Contract analysis

I. Executive Summary This memorandum analyzes the proposed two-step acquisition structure by which Torchlight Mining Corp. ("Torchlight" or "TMC"), a corporation organized under the laws of British Columbia, Canada, listed on the Toronto Stock Exchange (TMC.TO) and the New York Stock Exchange (TMC), will acquire all outstanding shares of common stock of Ridgeline Cobalt Inc. ("Ridgeline" or "RCI"), a corporation inco

II. Parties and Transaction Overview A. The Acquirer — Torchlight Mining Corp. Torchlight Mining Corp. is a corporation organized and existing under the laws of the Province of British Columbia, Canada, pursuant to the Business Corporations Act (British Columbia). Torchlight is a diversified mining and specialty chemicals company with principal executive offices located at 1200 – 885 West Georgia Street, Vancouver, B

III. Capitalization of Ridgeline Cobalt Inc. An accurate and comprehensive understanding of Ridgeline's capitalization is essential to the proper structuring of the tender offer and the calculation of the minimum condition. The following capitalization analysis is based on Ridgeline's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2023, supplemented by information provided by Ridgeline'

IV. Two-Step Transaction Structure A. Step One: Cash Tender Offer

1. Legal Framework. The tender offer will be conducted under Section 14(d) of the Exchange Act and Rules 14d-1 through 14d-11 promulgated thereunder. Section 14(d) governs tender offers for equity securities of issuers registered under Section 12 of the Exchange Act and requires, among other things, that the offer remain open for a minimum of 20 business days from the date of commencement, that all tendering sharehol

2. Offer Terms. The material terms of the tender offer are as follows: (a) Offer Price. $2.50 per share of Ridgeline common stock, payable in cash, without interest and less any applicable withholding taxes. The offer price was determined through arm's-length negotiations between Torchlight and Ridgeline, with the assistance of their respective financial advisors. (b) Aggregate Consideration. Based on 18,000,000 shar

3. Minimum Condition. The tender offer is subject to a minimum tender condition. Specifically, shares of Ridgeline common stock validly tendered and not withdrawn in the offer, together with any shares of Ridgeline common stock owned by Torchlight at the time of expiration (currently zero shares), must represent at least a majority of the total number of shares of Ridgeline common stock then outstanding on a fully di

4. Offer Timeline. The key dates in the anticipated offer timeline are as follows: The initial expiration date of June 14, 2024 provides approximately three months from commencement, which should be sufficient to obtain HSR Act clearance (assuming early termination of the waiting period or expiration of the initial 30-day waiting period without a request for additional information) and Investment Canada Act clearance

5. Additional Conditions. In addition to the minimum condition described above, the obligation of Torchlight to accept for payment and pay for shares tendered in the offer is subject to the satisfaction or waiver of the following conditions: (a) The representations and warranties of Ridgeline set forth in the Tender Offer Agreement (the "Agreement") shall be true and correct in all material respects (or, with respect

6. Non-Solicitation; Termination Fees. The Agreement will contain customary non-solicitation provisions restricting Ridgeline and its representatives from soliciting, initiating, or knowingly encouraging or facilitating any competing acquisition proposal. The non-solicitation covenant will be subject to a customary "fiduciary out" permitting the Ridgeline Board of Directors to engage with a party that makes an unsoli

1. Short-Form Merger — DGCL § 253. If, upon expiration of the tender offer, Torchlight has acquired 90% or more of the outstanding shares of Ridgeline common stock, Torchlight intends to promptly effect a short-form merger under DGCL § 253. Under Section 253 of the DGCL, a parent corporation that owns at least 90% of the outstanding shares of each class of stock of a Delaware subsidiary may merge the subsidiary into

2. Long-Form Merger — DGCL § 251 (Fallback). In the event that Torchlight acquires at least a majority of the fully diluted shares (11,500,001 shares, satisfying the minimum condition) but fewer than 90% of the outstanding shares (fewer than 16,200,000 shares) in the tender offer, a short-form merger would not be available, and a long-form merger under DGCL § 251 would be required to acquire the remaining outstanding

3. Rationale for Direct Tender Offer (No Merger Sub). In many two-step acquisition structures, the acquirer forms a wholly owned merger subsidiary — typically a Delaware corporation or limited liability company — to serve as the entity that commences the tender offer and into which the target is merged (or which merges into the target) in the second step. In the present transaction, Torchlight has elected to make the

V. Treatment of Pinnacle Convertible Notes A. Terms of the Notes As described in Section III.B, Ridgeline has outstanding $7,800,000 in aggregate principal amount of 6.5% senior secured convertible notes due June 30, 2026, issued under the Indenture dated June 30, 2022. The Notes are held in their entirety by Pinnacle Venture Resources Fund II, LP. The material terms of the Notes are summarized as follows: B. Analysi

VI. Financing A. Sources of Funds The tender offer will be funded entirely from two sources: (i) Torchlight's existing cash reserves and (ii) a draw on Torchlight's existing revolving credit facility. Torchlight has confirmed that it has sufficient available funds from these sources to pay the aggregate tender offer consideration, the Convertible Note payoff, and all associated transaction costs, without the need for

VII. Indemnification and Risk Allocation A. Indemnification Framework The Agreement will contain a customary post-closing indemnification framework under which the former shareholders of Ridgeline (acting through a shareholder representative, to be designated) will indemnify Torchlight for losses arising from breaches of representations and warranties, covenants, and certain specified matters. The key parameters of t

VIII. U.S. Federal Income Tax Analysis The following analysis addresses the U.S. federal income tax consequences of the proposed transaction to the principal parties involved. This analysis is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations thereunder, published rulings and administrative pronouncements of the Internal Revenue Service, and judicial decisions, all as in effect

1. Overview of Section 338. Section 338 of the Code provides an elective mechanism by which a purchasing corporation that makes a "qualified stock purchase" ("QSP") of a target may elect to treat the stock purchase as if it were an asset purchase for U.S. federal income tax purposes. A QSP is defined under Section 338(d)(3) as a transaction or series of transactions in which a corporation acquires by purchase, within

2. Section 338(g) Election. A Section 338(g) election may be made unilaterally by the purchasing corporation within a prescribed time period following the acquisition date. If made, the election causes the target (referred to as "old target") to be treated as having sold all of its assets to an unrelated person at fair market value on the acquisition date and then as having repurchased those assets at the same fair m