SfewTbi/ndlancl GovernmentofNev/foundland and Labrador Lsbrsdor DepartmentofOffice Natural Resources of the P/linfster May 10,2016 PRIVATES CONFIDENTIAL Mr. John Green Chair, NalcorEnergyBoard Dear Mr. Green: I write in relation to a Settlement Agreement between Nalcor Energy and former CEO Edmund Martin and the associated Resolution of the Board ofDirectors ofNalcor Energy. The Settlement Agreement first came to Government's attention on May 5, 2016. Upon review of that agreement. Government requested a copy ofthe supporting Minutes and Resolution ofthe Board ofDirectors ofNalcor Energy and received same on May 9,2016. As you are aware, the terms ofemployment ofMr. Martin were pursuant to a contract of employment with Nalcor Energy, and the administration of the contract rested with Board of Dhectors of Nalcor Energy. However, both the Settlement Agreement and the Minutes supporting &e Resolution of the Board of Directors indicate that Government confirmed to the Board ofDhrectors that Mr. Martin was entitled to receive the severance and pay mlieu ofnotice payments and benefits as if Mr. Martin had been released by the former Board of Dkectors without cause. Specifically, the Settlement Agreement statesthat: "And Whereas the Board ofDirectors ofNalcor have-been advised by the Government of Newfoundland and Labrador that in all the chrcumstances it has agreed that the Executive is entitled to receive the severance and pay in lieu of notice payments and benefits asifthe Executive (had) been released by the Board ofDirectors under clause 16 without cause pursuant to the Executive Employment Agreement between the parties hereto datedas of November2,2009." The Minutes ofthe Board ofDirectors meeting ofNalcor Energy held on April 20, 2016 state that: "The Chair reported that hehas had a discussion with a representative ofthe Government of Newfoundland and Labrador and it was confirmed that there was an agreement between the Government and Mr. Martin that he would receive severance payments upon &e cessation ofhis employment with the Corporation. The severance payment was to be in accordance with his employment contract as if he had been dismissed at the discretion of the Board." P.O. Box 8700, St John'3: NL, Canada A1B4J6 1709.7295920 f 709.729.0059 These statements are not accurate. At no time did the Government direct the former Board of Directors in relation to how Mr. Martin?s cessation of employment was to be treated under .his contract, or Mr. Martin?s entitlement to severance. Any interpretation of same by the Board was a misunderstanding on their part. Furthermore, contrary to the Minutes, Government was not consulted in advance by the former Board of Directors of its decisions as to how Mr. Martin?s cessation was to be treated under the contract or as to whether Mr. Martin would be entitled to severance. Government was instead advised of the decision to treat Mr. Martin as if he had been terminated, and to pay severance to Mr. Martin by the former Chair of the Board on 20 April, after such decision had already been made. Government was not aware that such decision was being attributed to speci?c instructions from Government until it received a copy of the Settlement Agreement. As noted above, administration of the employment contract is a matter within the purview of the Board of Directors, and Government approval is not required for such decisions. The purpose of this letter is to clarify the extent of Government?s involvement in that decision. Sincerely, g? a. SIOBHAN COADY, MHA St. John?s West Minister Hydro Plate. 500 Columbus Drive. R0. Box 12800. Nt Canada A18 0C9 t. 709.7311440 f. 709.737.1800 nalcor'energy.corn May 13, 2015 Government of Newfoundland and Labrador Department of Natural Resources Honourable Siobhan Coady 7th Floor, Natural Resources Building 50 Elizabeth Ave, 8700 St. John's, NL . A13 416 Dear Minister: I am writing on behalf ofthe Board of Directors of Nalcor Energy. This letter is in regard to yoLIr letter addreSSed to Mr. John Green, Chair, Nalcor Energy Board, dated May 10, 2016. Receipt ofthe aforesaid letter is acknowledged. As you are aware, none of the present members of the Nalcor Energy Board of Directors Were Directors On April 20, 2016, when the Board dealt with the termination of Mr. Martin?s employment with Nalcor Energy. The letter was reviewed with the Board of Directors at its meeting of May 12, 2016. The Board has received legal advice that this does not in any Way change the legal obligations of the Corporation to Mr. Martin and nothing further is required. . Yours very truly, Peter A. Hickman General Counsel and Corporate Secretary (Acting) ab