Court File No. CV-12-453483

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

STEPHEN JOHN GRIGGS Plaintiff

and

MAURICE GABAY, SCOTT CAMPBELL, TRACIE CROOK, ALICIA

CZEKIERDA, RON LANGER, PATRICIA LI, VICKI RINGELBERG, TONY ROSS, and RANDY MARIE SLOAT, Trustees of the OPSEU PENSION PLAN

TRUST FUND (c.o.b. as OPSEU PENSION TRUST or OPTrust) Defendants

REPLY

1. The plaintiff repeats and relies upon the allegations contained in the Statement of Claim.

2. The plaintiff admits the allegations contained in paragraph 3, 4, 6, 7, 9, 11 (all but first

sentence), 16 (all but last two sentences), 18 and 19 of the Amended Statement of Defence (the

“Defence”).

3. The plaintiff has no knowledge in respect of the allegations contained in paragraph 5, 11

(first sentence) and 13 of the Defence.

4. The plaintiff denies the allegations contained in the remainder of the Defence.

5. To the extent that capitalized terms are used in this pleading, the plaintiff relies on these

terms as defined in the Statement of Claim.

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Allegations of Cause

6. In the Defence, the Defendants claim for the first time that Mr. Griggs was terminated for

cause. None of the allegations set out in paragraphs 21 through 38 of the Defence, nor any other

allegation or suggestion of non-performance, were ever made or communicated to Mr. Griggs

prior to his termination on April 13, 2012, effective April 23, 2012. None of the allegations have

any basis in fact – they are an after-the-fact contrivance in an effort to justify OPTrust’s refusal to

pay Mr. Griggs the full severance to which he is contractually entitled.

7. Until March 2012, when the defendants formed an intention to undermine Mr. Griggs’

authority in order to placate the PMG, the Defendants had repeatedly communicated their

satisfaction with his performance and their support for his initiatives to reform the governance

model at OPTrust and in particular the excesses of the PMG group. Mr. Griggs’ employment was

terminated by OPTrust because he advocated for the reform of the excessive spending and

compensation of the PMG, which was and is far in excess of PMG’s Canadian peer group and

reasonable market standards.

8. In response to the particular allegations set out in paragraph 22 of the Defence:

(a) The 3PC report presented to the Trustees had been reviewed by McKinsey, the

Chief Investment Officer, the Senior Vice President, Finance, the head of PMG

and other OPTrust management prior to the presentation to the board. No one

suggested to Mr. Griggs, either before or after the presentation, that the

presentation was riddled with errors. Moreover, the internal records and

communications of the defendants confirm their support for the report ;

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(b) The defendants initially praised Mr. Griggs’ draft strategic plan for OPTrust. They

only alleged “concerns” with the strategic plan after they had decided to terminate

Mr. Griggs’ employment, and even then, the criticisms of the strategic plan were

minor or a misguided attempt to transform the high level long term plan into a

detailed annual operating plan; and

(c) During his tenure, the board of trustees repeatedly told Mr. Griggs that his materials

were far better than what had been provided to them in the past. None of the

trustees told Mr. Griggs that his materials were below the standard they expected.

9. Contrary to the allegation in paragraph 23 of the Defence, Campbell did not describe Mr.

Griggs’ hands-on style as a weakness during a meeting in the fall of 2011. The Vice Chair did

communicate his personal belief that a “CEO” should not do detailed work and should delegate all

of his tasks, suggesting that a very “hands off” approach (like the one he used as a government

official) was appropriate for a mid-sized public pension fund like OPTrust with only a few hundred

employees. Mr. Griggs disagreed with this approach and continued with his active engagement to

achieve the reforms which the relatively small organization required.

10. The leadership review commissioned by OPTrust without consulting the CEO in advance

was not independent. The consultant had a pre-existing relationship with Campbell and she was

retained by Gabay and Campbell to ensure the investigation led to a pre-determined outcome.

After she had concluded her “investigation” and consulted with Gabay and Campbell, the

consultant told Mr. Griggs to “lay off” the PMG and not to use his political capital trying to fix the

division. The message from the Chair and Vice-Chair through the consultant was clear: the PMG

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was “untouchable” and Mr. Griggs’ efforts to hold it accountable would not be supported by the

Trustees.

11. The other “concerns” alleged in the Defence are without foundation.

The Strategic Plan

12. Mr. Griggs was asked by the Trustees to develop OPTrust’s first strategic plan, with the

goal of completing the plan by June 2012 for review and approval by the trustees at a board retreat.

The strategic plan was to be prepared in conjunction with the development of OPTrust’s first risk

management plan, a strategic review of the PMG by Boston Consulting and a detailed

one-to-three-year operating plan to implement the approved strategic initiatives.

13. There were many participants in the drafting process, including all of OPTrust’s Executive

Committee and key staff as well as the Chair and Vice-Chair together with an ad hoc committee of

the board. Drafts were widely circulated in an attempt to achieve a consensus among management

and leading directors. The strategic plan was on track and had successfully obtained buy-in from

staff and the ad hoc committee.

14. The only problem with the development of the strategic plan and the other related

initiatives was that the Trustees were incapable of proceeding at the pace that would enable the

strategic plan and related initiatives to be finalized by June 2012. The Trustees were unable to

make the decisions necessary to proceed on schedule and so they discussed postponing the formal

approval date for the strategic plan and related initiatives to September 2012 to give themselves

more time to consider them.

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15. At no time did any of the Trustees communicate any complaints about the timing or

substance of the strategic plan to Mr. Griggs. The allegations in the pleading regarding the

strategic plan are also a contrivance to justify the wrongful termination of the plaintiff.

The PMG Audit

16. After Mr. Griggs learned from the human resources department about negative and

concerning comments about the PMG arising out of exit interviews from departing staff, including

the PMG’s Manager of Finance, he and John Brennan, the Senior Vice President, Shared Services,

decided that OPTrust had to conduct an independent review of the PMG in order to determine if

the numerous independent accusations of financial and other irregularities at the PMG had any

merit. This was strongly supported by the Senior Vice President, Finance who was responsible for

financial controls and expenditures. The internal records of the defendant confirm the

organisation’s concerns about the information derived from the exit interview process and the need

to conduct an independent review.

17. Mr. Griggs did not target anyone or attempt to sully anyone’s reputation. The decision to

conduct an independent review was not made by Mr.Griggs alone, and it was supported by Gabay,

Campbell, and Tracie Crook, the chair of the board of trustees’ Governance and Compensation

Committee. All three trustees recognized the need for the review in light of the departing

employees’ allegations. The records and communications of the members of the Governance and

Compensation Committee reflect their concerns and the desire for an independent review.

18. Contrary to paragraph 48 of the Defence, the independent external review concluded that

certain expenses required further investigation by OPTrust as it appeared that, absent a reasonable

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explanation, Walsh and Warn-Shindel had violated OPTrust’s expense and other policies, as

pleaded at paragraph 25 of the Statement of Claim.

19. In addition to these and other identified items, the review also raised the concern that

Walsh had improperly claimed the use of vacation and business time, apparently using OPTrust

time and resources for political purposes contrary to OPTrust policy.

The PMG’s Compensation

20. The compensation of the PMG was and remains a concern at OPTrust. On many occasions,

the Trustees, and in particular Gabay and Campbell, asked Mr. Griggs to investigate the PMG’s

compensation system, which did not apply metrics customarily used in the industry and which

consistently ranked the PMG above its industry peers. For example, in 2011, the PMG submitted

bonus recommendations for approval that rated the performance of 88% of management

employees as “Exceeds” or “Significantly Exceeds” expectations. The board-approved policy for

all other staff requires that only a small number of staff would be expected to have these ratings.

21. In November 2011, the Governance and Compensation Committee unanimously approved

a recommendation to the board to change the PMG’s compensation target for 2012 to be

approximately the fiftieth percentile of the Canadian pension market, rather than the use of the

much higher 75th percentile of the NY/Global market. At all material times, the Trustees were

advised by outside consultants from Hay Group, who supported the compensation changes.

However, when this decision was presented to the wider board of trustees, the Trustees made an in

camera decision to retain the existing compensation structure.

22. Mr. Griggs assured the PMG that there would be no changes to the 2011 compensation

plan for their 2011 compensation. However, as CEO of OPTrust, was obligated to ensure that the

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compensation plan was correctly applied. In the past, PMG staff almost always received the

maximum bonus possible under the plan, even though the market data did not support this level of

payout. As a result, OPTrust’s human resources staff independently of Mr. Griggs recommended

to the Trustees that, in keeping with the 2011 compensation plan, bonuses for the PMG be reduced

to reflect actual performance and the presented independent market data. This approach was also

recommended to the board by it independent compensation advisers.

23. When this recommendation was presented to the OPTrust Governance and Compensation

Committee (which had authority to set the 2011 PMG bonuses), the meeting was attended by the

defendant Tony Ross, who was not a member of that committee but who had played a key role in

establishing the PMG. Mr. Ross, a strong supporter of PMG, attempted to participate in voting at

this meeting, even though he had no standing to vote. At this meeting, the committee rejected the

proper application of the board-approved PMG compensation plans and paid out the much higher

amounts recommended by PMG management.

Investeco and Underwood Capital Partners

24. Mr. Griggs suggested to PMG when he started that they meet with Investeco because

Investeco is a leading player in the alternative energy industry and could give PMG some guidance

in this small, but growing, industry. This was not the pursuit of an opportunity but an effort to help

PMG learn more about this industry.

25. The suggestion that Mr. Griggs failed to disclose his relationship with Investeco to PMG is

false and is made for the improper purpose of vexing and embarrassing Mr. Griggs. Mr. Griggs’

past relationship with Investeco was well known: he disclosed it on his resume and it was

expressly referred to in an OPTrust newsletter article announcing Mr. Griggs’ appointment.

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26. Mr. Griggs has a family corporation called Underwood Capital Partners Inc., through

which he conducted his business interests prior to becoming CEO of OPTrust. On his appointment

as CEO, Mr. Griggs ceased his other business interests and this corporation became inactive, save

for holding its passive investments.

Alleged Copying of Electronic Records

27. In April 2012, Mr. Griggs asked OPTrust’s IT help desk to retrieve his own personal

contacts from OPT’s Outlook system. He did not remove OPTrust information other than in the

course of performing his ordinary role as CEO of OPTrust and puts OPTrust to the strict proof

thereof.

Artwork

28. Cathy Griggs is a professional artist whose works have sold for several thousands of

dollars. During OPTrust’s recent office re-design, the designers responsible for choosing the

artwork learned that Ms. Griggs is an Ontario artist, reviewed her website and asked to purchase a

number of her works. Mr. Griggs did not influence this decision and played no role in the decision

to purchase his wife’s artwork.

29. Contrary to the allegations in the Defence, Ms. Griggs sold her artwork to OPTrust at her

out-of-pocket cost for approximately $600 per work, which was significantly less than the market

value. There was no collateral benefit to Mr. Griggs or his wife through a donation tax credit or

otherwise and no charity was involved. These facts are well known to the defendants and the

allegations against Ms. Griggs are made for the wrongful purpose of vexing and embarrassing Mr.

and Ms. Griggs.

Mr. Griggs Did Not Resign – His Employment was Terminated by OPTrust

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30. Mr. Griggs never expressed an intention to resign from OPTrust. Rather, after he was

presented with the conclusions of the 360º review and learned that the Trustees were meeting in

camera twice to discuss the review, he told Gabay and Campbell that if the Trustees did not have

confidence in OPTrust’s CEO, then they should terminate his employment, which is what OPTrust

did on April 13, 2012. On this date he was told to leave the office until the details of his

termination could be “finalized”. On the expectation that his contract would be honoured in full,

Mr. Griggs left the office and, as requested, had no communications with the office until the board

could finalize its communications plans.

31. In the alternative, if Mr. Griggs did “leave” OPTrust, he did so after being constructively

dismissed by OPTrust as a result of the Trustees undermining his authority and expressing their

lack of confidence in Mr. Griggs. The result is the same: Mr. Griggs’ employment at OPTrust was

terminated without cause.

32. OPTrust is in breach of its contractual and common law obligations to Mr. Griggs. Its

allegations against Mr. Griggs are a contrivance intended to punish him for pursuing his legal

rights and to harm his reputation in the investment industry. OPTrust has advanced scurrilous

allegations against Mr. Griggs which it knows to be false, in order to avoid having to answer for its

own governance and other shortcomings. As such, its conduct entitles Mr. Griggs to punitive and

aggravated and exemplary damages.

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May 22, 2012 LAX O'SULLIVAN SCOTT LISUS LLP Counsel Suite 1920, 145 King Street West Toronto, Ontario M5H 1J8 Jonathan C. Lisus LSUC#: 32952H Tel: (416) 598-7873 jlisus@counsel-toronto.com Andrew J. Winton LSUC#: 54473I Tel: (416) 644-5342 awinton@counsel-toronto.com Fax: (416) 598-3730 Lawyers for the Plaintiff

TO: SHERRARD KUZZ LLP

Barristers and Solicitors 250 Yonge Street Suite 3300 Toronto, ON M5B 2L7 Thomas J. Gorsky LSUC#: 21668M Tel: (416) 603-6241 Fax: (416) 603-6035 Lawyers for the Defendants

STEPHEN JOHN GRIGGS -and- MAURICE GABAY et al. Plaintiff Defendants

Court File No. CV-12-453483

ONTARIO

SUPERIOR COURT OF JUSTICE

PROCEEDING COMMENCED AT TORONTO

REPLY

LAX O’SULLIVAN SCOTT LISUS LLP Counsel Suite 1920, 145 King Street West Toronto, Ontario M5H 1J8 Jonathan C. Lisus LSUC#: 32952H jlisus@counsel-toronto.com Tel: (416) 598-7873 Andrew J. Winton LSUC#: 54473I awinton@counsel-toronto.com Tel: (416) 644-5342 Fax: (416) 598-3730 Lawyers for the Plaintiff