ARTICLE 1

(a) This Memorandum is intended to set out the parties’ understanding of the Company’s certificate requirements for Chief Officer and is undertaken on a trial basis and will be reviewed by the parties upon the completion of twenty-four months.

(b) The Company has set its current minimum certificate requirements at the level of Mate Local Voyage for Deck Officer for positions below the level of Master, or as set out in the attached Required Certificate Level schedule.

(c) The Company retains its residual rights to establish certificate requirements. However, in the event that certificate requirements for Deck Officers are to be changed, the Company undertakes to meet with the Union to discuss the rationale and impact of the changes. In the event of significant permanent changes, the Company agrees to provide 6 months notice to the Union before the changes permanently come into effect.

(d) As part of the Company’s career development plans, Career Development Opportunities, as determined by the Company, may be posted at local Points of Assembly requiring employees to obtain their Master’s Certification within a planned timeframe and with the financial support of the Company.

Required Certificate Level Position

Master Chief Officer / Relief Master

ASTO Mate / Relief Master

Mate Local Voyage Mate, Minor & Intermediate Vessel*

Chief Officer

Second Officer, Northern Vessels,

Second/Relief Chief Officer, Staffing Pool

Watch Keeping Mate Second, Third and Fourth Officer

* Officers holding Watch Keeping Mate Ferry Mate Long Run Endorsed certificates can also be considered for positions as Mate, Minor & Intermediate Vessels

MOU II - Hours of Work Committee

(a) An Hours of Work Committee(s) comprised of an equal number of Company and Union representatives shall be formed.

(b) The purpose of the Committee(s) will be to reduce the operational costs and improve operational efficiencies and services, through changes in the Hours of Work, consistent with customer requirements by operational area and/or route on or before April 1, 2005 or as otherwise agreed to by the parties.

(c) Differences shall be submitted to an Hours of Work Umpire (Vince Ready or Irene Holden) who shall resolve the dispute within fourteen (14) days of receiving a submission from either party. The Umpire(s) shall have the right to determine his or her own procedures.

(d) In resolving a dispute, the Umpire(s) shall take into consideration customer requirements and operational efficiencies relative to the impact on employees of the proposed changes to the hours of work and schedules.

MOU III - Departure Bay, Duke Point and Wellington Road

Departure Bay, Duke Point and Wellington Road are separate and distinct points of assembly except as provided in this Memorandum as follows:

1. Departure Bay Staffing Pool, casual and seasonal employees may be assigned work, for which they are qualified, at either Departure Bay, Duke Point or Wellington Road.

2. Departure Bay employees on Engineer watch #9 may be assigned work, for which they are qualified, at either Departure Bay or Duke Point.

3. Wellington Road casual and seasonal employees who are employed in Catering Stores may be assigned work, for which they are qualified, at either Wellington Road, Departure Bay or Duke Point.

The Union agrees that the employees identified in points 1. through 3. above cannot claim expenses for travel for work at any of the points of assembly identified.

Wellington Road, Departure Bay and Duke Point shall be considered the same location for the purpose of intra-terminal transfers.

MOU IV - Northern Service

(a) The minimum of 84 regular ship board positions in the North on Routes 10 and 11 shall be reduced only through attrition to a minimum of 78 positions.

(b) In order to encourage employees to take shorter blocks of compensatory time off (C.T.O.), the Company shall provide transportation for designated periods to allow for effective scheduling of C.T.O.

(c) The Company shall approach the Union with the concept of creating classifications that shall provide greater flexibility in other areas on the northern vessel.

MOU V - Northern Vessel Employee Transportation

Employees whose point of assembly is Prince Rupert but who are not resident in Prince Rupert, shall be entitled to use their employee travel pass to travel to and from their point of assembly for a shift assignment aboard the Northern Vessels. If accommodation is available aboard the vessels, employees may make use of it. Employees will be entitled to use the 50% staff meal discount while travelling.

MOU VI - Northern Vessels (Grandparented Transportation Costs)

(a) The Company shall continue to pay transportation costs associated with air travel from Vancouver to Prince Rupert to those employees guaranteed travel expenses. The Company shall not be responsible for providing the transportation costs to employees who fill vacancies as they arise in the future.

(b) Costs associated with air travel shall include the costs of travel from Nanaimo, Victoria, and in Vancouver, to the Vancouver International Airport and to Prince Rupert.

(c) Costs associated with air travel shall not include the costs of travel from residences that are out of province. Employees who reside out of province shall be paid the cost of transportation from the Vancouver International and to Prince Rupert.

(d) Where an employee changes his/her current residence to another location of Vancouver Island, the costs associated with air travel for that employee shall not increase.

(e) Where an employee changes his/her current residence to another location in the province, outside of Vancouver Island. The Company shall be responsible for costs of travel from Vancouver Airport to Prince Rupert for that employee.

(f) An employee who formerly travelled to Prince Rupert by transportation provided by the Company from Port Hardy shall continue to be paid transportation expenses under clause 29.10(b).

MOU VII - Joint Commitment on Increasing Productivity, Reducing Costs, Increasing Revenue and Gainsharing

(a) The parties are committed to increasing productivity and efficiency, reducing costs and increasing revenue throughout the operations of the Company in a manner which is beneficial to the people of British Columbia, to the employees of the Company and which meets the Company’s operational needs.

(b) The parties are particularly mindful of the mutual benefits to be gained by reviewing work practices, systems and processes within the Company with a view to identifying alternatives and operational efficiencies.

(c) Therefore, the parties agree to establish a Joint Committee of equal members of Union and Management representatives and meet pursuant to Clause 2.11 of the Collective Agreement

(d) The Committee shall enter into discussions within 90 days of the signing of the Collective Agreement with a view to enhancing the delivery of service to the public, to improving work practices, systems, and processes with the Company, and to identifying opportunities for revenue enhancement. Issues to be discussed shall include but are not limited to the following:

1. work practices, systems and processes;

2. utilization of casual employees;

3. improved value from low usage operational times;

4. improvements to administrative, human resource and operational practices, and

5. new or alternative methods for the enhancement of revenue.

(e) The parties acknowledge that during the course of these discussions suggestion for gainsharing improvements may arise.

(f) In the event the parties cannot reach agreement, the matter may be referred by either party to Vince Ready or Irene Holden for adjudication.

MOU VIII - Vessel Designation Overlay

The parties agree that the Vessel Designation Overlay agreed to by the parties will be applied to the current rates of pay for licensed employees. When applied to Ships’ Officers rates of pay for employees who work on Spirit Class Vessels, the base rates for Third Engineers shall be 10% higher than their counterparts on Large Vessels and 7% higher for all other Officers who work on Spirit Class Vessels. The amounts specified are currently in effect and in applying the Vessel Designation Overlay to the Structured Job Based Rating Plan; the intent of the Memorandum is to retain the salary differential which currently applies to positions on Spirit Class Vessels.

MOU I X - Workforce Planning Committee

(a) The parties are committed to the ongoing determination of an efficient, productive and skilled workforce.

(b) The parties recognize that a fair and reasonable workforce structure and balance of Regular Employees, Casual Employees and Seasonal Employees are necessary to the efficiencies of the business.

(c) On or before November 15^th of each year, the parties shall meet in one or more Workforce Planning Committees for the purpose of discussing and identifying workforce staffing requirements, trends and needs by operational area and/or route.

(d) The Committees are to give appropriate consideration to past requirements relative to anticipated future plans so as to identify:

1. skill shortages and training needs,

2. regular full-time postings,

3. regular part-time postings,

4. term certain positions,

5. conversion of casual employees, who worked full-time equivalent shifts during the preceding twelve months, to regular status and/or to the Staffing Pool,

6. termination of casual employees working less than 240 hours during the preceding twelve months.

(e) Differences may be submitted for adjudication to Arbitrator Vince Ready or Arbitrator Irene Holden. In resolving any differences the Arbitrator(s) shall take into consideration customer requirements, operational efficiencies, costs and benefits relative to the appropriateness of the workforce structure and proposed changes.

MOU X - Seasonal Help Employees

The Company may employ Seasonal Help (i.e. students) under the following conditions:

(a) Seasonal Help shall be defined as those employees hired between April 1^st to October 15^th (or other period as mutually agreed) of any calendar year for the purpose of supplementing the regular workforce and/or replacing regular employees compensatory time off.

(b) Seniority shall not accumulate during the designated seasonal period. In the event a seasonal employee is retained outside the designated seasonal period, his/her probationary period will commence as of the first day outside of the period. Should the employee complete his/her probationary period, the seniority date will be established as of the original date of hire as a Seasonal Help employee.

1. be entitled to benefits normally granted to other employees,

2. be entitled to any premiums or differentials,

3. be granted a minimum number of hours.

(d) Seasonal Help employees shall be entitled to overtime compensation for all work performed in excess of standard daily hours.

MOU XI - Job Posting Selection

(a) In order to encourage and facilitate the posting of regular job postings during the initial three years of the Collective Agreement, the selection of candidates are to reflect a balance between employees already at the position location (often referred to as the Homestead) and senior employees at other locations. The parties may by mutual agreement extend this process.

(b) The intent is for the Company and the Union to exercise sufficient discretion on a “case by case and geographic basis” so as to reach a reasonable and responsible reflection of these potentially contradictory factors.

(c) In the event that the parties cannot reach agreement, differences may be referred directly for expedited adjudication to Vince Ready or Irene Holden, in the event that Mr. Ready is not available.

MOU XII Ships’ Officers Component

(a) The parties acknowledge the unique concerns of Licensed Officers including certification, training, rates of compensation and liabilities.

(b) Further, the parties recognize the historic problems associated with the homogenous nature of the bargaining unit resulting in the compression of licensed wage rates and reduction of salary levels as compared to industry and market comparators.

(c) The parties also recognize the growing shortage of Licensed Officers worldwide and the need to review incentives being offered for the recruitment, development and retention of Ships’ Officers at BC Ferries.

(d) Therefore, the parties agree to meet whenever necessary in order to discuss solutions to these concerns as well as any others identified by the parties within the context of the Ships’ Officers’ Component Review Committee.

MOU XIII - Salary Adjustments

(a) Wage rates

Wage rates will be adjusted in accordance with the following:

MOU XIV - Payment of Committees

All committees established as a result of the Ready Award shall be deemed to be Article 2.11 committees for the purpose of payment.

Letter of Understanding

Between

BC Ferry Services Inc.

And

BC Ferry & Marine Workers’ Union

Subject: EXCLUSIONS / INCLUSIONS

It is recognized that the composition of the bargaining unit relative to the principles of exclusions and inclusions by the Labour Relations Board has and continues to change and that the October 13, 1999 “Consent Order” issued by Rod Germaine no longer facilitates reasonable and effective relations.

The 1999 “Consent Order” is repudiated and further exclusions/inclusions shall be determined on an assessment of the Traditional Management Responsibilities Test (e.g. hire, fire, demote, confidentiality, industrial relations input etc.) and/or the contemporary test of “Management Team” responsibilities.

Consistent with this understanding, currently included positions in Human Resources, Crewing and the position of Assistant Terminal Manager shall be excluded from the bargaining unit on the basis of their industrial relations affects.

Current employees affected by this Letter shall retain all options under the Collective Agreement for a period of six (6) months. This period may be extended by mutual agreement on a case by case basis.

Notwithstanding this Letter, included persons may continue to substitute into excluded positions as determined by the Company.

For the duration of this Agreement, disputes with respect to exclusions/inclusions shall be referred to Vince Ready and/or Irene Holden. It is agreed that Mr. Ready and Ms. Holden will have the necessary jurisdiction to bind the parties in all exclusion/inclusion matters.

Agreed to for the Union: Agreed to for BCFS Inc.:

________________________________ _________________________________

Letter of Understanding

Between

BC Ferry Services Inc.

And

BC Ferry & Marine Workers’ Union

And

DEAS Pacific Marine Inc.

Subject: DPMI / BCFS WORKFORCE MOBILITY

The parties recognize the mutual benefits in workforce mobility between DPM and BCFS bargaining unit employees.

The parties recognize that this Workforce Mobility Agreement is intended to be inclusive of: 1) posted vacancies by either employer and 2) temporary transfers of personnel between the two employers.

The parties agree that this Letter of Understanding (LOU) is entered into on a without prejudice basis and shall continue until the expiry of the BCFS Collective Agreement. Further, the parties understand and agree that this LOU is conditionally predicated on the understanding that it shall not be used by either party in any manner, in any court, LRB hearing, or other adjudication process with respect to any tribunal's consideration of the issue of common employer or ally status between DPM and BCFS.

(a) Posted Vacancies

1. It is understood that determination of the structure of the workforce is the
right of the employer.

2. It is intended that Bargaining Unit employees from either employer may
apply for posted vacancies with either employer (ie: Regular postings, Fixed
Term postings, Term Certain postings) and be covered by the terms of that
posting and the Collective Agreement under which the posting is covered.

3. Employees applying for postings with the other employer (ie: crossing over)
shall be selected on the basis of seniority, qualifications, and suitability as
determined by the employer with the vacancy.

4. The posting 'process' provisions of the Collective Agreement of the employer
posting the vacancy shall apply.

5. Employees of the employer posting the vacancy shall continue to be assessed
and selected relative to the posting provisions of that agreement.

6. In the case of the Term Certain or Fixed Term vacancies, either employer
may deny the applicant where it is not practical or where it is inefficient to
release him/her.

7. Any grievance arising as a result of the posting of vacancies shall be dealt
with under the Collective Agreement in force with the employer posting the
vacancy.

(b) Temporary Assignment and Transfer

1. Temporary, supplemental, and seasonal workforce requirements may
necessitate the temporary transfer of employees between the employers.

2. Employees of either employer may be temporarily transferred or assigned
under the terms of their Collective Agreement.

3. Where the temporary assignment results in a temporary change in point of
assembly or change in scheduled hours of work, the terms of the Collective
Agreement of the employees affected shall apply.

4. In the event that sufficient employees cannot be obtained, qualified and available employees may be canvassed and required to work in reverse order of seniority.

5. Employees who are temporarily transferring or assigned (temporary cross
over) to the other employer shall continue to be covered by the terms of
their employer's Collective Agreement.

This Agreement shall be effective May 19, 2005

Agreed to for the Union: ____________________________________

Agreed to for BDFS Inc.: ___________________________________

Agreed to for Deas Pacific Marine: ___________________________

Letter of Understanding

Between

BC Ferry Services Inc.

And

BC Ferry & Marine Workers’ Union

Subject: DROP TRAILER SERVICE - SWARTZ BAY AND TSAWWASSEN

(a) In the event the Company elects to provide a ‘drop-trailer service’ the parties agree to co-operate in order to create an efficient system using BC Ferries employees.

(b) It is understood that following the ‘start-up’ phase of initiating this service (approximately twelve months) it is intended that the Company will post these opportunities for BC Ferries employees so that the work may be integrated and performed as part of the Company’s terminal night shift work.

Letter of Understanding

Between

BC Ferry Services Inc.

And

BC Ferry & Marine Workers’ Union

Subject: SALES AND MARKETING CENTRE - VANCOUVER

It is understood and agreed that in the event the Company establishes a Sales & Marketing Centre in Vancouver that these positions are excluded from the bargaining unit.

Letter of Understanding

Between

BC Ferry Services Inc.

And

BC Ferry & Marine Workers’ Union

Subject: SEASONAL HELP EMPLOYEES

(a) Seasonal Help shall be defined as employees hired between April 1^st to October 15^th (or peak periods inclusive of Christmas, Easter, or other periods mutually agreed by the parties) of any calendar year for the purpose of supplementing the regular workforce and/or replacing regular employees on compensatory time off.

(b) The rate of pay for Seasonal Employees shall be 90% of the classification worked and 95% for returning Seasonals.

Letter of Understanding

Between

BC Ferry Services Inc.

And

BC Ferry & Marine Workers’ Union

Subject: NORTHERN DIFFERENTIAL - PENSIONABLE EARNINGS

This will confirm the many discussions with respect to the above and the Company’s agreement to amend the Northern Differentials in order that they be deemed as pensionable earnings and subject to pension contributions as per the following:

1. In order to simplify the process, and to cover the cost of the pension contributions, the current Northern Differentials will be reduced by 2% (from 29% to 27% and 27% to 25%) respectively.

2. In order to effect this change, the pensionable pay for positions on Vessels covered by Article 29 will be increased by 20%. The Company will, therefore, remit pension contributions on this increase. The remaining 7% for the northern vessels and 5% for the Mill Bay service will be non-pensionable.

3. This change will be affective March 1, 2006.

4. On a one-time basis, employees eligible for the Northern Allowance who do not wish to have the premium pensionable shall have the option to continue to receive the non-pensionable amount of 29% and 27% respectively. Such employees must advise Payroll, in writing, prior to March 1, 2006 should they wish to exercise this option.

5. It is understood that the same principle shall apply to Article 29.11 - Differential Pay When On Leave, such that the STIIP, Vacation, etc. shall be pensionable.

6. This understanding is based on there being no additional cost to the Company and is subject to the approval of the BC Pension Corporation.

7. The parties agree that should there be a change in the Pension plan contribution requirements the Company reserves the right to amend the reduction.