Contract analysis

I. EXECUTIVE SUMMARY The purpose of this memorandum is to set forth Calderwood & Harkness LLP's recommended defense strategy for Torchlight Mining Corp. ("TMC" or "Torchlight" or the "Company") in connection with the United States Department of Justice, Antitrust Division, grand jury investigation, Grand Jury No. GJ-22-0194, currently pending before the United States District Court for the Northern District of Califo

II. BACKGROUND AND PROCEDURAL STATUS A. The Investigation On February 10, 2022, the Antitrust Division of the United States Department of Justice, acting through its San Francisco Field Office, opened a federal grand jury investigation into suspected violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, in the North American specialty-minerals sector. The grand jury was seated in the Northern District

III. LEGAL FRAMEWORK A. Substantive Law — Section 1 of the Sherman Antitrust Act (15 U.S.C. § 1) The DOJ investigation targets alleged violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, which prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." The three categories of conduct u

IV. EVIDENCE ASSESSMENT A. Evidence Against TMC — Strengths of DOJ's Case Based on our review of the available evidence and our understanding of the Antitrust Division's investigative file (as inferred from the grand jury subpoena specifications, the target letter, and information obtained through the internal investigation), the government's case against TMC rests on the following principal evidentiary pillars: Casc

V. RECOMMENDED STRATEGY: COOPERATION AND NPA A. Strategic Recommendation Based on the analysis set forth in the preceding sections of this memorandum, it is our recommendation that TMC pursue a strategy of full cooperation with the DOJ Antitrust Division, aimed at obtaining a non-prosecution agreement as the ultimate resolution of the investigation. The rationale for this recommendation rests on a convergence of fact

1. Continue and accelerate document production. Rolling document productions to the Antitrust Division are ongoing. The first production of approximately 42,000 documents was completed on April 4, 2022, and additional productions are in progress toward a cumulative target that we anticipate will reach several hundred thousand documents encompassing millions of pages. Redstone Digital Forensics, Inc., under the direct

2. Complete internal investigation. Calderwood & Harkness will complete interviews of all 23 identified current and former TMC employees who may possess relevant information regarding the conduct at issue. Priority interviews of Sandra Chu and Thomas Eriksen are already scheduled. Other key interview subjects include General Counsel Priya Anand, CFO Richard Fong, and additional members of the U.S. Specialty Minerals

3. Retain forensic economics expert. We recommend that TMC retain a qualified forensic accounting and economics firm to conduct an independent analysis of pricing patterns and affected-commerce calculations. Our recommendation is to engage Hargrove Forensic Advisory LLC, led by Dr. Vanessa Tremblay, an economist based in Chicago with substantial experience in antitrust damages analysis. The engagement should be struc

4. Make witnesses available for DOJ proffer sessions. We recommend that TMC offer to make Sandra Chu and Thomas Eriksen available for voluntary proffer sessions with the Antitrust Division. These sessions should be conducted under queen-for-a-day (use immunity) protections, pursuant to which the government agrees that statements made during the proffer session will not be used directly against the witness in any subs

5. Submit cooperation proffer to DOJ. After the internal investigation findings are finalized and the forensic economic analysis is complete, we will prepare a comprehensive written proffer to the Antitrust Division. This proffer will summarize TMC's cooperation to date, present our internal investigation findings in a structured format, describe the remediation measures TMC has undertaken and plans to undertake, and

6. Proactively remediate compliance program. We recommend that TMC engage a qualified antitrust compliance consultant to design and implement an enhanced antitrust compliance program. Proactive remediation — i.e., implementing reforms before the Antitrust Division requires them as a condition of resolution — is a powerful demonstration of good faith and will enhance TMC's cooperation credit. The enhanced compliance p

7. Engage DOJ on NPA discussions. After TMC has demonstrated substantial cooperation through its document productions, witness proffers, and cooperation proffer, we will formally propose an NPA resolution to the Antitrust Division. Based on typical timelines in comparable investigations, we anticipate that the cooperation proffer could be submitted in early 2023, with NPA negotiations beginning in mid-to-late 2023. W