of one individual.The Committee agreed to apply the performance criteria on a strict basis. Inparticular, it was identified that the fact the Marine sale did not conclude by 2002year-end was regarded as missing that objective. A separate discussion wasconducted regarding establishing and approving the incentive plan bonus to be paidto Bob Phillips.Discussion of this agenda item continued in-camera from 10:30 to 11:10.


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E&SCOMMITTEEREPORT(1571 -03)

AF&RMCOMMITTEEREPORT(1572-03)

2002FINANCIALSTATEMENTS(1573-03)

Mr. Bill Weymark and Mr. Michael Kaye joined the meeting at 11:10.Mr. Jim Shepard, Chair of the Environment & Safety Committee, presented theMinutes of the Committee's meeting of January 30, 2003, as a complete report onthe activities of the Committee. There was no further discussion.Mr. Brian Kenning, Chair of the Audit, Finance & Risk Management Committee,reported on the outcome of the recently completed audit process.Brian identified that the auditors were satisfied with management's responses to allissues raised. The auditors had no outstanding issues or concerns withmanagement. There were no major issues related to active litigation.Brian identified that the auditors, KPMG, have now completed a five-year term asauditors, plus an additional one"year extension as approved by the Board last year.Normally, it would be required to seek bids for new auditors for the next five yearperiod. However, recognizing the process embarked on by the Province relating torestructuring of the railway, and the value of maintaining continuity through thisprocess, it is recommended that the appointment of KPMG as auditors be extendedby one further year.ON A MOTION duly made and seconded,IT WAS RESOLVED that:on recommendation of the Audit, Finance and Risk Management Committee, theCompany seek the approval of the Minister of Finance:

for a one-year extension to the appointment of KPMG as auditors of theCompany for the year ending December 31, 2003; and for a two-year appointment of KPMG as auditors of both the BC Rail Ltd.Pension Plan and the BCR Marine Ltd. Pension Plan for the years endingDecember 31, 2002 and December 31, 2003.

Mr. Michael Kaye presented the 2002 year-end financial results for BCR Marine.Following the presentation, there were no questions or discussion by the Board.Mr. Peter Ballachey presented the 2002 year-end financial results for BC Rail,including the strong results specific to the fourth quarter. The presentation includedan accounting of the restructuring charges actually expended during 2002 versus theprovision established in 2001.Mr. Peter Ballachey presented the audited 2002 year-end consolidated financialresults for British Columbia Railway Company. It was pointed out that, despite thevery positive results achieved by the railway, management will have to carefully

Section 17


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2002FINANCIALSTATEMENTS11573-03)continued

BCRMARINE2003 BUDGETandPRESIDENT'SREPORT11574-03)

manage communication of the message associated with the substantial Net Losswhich is entirely attributable to discontinued operations. Emphasis should be placedon the achievements and dramatic improvements in BC Rail's continuing operations.Jim Yeates wished the Board to formally acknowledge the substantialaccomplishments of management in achieving the exceptional results for 2002. BobPhillips recommended that the Chair consider issuing a letter to BC Rail'smanagement commending them for their accomplishments in 2002. The Chairagreed and will draft a letter.

Brian Kenning offered a general comment that the Audit Committee processproceeded very well this year and that the AF&RM Committee was comfortable withthe results and discussion as presented.ON A MOTION duly made and seconded,IT WAS RESOLVED that:on recommendation by the Audit, Finance and Risk Management Committee, theaudited 2002 consolidated financial statements for British Columbia RailwayCompany are approved and accepted.Peter Ballachey provided a brief explanation to the Board, particularly for the benefitof Gerry Offet, regarding the rationale for BCRC owning its own captive insurancecompany. Peter presented the audited 2002 year-end financial results for BCRCaptive Insurance Co. Ltd. Brian Kenning inquired about the management ofsurplus funds which had been accrued in 2001. Peter advised that these have beeninvested with BC Investment Management Corporation and remain there forapplication against future claims as necessary, but it is estimated that approximately$8 to $10 million of that amount may be truly surplus.ON A MOTION duly made and seconded,IT WAS RESOLVED that:on recommendation by the Audit, Finance and Risk Management Committee, theaudited 2002 financial statements for BCR Captive Insurance Co. Ltd. are approvedand accepted. Mr. Michael Kaye presented a summary of the 2003 Operating and Capital budgetsfor BCR Marine. Mr. Bill Weymark presented the highlights from his President'sReport in tandem with Michael Kaye's presentation.Michael clarified that the 2003 Budget includes Canadian Stevedoring and CascoTerminals for the first two months of the year, and Vancouver Wharves throughoutthe year. He also noted that not all of the overhead costs associated with CanadianStevedoring and Casco Terminals disappear after the first two months, as there will

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BCR MARINE2003 BUDGETandPRESIDENT'SREPORT(1574-03)continued

be a brief period where some of those costs linger during the separation transitionperiod. It is anticipated that Vancouver Wharves will be in a "stand-alone" positionby the end of June 2003, with associated expenses consistent with information in theConfidential Information Memorandum (CIM) issued in connection with the sale ofVancouver Wharves.Michael presented the planned 2003 capital budget. Bill Weymark presented asummary of the major projects included under the 2003 plan. He also highlightedprojects deferred from the plan due to the present VWL sale process, but which wereshown in the capital plan in the CIM.ON A MOTION duly made and seconded,IT WAS RESOLVED that:on recommendation by the Audit, Finance and Risk Management Committee, the2003 operating and capital budgets for BCR Marine are approved and accepted.

Mr. Bill Weymark provided progress reports on a number of key issues at BCRMarine and Vancouver Wharves. The IT segregation process should result inVancouver Wharves operating on a stand-alone system by September 2003.There has been some renewed interest expressed in agri-products business at VWL,possibly involving the Euro silo. The potential exists for additional bins for specialtyproducts, although any such decisions will be deferred due to the present VWL saleprocess.

ON A MOTION duly made and seconded,IT WAS RESOLVED that:issue in a manner that will ensureVancouver Wharves' continued ability to handle mineral concentrates through therequired facilities for a period not less than the term of the proposed Teck/Comincocontract (the "Agreement"):

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Section 21


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BCRMARINE2003 BUDGETandPRESIDENT'SREPORT(1574-03)continued

AMENDFINANCIALAUTHORITIESPOLICY(1575-03)

ADOPT BC RAILAGENDA(1576-03)

1.

2.

The Agreement is hereby approved substantially on the terms described in theinformation provided with such changes thereto as may be approved by thedirector or officer of BCR Marine Ltd. ("BCRM") executing and delivering theAgreement in accordance with paragraph 2(b) below, such approval to beconclusively evidenced by the execution and delivery of the Agreement by suchdirector or officer.Any director or officer of BCRM is hereby authorized, on behalf of BCRM, to:(a) negotiate the final terms of the Agreement;(b) settle the form of, and execute and deliver, all documents necessary tocomplete the Agreement; and(c) take all additional steps as may be necessary or advisable in order tocomplete the Agreement and give full effect to the foregoing resolutions.

The meeting broke for lunch at 12:45.Mr. Bill Weymark and Michael Kaye left the meeting and the meeting resumed at13:05.Mr. Peter Ballachey introduced proposed amendments to the Financial AuthoritiesPolicy. Mr. Ballachey pointed out that the reason for seeking the meeting of theBoard on February 12, 2003, was due to the uncertainty regarding management'sfinancial authority to enter into a long-term revenue lease with a real estate tenant. Itwas noted at that time that the term of the lease exceeded the five-year limit on theCEO's authority applicable to other non-real-estate leases.As a result, it is proposed that the Financial Authorities Policy be amended to reflectcircumstances reasonably typical for the period terms of revenue lease transactionsto reduce the requirement for bringing an excessive number of such transactions tothe Board for approval in the future.Mr. Jim Yeates questioned the reasonableness of providing management authority toapprove leases with a 30-year term. Peter responded that the railway enters into anumber of such long-term leases for lands with relatively low revenue value. It isintended that the $5 million revenue threshold be the primary criteria for resulting inthe need for the Board to approve future real estate revenue leases.ON A MOTION duly made and seconded,IT WAS RESOLVED that:the Financial Authorities Policy, as originally approved by the Board on July 29,2002, be approved with the draft amendments presented to include limits of authorityfor the execution of real estate revenue lease transactions.Mr. Paul Brent, Mr. Norm Hooper and Mr. Dennis Lypka joined the meeting.ON A MOTION duly made and secondedIT WAS RESOLVED that:the meeting agenda for BC Rail is approved and adopted.


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British Columbia Railway CompanyMinutes of Board Meeting 12 March 11 , 2003

BC RAILPRESIDENT'SREPORT(1577-03)

APPROVAL OFFINLAYNAVIGATIONSALE(1578-03)

Mr. Bob Phillips presented his report on BC Rail for the 2002 year-end, plus someissues of note which have occurred over the first 10 weeks of 2003.Bob highlighted the pending last coal train anticipated on April 15, 2003. Anotherpressing issue is the challenge to sustain lumber car supply in the face of heightenedcustomer demand. The situation has been made worse by winter weather conditionsand derailments on other Class 1 systems, delaying the cycle times for the return ofempty cars. Bob provided the assurance that BC Rail management will continue topush hard on all initiatives in its three-year plan.Kevin Mahoney provided a summary update on the present labour negotiations.Sectoral table discussions are approaching conclusion. One of the unions (IWAC)has taken a position that it does not wish to take matters forward to Main Tablebargaining. At present, Main Table bargaining has been delayed. The presentsituation further emphasizes the dysfunctional nature of the present seven-memberCouncil of Trade Unions. Following the government's recent announcement aboutthe BC Rail RFP process, it appears that the unions may be pushing for a roll-over ofthe existing collective agreements.Bob advised the Board that employees have expressed concern and dismay over thenegative comments recently made by the Premier regarding management's inabilityto successfully run the railway. Management will continue to emphasize positiveaffirmation to employees regarding the exceptional achievements in 2002.The Chair asked whether BC Rail management had any questions of the Board.Paul Brent commented that, under the present uncertainty, it is increasingly difficultto make decisions requiring commitments to invest for the railway's future. Inparticular, it is difficult to make commitments regarding discussions with potentialthird-party passenger train operators. Norm Hooper added that, the longer thetransaction process takes, the more difficult it will be to make forward-looking capitaldecisions. Under normal circumstances, Norm would be seeking advance approvalof 2004 capital funding to enable advance ordering of ties, rail, etc. This matter willlikely be brought forward to the Board meeting in May, assuming there is greaterclarity about the future of the railway by that time. Dennis Lypka raised the issue thatthere is concern over the potential loss of key people as uncertainty continues andthe transaction process unfolds.Mr. Peter Ballachey reviewed the proposed transaction for the sale of the assets ofFinlay Navigation.Peter provided a brief summary of Finlay Navigation's operations, the difficulties withBC Rail's continued involvement in this business and the issues pertaining to thesale. There are two large vessels presently operating and two idled vessels.Primary shipping customers are Slocan Forest Products and Canfor, both of whichhave a right of first refusal on bids for the two larger vessels. To date, Slocan haswithheld its consent for sale of the "Williston Transporter" to a company controlled bythe recommended bidder.Jim Shepard inquired about other offers made. Peter responded that there wereoriginally 13 proposals, with three proposals advancing to the second round.However, two of those bidders dropped out, resulting in only one firm bid remaining

Section 22


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APPROVAL OFFINLAYNAVIGATIONSALE(1578-03)continued

OVERVIEW OFABORIGINALAFFAIRS(1579-03)

at the conclusion of the final round.Jim Yeates questioned whether there was a possibility of achieving an additionalmultiple of EBITDA for the business. It was concluded that there is little upsidepotential given the circumstances of the business and declining revenues.The concern was expressed that the purchaser may intend to "flip" the business for asubstantial gain in the near term, which may prove embarrassing to the Company orthe Shareholder. The Board requested that management seek to negotiate into thecontract terms that would limit the risk of the purchaser "flipping" the assets within atwo or three year period, perhaps by including a contingent participation by BC Railin any upside potential realized through a "flip" sale. However, the Board concludedthat, due to the relatively modest value of the deal, even if BC Rail is unable tosuccessfully negotiate such a provision to discourage "flipping," that the sale ought tobe concluded in any event.ON A MOTION duly made and seconded,IT WAS RESOLVED that:subject to BC Rail seeking to negotiate a provision in the agreement to sell theassets of Finlay Navigation Limited Partnership (the "Agreement") that woulddiscourage the purchaser from re-selling the assets for a profit within a two-year orthree-year period, that:1. The Agreement is hereby approved substantially on the terms described in theattached memo with such changes thereto as may be approved by the directoror officer of British Columbia Railway Company ("BCRC") executing anddelivering the purchase agreement governing the Agreement in accordancewith paragraph 2(b) below, such approval to be conclusively evidenced by theexecution and delivery of the purchase agreement by such director or officer.2. Any director or officer of BCRC is hereby authorized, on behalf of BCRC, to:

(a) negotiate the final terms of the Agreement;(b) settle the form of, and execute and deliver, all documents necessary tocomplete the Agreement including, without limitation, the purchaseagreement governing the Agreement; and(c) take all additional steps as may be necessary or advisable in order tocomplete the Agreement and give full effect to the foregoing resolutions.

Messrs. Brent, Hooper and Lypka left the meeting.Mr. Alan Dever and Ms. Leonie Rivers joined the meeting. Alan Dever, VicePresident responsible for Aboriginal Affairs, introduced Ms. Rivers, Director ofAboriginal Affairs, to the Board.Ms. Leonie Rivers presented an overview of BC Rail's Aboriginal Affairs group andits important Protocol initiatives. She identified the different First Nations and Bandssituated along BC Rail's right-of-way. She also summarized the evolution of BCRail's Aboriginal Relations group and mandate from 1990.


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OVERVIEW OFABORIGINALAFFAIRS(1579-03)continued

BUSINESSARISING FROMAGENDA(1580-03)OTHERBUSINESS(1581-03)

Leonie highlighted the major elements in the Protocol Program and some of thebeneficial results that have been achieved with First Nations.There was some discussion regarding the process for resolving boundary overlap ortrespass issues. It was pointed out that these can be extremely long-term issues toresolve but that some substantial break-throughs have been achieved in the pastyear.Anne Stewart expressed congratulations to Leonie and Alan regarding the significantachievements and improvements made in the area of Aboriginal Relations.Len Marchand asked Leonie as to whether there has been any response by FirstNations to the Premier's announcement regarding future third-party private-sectorinvolvement in the operation of BC Rail. Leonie responded that initial feedbackindicates that at least some First Nations will be seeking negotiation andaccommodation from the Province, notwithstanding the Province's intent to retainownership of all railway lands.Leonie also commented that First Nations are general ly responding favourably tonew government initiatives which seek to stimulate economic development in FirstNation territories. First Nations are very interested but are waiting to see whether theprograms will actually deliver the intended results.Brian Kenning asked about the range in the nature of BC Rail's relationship with allof the First Nations. Leonie identified that two Bands completely oppose anyrelationship with BC Rail, insisting that all dealings be through the federal Indian &Northern Affairs Canada. However, for the most part, BC Rail generally has positiverelations and respect with most First Nation communities along its system.Alan Dever and Leonie Rivers left the meeting.Any business arising from this agenda will be carried forward to the next meetingagenda.

There was no other business identified.


Corporate Secretary


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PLACE:

DATE:TIME:

AGENDA

BRITISH COLUMBIA RAILWAY COMPANYBOARD MEETING

BC Rail Executive Boardroom 5th Floor, 221 West EsplanadeNorth Vancouver, British ColumbiaThursday, May 1, 20039:00 a.m.


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PART A CORPORATE

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerK. Mahoney, Vice President Corporate AffairsJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC RailR. Switzer, Legal Counsel, Borden Ladner Gervais (portion of Corporate Agenda)

IN-CAMERA SESSION.TAB# SECTION I - PRELIMINARY MATTERS PRESENTER TIME

Call to Order Chair 9:00Part A - Excusals Chair

Chair's Comments Chair 9:00 - 9:05CEO's Comments B. Phillips 9:05 - 9:10RFP Process Update B. Phillips. 9:10 - 9:30

J. McLernonK. Mahoney

BCR Marine Sale Update B. Phillips 9:30 - 10:001. Draft Minutes of March 10, 2003, BCR Marine J. McLernonSale Committee meeting (Directors' bindersonly)2. R. Switzer

Board Matters 10:00 - 10:153. Re-appointment of Anne Stewart to Human J. MclernonResources, Governance & NominatingCommittee (resolution required)4. Memo: Updated Conflicts of Interest I J. LeightonDeclared Business Activities5. Updated Schedule of Officers and Directors of J. LeightonBCRC and Subsidiaries (resolution required)

Appointment of Cheryl Yaremko as ChiefFinancial Officer of British Columbia RailwayCompany (resolution required)END IN-CAMERA SESSION 10:15

Section 14 and 17


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PART A CORPORATE continued

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerK. Mahoney, Vice President Corporate Affairs, BC RailC. Yaremko, Vice President Finance & CFO, BC RailB. Weymark, President, BCR MarineM. Kaye, VP Finance, BCR MarineJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC Rail

TAB# SECTION II - CORPORATE AGENDA

6.

7.

8.

9.

10.

11.

12.

13.

Adopt Corporate AgendaApprove Previous Minutes (Directors' binders only)(resolution required)

March 11, 2003Business Arising from Previous Meetings (seeattached Schedule A)Committee Reports I Pending Business I BusinessPresentations

Human Resources, Governance andNominating Committee Report(i) Draft Minutes of March 6 & 7, 2003(Directors' binders only)(ii) Update on BC Rail Labour Negotiations

Environment and Safety Committee Report(i) Report on meeting of April 30, 2003

Audit, Finance and Risk ManagementCommittee Report(i) Minutes of March 3, 2003 (Directors'binders only)(ii) Report on meeting of April22, 2003(iii) BCR Marine - First Quarter financialresults and 2003 Outlook(iv) BC Rail - First Quarter financial resultsand 2003 Outlook(v) BCRC - Consolidated First Quarterfinancial results and 2003 outlook(resolution required)(vi) Review and approval of proposed FinancialAuthorities Policy for Vancouver WharvesLimited Partnership(resolution requested)

PRESENTER TIMEChair 10:15

10:15 - 10:20

A. Stewart 10:20 - 10:40

J. Shepard 10:40 - 11:00

B. Kenning 11:00- 11:15

M. Kaye 11:15- 11:30C. Yaremko 11:30 - 11:45C. Yaremko 11:45 - 12:00

C:Yaremko 12:00 - 12:10


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14.15.

(vii) Transfer of Lease Assets of BCR MarineLtd. (resolution requested)

(viii) Corporate Simplification PlanBusiness Arising from AgendaOther BusinessEND CORPORATE AGENDA

!@I LUNCH BREAK

C. Yaremko 12:1 o _12:25C. Yaremko 12:25 - 12:35

12:35

12:35 - 12:55


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PART 8 BCR MARINE

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerK. Mahoney, Vice President Corporate Affairs, BC RailC. Yaremko, VIce President Finance & CFO, BC RailB. Weymark, President & Chief Operating Officer, BCR MarineM. Kaye, Vice President Finance, BCR MarineJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC Rail

. . .TAB# SECTJON I 'PRELIMINARY MATTERS

Part B ExcusalsChair's Comments

TAB# SECTION II BCRMARINEAGENDA.

16.

Adopt BCR Marine AgendaBusiness Arising from Previous Minutes (seeattached Schedule A)Pending Business I Business Presentations

BCR Marine President's ReportBusiness Arising from AgendaOther BusinessEND BCR MARINE AGENDA

PRESENTER TIMEChair 12:55Chair 12:55 1:00

PRESENTER TIMEChair 1:00

B. Weymark 1:00 1:20

1:20


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PART C BC RAIL

Attendees:DirectorsB. Phillips, Group President & Chief Executive OfficerK. Mahoney, Vice President Corporate Affairs, BC RailC. Yaremko, Vice President Finance & CFO, BC RailP. Brent, Vice President Marketing & Sales, BC RailN. Hooper, Vice President Maintenance & Chief Engineer, BC RailD. Lypka, Vice President Operations, BC RailJ. Leighton, Director Corporate Affairs & Corporate Secretary, BC Rail

TAB# SECTION I - PRELIMINARY MATTERS PRESENTERPart C - Excusals ChairChair's Comments Chair

TAB# SECTION II - BC RAIL AGENDA PRESENTERAdopt BC Rail Agenda ChairBusiness Arising from Previous Minutes (seeattached Schedule A)Pending Business I Business Presentations

17. BC Rail President's Report B. Phillips18. Approval of early funding commitment to tie N. Hooperpurchases for 2004 track programs(resolution required)19. Approval to renew Procor log car lease expired D. Lypkain 1997 (resolution required)

Business Arising from AgendaOther BusinessEND BC RAIL AGENDA

TIME1:20

1:20 - 1:25TIME

1:25

1 25 - 1:451:45 - 2:00

2:00 - 2:10

2:10


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PART D POST IN-CAMERA

Attendees:DirectorsB. Phillips, Group President & Chief Executive Officer



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Thursday, July 31, 2003 9:00 a.m. TBD, Prince GeorgeThursday, October 30, 2003 9:00 a.m. BC Rail Centre Boardroom


DATE TIME LOCATIONMonday, July 21,2003 9:00 a.m. BC Rail Centre BoardroomMonday, October 20, 2003 9:00 a.m. BC Rail Centre BoardroomTuesday, December2, 2003 9:00 a.m. BC Rail Centre Boardroom


Thursday, July 24, 2003 1:30 p.m. BC Rail Centre BoardroomFriday, October 24, 2003 9:00 a.m. BC Rail Centre Boardroom



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SCHEDULE ABUSINESS ARISING FROM PREVIOUS MINUTES

CORPORATE1. Presentation on review of Director response to Board Evaluation A. Stewartforms.

(to be carried forward to July 31' agenda)

BCR MARINE


BC RAIL

1. No business arising from p'revious minutes.


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TAB NO.1.2.3.4.5.6.

7.8.9.

10.11.12.13.14.15.16.17.18.19.

SCHEDULE BSUMMARY OF ATTACHMENTS IN BOARD BINDER

May 1, 2003

ATTACHMENT ITEMDraft Minutes of March 10, 2003, BCR Marine Sale Committee meeting.binders only) (Directors'

Re-appointment of Anne Stewart to the Human Resources, Governance &Nominaling Committee of the BoardMemo: Updated Conflicts of Interest I Declared Business Activities.Updated Schedule of Officers and Directors of BCRC and Subsidiaries.Minutes of previous Board meeting for approval: (Directors' binders only) March 11 , 2003HRG&N Committee, Minutes of March 6 & 7, 2003. (Directors' binders only)Memo: Update on status of BC Rail labour negotiations.AF&RM Committee, Minutes of March 3, 2003 (Directors' binders only)BCR Marine - First Quarter fina'ncial results and 2003 OutlookBC Rail - First Quarter financial results and 2003 OutlookBCRC - Consolidated First Quarter financial results and 2003 OutlookProposed Financial Authority Policy for Vancouver Wharves Limited Partnership.Memo: Transfer of Lease Assets of BCR Marine Ltd.Memo: Corporate Simplification PlanBCR Marine President's Report, First Quarter 2003BC Rail President's Report, First Quarter 2003Memo and resolution regarding early funding commitment to tie purchases for 2004track programs.Memo and resolution regarding renewal of Procor log car lease expired in 1997.

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BRITISH COLUMBIA RAILWAY COMPANYOFFICIAL MINUTES - BOARD OF DIRECTORS

THURSDAY, MAY 1, 2003, 9:00A.M.6TH FLOOR EXECUTIVE BOARDROOM, BC RAIL CENTRE


PRESENT: John McLernonBev BriscoeBrian KenningLen MarchandGerry Offet

Chair

Pat RorisonJim ShepardAnne StewartJim Yeates

- portion of meeting only

IN ATTENDANCE: Bob PhillipsCheryl YaremkoJohn LeightonBill WeymarkMichael KayePaul BrentNorm HooperDennis LypkaRobert PiroozRoss Switzer

Corporate Secretary- Corporate and Marine portion of meeting only- Corporate and Marine portion of meeting only- BC Rail portion of meeting only- BC Rail portion of meeting only- BC Rail portion of meeting onlyGuest, IRIS Consulting - portion of meeting onlyGuest, Borden Ladner Gervais - portion of meeting only

Due notice having been given and a quorum being present, the meeting was determined properlyconstituted and was called to order.CHAIR'SCOMMENTS(1582-03)

Mr. John McLernon provided introductory remarks to the Directors.The Chair reminded board members of the meeting with the Premier scheduled for10:00 a.m. on May 201h in Vancouver.

Anne Stewart temporarily left the meeting.

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British Columbia Railway CompanyMinutes of Board Meeting 2 May 1, 2003

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RFP PROCESSUPDATE(1584-03)

Mr. Ross Switzer and Mr. Robert Pirooz left the meeting.The Chair provided an update regarding progress on the RFP involving BC Rail. Headvised that information meetings are underway with First Nations and dialoguebetween BC Rail and the First Nations has been going well, although there hasbeen minimal direct feedback from First Nations in those meetings. Many haveindicated that they will follow-up on their issues with the Province.

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RFP PROCESSUPDATE(1584-03)continued

On April 23'd, a briefing session was held with a group of Mayors from BC Rail-served communities regarding the proposed RFP process. The Chair advised thatthere is general acceptance by the Mayors of the objectives of the government,provided that the interests of the north are taken into consideration. Other concernsrelated to continuation of service, no line abandonments and potential for passengerservice. There will be a follow-up meeting with the Mayors on May 51h.Gerry Offet commented on the government's communications strategy and theirreliance on the Mayors' Council to represent community interests. The difficulty isthat the mayors do not necessarily speak on behalf of their councils or citizens andthat they do not have a mandate to do so. On May 2nd, a meeting of northernmayors will be discussing a number of resolutions passed by various municipalcouncils relating to the proposed BC Rail transaction. These resolutions call for anindependent commission to investigate the status of the railway and acorresponding one-year moratorium on any sale or transaction involving BC Rail.Gerry Offet will be attending that May 2"d meeting as an observer and will provideinformation back to the Evaluation Committee.The Chair advised that there will be a meeting on May 51h with a group of shippersfor dialogue and feedback on the proposed RFP process.The overall timetable remains on track with the potential for the transaction to becompleted by 2003 year-end, barring unforeseen impediments to the process.The Chair emphasized that this RFP process is the government's process and thatBCRC's role is to listen and follow the shareholder's instructions.Jim Yeates inquired about the process involving First Nations. Bob explained thatour instruction from government is for BC Rail to proceed with a role to "notify andexplain" the intended RFP process to the First Nations. The Chair identified thatpotential responses by First Nations to the government could present some risks tothe RFP process but this risk is uncertain.The Chair advised that there will be a separate RFP process for the PortSubdivision.Len Marchand pointed out that he had expected to be receiving regular updatesfrom the Evaluation Committee throughout the process. Discussion indicated thatthe board was satisfied that the board's members on the Evaluation Committeewould provide reports to the rest of the board as items of significance occur. A copyof the presentations to the Mayors' Council and Shippers' Council will also beprovided to the directors.Bob Phillips commented that the RFP process is clearly a government process andthat this creates difficulty for BC Rail being in the middle of it. He furthercommented that the uncertainty around this process is causing significant concernfor employees and management has committed to informing employees assignificant steps develop. The greatest concerns of many relate to employmenttenure, but it is impossible to provide any concrete answers to employees on thatmatter.


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BCRMARINESALE UPDATE(1585-03)

BOARDMATTERS(1586-03)

The minutes of the BCR Marine Sale Committee of March 10, 2003, still in draftform, were provided to the board for reference only. These minutes remain in draftform as the Committee has not met since that date to formally approve them as finaland complete.Due to the expiry of Anne Stewart's appointment as a Director on March 31, 2003,and her subsequent re-appointment effective April 24, 2003, the Chair requestedthat Anne Stewart resume her previous role on the Human Resources, Governance& Nominating Committee of the Board and to act as Chair of that Committee.

ON A MOTION duly made and secondedIT WAS RESOLVED that:Anne Stewart is appointed as a member and Chair of the Human Resources,Governance & Nominating Committee of the Board.

Mr. John Leighton presented an updated memo which declares existing or potentialconflicts of interest and declared business activities of Directors, highlightingchanges since the previous Board meeting.John Leighton presented the proposed changes to the Directors and Officers of thesubsidiary companies of British Columbia Railway Company ("BCRC") for approvalby the Board.

ON A MOTION duly made and seconded,IT WAS RESOLVED that:individuals described under the headings of directors or officers set opposite thenames of the subsidiaries of the Company on Schedule A (attached) are approvedto hold positions of director or officer of such subsidiaries and that managementand (or) management nominee directors of subsidiaries of the Company areauthorized to pass such resolutions and (or) take such steps as may be requiredto duly appoint each such individual listed as a director or officer, as the case maybe, of the subsidiary so identified.IT WAS FURTHER RESOLVED that:prior to any amendment to Schedule A hereto and any appointment in connectiontherewith, the approval of the Board of Directors of the Company be sought andobtained.

John Leighton presented a resolution to appoint Cheryl Yaremko, Vice PresidentFinance and Chief Financial Officer of BC Rail, to the position of Chief FinancialOfficer of British Columbia Railway Company, thereby increasing the number ofofficers of BCRC to three persons.ON A MOTION duly made and seconded,IT WAS RESOLVED that:Ms. Cheryl Yaremko is appointed as Chief Financial Officer of British ColumbiaRailway Company.


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ADOPTCORPORATEAGENDA(1587-03)APPROVEPREVIOUSMINUTES(1588-03)

BUSINESSARISING FROMPREVIOUSMEETINGS(1589-03)HRG&NCOMMITTEEREPORT(1590-03)

ON A MOTION duly made and secondedIT WAS RESOLVED that:the corporate meeting agenda is approved and adopted.

The previous minutes of the Board meeting held on March 11, 2003, werepresented. There was no discussion.ON A MOTION duly made and seconded,IT WAS RESOLVED that:the minutes of the meeting of the Board of Directors held on March 11, 2003 areverified as a correct record.

John Leighton advised that all business arising from previous meetings will be dealtwith through the balance of this meeting's agenda items, except for one item whichwill be deferred to the next meeting agenda on July 31st.

Ms. Anne Stewart, Chair of the Human Resources, Governance & NominatingCommittee, presented a report on the Committee's activities. Draft Minutes frommeetings of March 6th and th , 2003 were provided for information purposes. Theseminutes remain in draft form as the Committee has not met since March 7th toapprove a final version of the minutes.Anne presented the proposed 2003 Incentive Plan targets and plan for BCR Marine.Evaluation and payment will be based 50/50 on corporate performance andpersonal performance. Anne presented the threshold budget figures upon which theevaluation will be based for incentive payment purposes. In response to a question by Brian Kenning, it was identified that approximately 32management personnel at BCR Marine participate in this incentive plan.

ON A MOTION duly made and seconded,IT WAS RESOLVED that:the 2003 Incentive Plan and bonus targets for management at the VancouverWharves business unit of BCR Marine is approved as presented.

Anne informed the board that work continues on finalizing three corporate policies.These will receive a second review at the next HRG&N Committee meeting and donot need to come to the full board for final approval.Anne provided an update on the litigation concerningShe reminded all directors that they

She advised that, to the best of her knowledge, the activities of BCRC under thejurisdiction of the HRG&N Committee remain in compliance with all pertinent

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HRG&NCOMMITTEEREPORT(1590-03)continuedE&SCOMMITTEEREPORT(1591-03)

statutes and legislation.The Board was provided a summary update on the present status of collectivebargaining with BC Rail's unions in a briefing note dated April 22, 2003.

Mr. Jim Shepard, Chair of the Environment & Safety Committee, presented asummary of the Committee's meeting held on April 30, 2003. At that meeting, theCommittee received a similar briefing by Mr. Ross Switzer as was made to the fullBoard earlier in this meeting.Jim reported that VW has made positive progress in the area of safety and recordedan excellent quarter with no lost time injuries. He commented that this type ofperformance reflects strong commitment by management. Management hasresponded with hosting BBQ events to recognize the employees' achievement, andthese have been well received.

Jim presented the results of BC Rail's safety performance. BC Rail does notcompare favourably with industry peers. Updates were provided on the introductionof Beltpack and the fuel conservation initiative, both of which are achievingfavourable results. He provided an update on derailments, including a serious run-away train incident on the Dawson Creek subdivision. The derailment wasattributed to poor judgement by the crew and failure to act properly.BCR is still awaiting a response from the Environmental Appeal Board regarding theThere were no reportable spills orenvironmental incidents. Fisheries has charged BC Rail for a spill which occurredlast year on Rodgers Creek in West Vancouver and this will be contested.A summary was provided on the "Strategic Plan for Assessment & Remediation ofContaminated Sites" for BC Rail. Jim expressed satisfaction with the plan asp

mackin-bcrc board jan 2003 to jun 2004 redacted

Documents