1016-00001 · Dunmore Energy Holdings · Legal Analysis

liability-exposure-memo.docx DOCUMENT Antitrust

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CALDERWOOD & HARKNESS LLP 1900 K Street NW, Suite 1100 Washington, DC 20006

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Patricia Aldridge, Senior Vice President & General Counsel, Dunmore Energy Holdings Ltd. Malcolm Haverford, Chief Executive Officer, Dunmore Energy Holdings Ltd.

FROM: Howard Bellamy, Calderwood & Harkness LLP

DATE: September 15, 2025

RE: Liability Exposure Assessment — Meridian AG Antitrust Investigation (CID No. AG-ANT-2025-04172) / C&H Matter No. 1016-00001

I. Purpose

This memorandum provides a preliminary assessment of the potential financial and operational exposure faced by Dunmore Energy Holdings Ltd. ("DEH") and its wholly owned subsidiary, Dunmore Fuel Supply, Inc. ("DFS"), in connection with the bid-rigging investigation initiated by the Office of the Attorney General of the State of Meridian, Antitrust Division. The investigation was formally announced to DEH and DFS through the issuance of Civil Investigative Demand No. AG-ANT-2025-04172 (the "CID"), dated August 22, 2025.

This assessment is based on the allegations set forth in the CID, publicly available information concerning the contracts and parties at issue, and our preliminary review of documents collected to date from DEH and DFS custodians. As our team is still in the early stages of document collection and review, the analysis and conclusions set forth herein remain subject to refinement and revision as the factual record develops. We anticipate providing an updated assessment once the initial document review is complete, currently projected for mid-November 2025.

This memorandum has been prepared at the specific request of the General Counsel for the purpose of providing legal advice and strategy recommendations concerning the investigation. It is protected in its entirety by the attorney-client privilege and the work-product doctrine. No portion of this memorandum should be disclosed to any person or entity outside of the individuals named above, and any further dissemination should occur only with prior consultation with this firm regarding the potential implications for privilege.

II. Background

A. The Investigation

On August 22, 2025, the Attorney General of the State of Meridian, the Honorable Carolyn Fisk, acting through the Antitrust Division of the Attorney General's Office, issued CID No. AG-ANT-2025-04172 to DEH and DFS. The Antitrust Division is led by Derek Montague, Senior Assistant Attorney General and Division Chief, and the investigation is being handled by Alicia Brennan, Assistant Attorney General, who serves as lead counsel on the matter.

The CID alleges that during a period spanning approximately January 2021 through December 2024, DFS engaged in a scheme with two competitors — Galloway Petroleum Corp. ("Galloway" or "GPC") and Ridgeline Energy Partners LLC ("Ridgeline" or "REP") — to rig bids on fuel-supply contracts issued by the Meridian State Department of Transportation ("Meridian DOT"). Galloway is a Delaware corporation headquartered at 2255 Commerce Park Drive, Suite 800, Birmingham, Alabama 35244. Ridgeline is a Georgia limited liability company headquartered at 600 Peachtree Industrial Boulevard, Suite 450, Duluth, Georgia 30097. Both entities are named as co-respondents in the CID.

The CID describes the alleged conduct in three principal respects:

(a) Bid Allocation: Agreement among the three competing companies as to which company would submit the lowest bid for particular contract lots in a given fiscal-year procurement cycle, effectively pre-determining the winner of each lot before bids were submitted;

(b) Complementary ("Cover") Bidding: Submission of intentionally high, non-competitive "cover" bids by the companies that were not designated to win a particular lot, thereby creating the appearance of genuine competition while ensuring the pre-selected company would prevail; and

(c) Bid Rotation: Rotation of winning bids across successive contract cycles so that each conspirator received a roughly equal share of the total contract value over time, ensuring that the benefits of the alleged conspiracy were distributed equitably among participants.

The Attorney General's theory is grounded in several categories of evidence identified in the CID. First, the AG references statistical analysis of bidding patterns across multiple contract cycles, which the AG contends reveals patterns inconsistent with independent competitive bidding. Second, the AG references communications obtained from a confidential informant, the identity of whom has not been disclosed but who the AG describes as a person with direct knowledge of the alleged coordination. Third, the AG relies on pricing data obtained from Meridian DOT procurement records, which the AG contends demonstrates pricing anomalies consistent with collusive behavior.

DEH and DFS are named as respondents to the CID. Galloway and Ridgeline are co-respondents. We understand that Galloway has retained Whitfield, Strauss & DeVane LLP to represent it in this matter, with the firm's founding partner, Gregory Whitfield, serving as lead counsel. Ridgeline has retained Archer Colby LLP, with founding partner Diane Colby serving as lead counsel. We have had no substantive discussions with either firm regarding the investigation at this time, pending authorization from the Client to engage in joint-defense discussions, as discussed further in Section VII below.

B. The Respondents

Dunmore Energy Holdings Ltd. ("DEH") is a Cayman Islands exempted limited company. Its operational headquarters are located at 4100 Westchase Boulevard, Suite 1200, Houston, Texas 77042. Its registered office is maintained c/o Harbour Trust Corporate Services Ltd., 71 Fort Street, George Town, Grand Cayman KY1-1102. According to audited financial statements prepared by Alderton & Knox, CPAs, LLP, DEH reported consolidated annual revenue of approximately $2.18 billion for fiscal year 2024. The company employs approximately 3,400 individuals across its various subsidiaries and operating divisions. DEH's Employer Identification Number is 84-3291057.

Dunmore Fuel Supply, Inc. ("DFS") is a Delaware corporation and a wholly owned subsidiary of DEH. DFS is the operating entity that submitted bids on the Meridian DOT fuel-supply contracts at issue in the investigation. DFS's Employer Identification Number is 82-4567193. The key personnel identified in or relevant to the CID's allegations include:

• Terrence "Terry" Kinloch, Vice President, Government Contracts — Mr. Kinloch has overall responsibility for DFS's government-contract bidding activities and has served in this role since 2019.

• Sandra Ochoa, Director of Pricing & Analytics — Ms. Ochoa is responsible for developing and implementing the pricing models used by DFS to formulate its bids on government fuel-supply contracts.

• Nolan Prescott, Regional Sales Manager, Southeast U.S. — Mr. Prescott manages DFS's relationships with governmental customers in the Southeast region, including Meridian DOT, and was the primary point of contact for the Meridian DOT account during the relevant period.

Galloway Petroleum Corp. ("Galloway" or "GPC") is a Delaware corporation with annual revenue of approximately $1.45 billion for fiscal year 2024 and approximately 2,100 employees. The company's Chief Executive Officer is Richard "Rick" Ellerbee. Constance Barlow, Galloway's Vice President of Sales, is specifically named in the CID as a participant in the alleged bid coordination.

Ridgeline Energy Partners LLC ("Ridgeline" or "REP") is a Georgia limited liability company with annual revenue of approximately $680 million for fiscal year 2024 and approximately 850 employees. The company's Managing Partner is Jonas Hartwick. Elaine Pruitt, Ridgeline's Director of Business Development, is specifically named in the CID as a participant in the alleged coordination.

C. The Contracts at Issue

The Meridian DOT fuel-supply contracts are awarded on a fiscal-year basis through a sealed-bid request for proposal ("RFP") process. The contracts cover the supply of diesel fuel and unleaded gasoline for the state's vehicle fleet, which comprises approximately 12,000 vehicles and consumes approximately 38 million gallons of fuel per year. The contracts are divided into five geographic lots, each corresponding to a region of the state. Based on publicly available Meridian DOT procurement data, the lots and their approximate parameters for FY 2023 (which we use as a representative year) are as follows:

The CID identifies fifteen (15) separate contract awards across the three fiscal-year procurement cycles at issue (FY 2022, FY 2023, and FY 2024), representing five lots per cycle. During this period, DFS was awarded Lots B and D in FY 2022 and FY 2024, and Lots A and E in FY 2023. DFS's aggregate awarded contract value over these three fiscal-year cycles totaled approximately $198.6 million. The remaining contract awards during this period were split between Galloway and Ridgeline. This allocation pattern — in which no single bidder consistently won the same lots across successive cycles but each bidder maintained a relatively consistent share of total contract value — forms a central element of the AG's statistical evidence of bid rotation.

III. Statutory Framework

The Attorney General's investigation is grounded in the Meridian Antitrust Act, codified at Meridian Code Annotated § 75-21-1 et seq. The relevant provisions of the statute are summarized below.

Section 75-21-1 sets forth the general prohibition against anticompetitive agreements, providing that "every contract, combination, or conspiracy in restraint of trade or commerce" within the State of Meridian is unlawful. This provision serves as the analogue to Section 1 of the federal Sherman Antitrust Act, 15 U.S.C. § 1, and has been consistently interpreted by Meridian courts to reach the same categories of conduct proscribed by the federal statute.

Section 75-21-3 specifically proscribes bid rigging in connection with public procurement. This provision expressly prohibits agreements among competitors to manipulate the competitive bidding process for public contracts, and it applies both to agreements to allocate winning bids and to the submission of sham or complementary bids designed to create the appearance of competition. Section 75-21-3 provides an independent statutory basis for liability beyond the general prohibition of Section 75-21-1, and it reflects the Meridian legislature's particular concern with protecting the integrity of the state's public procurement process.

The Meridian Antitrust Act closely mirrors the federal Sherman Act in both its substantive provisions and its remedial structure. Meridian courts have historically followed federal precedent in construing the Act's provisions, including the standards for establishing the existence of an agreement, the distinction between per se violations and conduct analyzed under the rule of reason, and the evidentiary standards applicable to inferring conspiracy from circumstantial evidence. Bid rigging is treated as a per se violation under both federal and Meridian law, meaning that once an agreement to rig bids is established, no further analysis of competitive effects or market impact is required to impose liability.

Section 75-21-37 provides for the imposition of civil penalties by the Attorney General, as discussed further in Section IV.A below.

Section 75-21-9 creates a private right of action for treble damages, providing that "any person injured in his business or property by reason of a violation" of the Act may recover three times the actual damages sustained, plus reasonable attorneys' fees and costs of suit. This provision is the analogue to Section 4 of the federal Clayton Act, 15 U.S.C. § 15, and is discussed further in Section IV.B below.

Section 75-21-39 authorizes the Attorney General to issue Civil Investigative Demands when the Attorney General has "reason to believe" that a violation of the Act has occurred or is occurring. The CID power is broadly drafted and permits the AG to compel the production of documents, written answers to interrogatories, and oral testimony. The "reason to believe" standard is a relatively low threshold — it does not require probable cause or a finding of violation, but merely a reasonable basis for suspecting that a violation may have taken place.

IV. Categories of Exposure

A. Civil Penalties (§ 75-21-37)

Under Section 75-21-37 of the Meridian Antitrust Act, the Attorney General is authorized to seek civil penalties of up to $1,000,000 per violation in any action brought to enforce the Act. The statute defines a "violation" broadly to encompass each act or agreement in restraint of trade, which affords the Attorney General substantial discretion in determining the number of violations to allege and, correspondingly, the maximum penalty exposure.

As noted above, the CID identifies fifteen (15) separate contract awards across five geographic lots and three fiscal-year procurement cycles (FY 2022, FY 2023, and FY 2024). If the Attorney General takes the position — as is likely — that each contract award tainted by the alleged bid-rigging scheme constitutes a separate violation, the maximum aggregate penalty exposure would be calculated as follows:

15 violations × $1,000,000 per violation = $15,000,000

We note, however, that in practice, Meridian courts have not imposed civil penalties at the statutory maximum in most comparable antitrust enforcement actions. Our review of reported decisions and publicly available settlement records in Meridian antitrust cases involving bid rigging and related conduct indicates that courts have typically assessed penalties in the range of approximately 30% to 50% of the statutory maximum when the defendant is a first-time offender and the case is resolved through settlement or consent decree. Applying this practical range to the maximum penalty exposure yields a more realistic penalty estimate:

Low end (30%): $15,000,000 × 30% = $4,500,000 High end (50%): $15,000,000 × 50% = $7,500,000

The actual penalty amount in any given case is determined by the court based on range factors, including: (1) the severity and scope of the anticompetitive conduct; (2) the duration of the violation; (3) the degree of harm to consumers and the public procurement process; (4) the respondent's history of compliance or prior violations; (5) the respondent's cooperation with the investigation and willingness to implement remedial measures; (6) the respondent's ability to pay; and (7) the deterrent effect of the penalty. DEH's substantial financial resources and the duration of the alleged conspiracy (approximately four years) weigh toward a higher penalty. However, the absence of any prior antitrust violations by DEH or DFS and any cooperation or remediation efforts that DEH undertakes could serve as mitigating factors.

It is also theoretically possible that the AG could seek to characterize the overarching conspiracy itself as a single continuing violation, which would cap penalties at $1,000,000, or alternatively could attempt to count each individual bid submission (including cover bids) as a separate violation, which could increase the violation count beyond fifteen. At this stage, we believe the most likely approach is the one identified above — treating each tainted contract award as a separate violation.

B. Treble Damages — Follow-On Civil Action (§ 75-21-9)

Section 75-21-9 of the Meridian Antitrust Act provides that "any person injured in his business or property by reason of a violation" of the Act may recover treble the actual damages sustained, together with reasonable attorneys' fees and costs of suit. This provision creates a substantial exposure that is, in our assessment, the single largest financial risk presented by the investigation.

The most likely plaintiff in a follow-on treble-damages action would be the Meridian State Department of Transportation, which, as the purchasing entity, is the party most directly injured by any overcharges resulting from the alleged bid-rigging scheme. It is also possible that the Attorney General could bring a treble-damages claim on behalf of the State as parens patriae under Section 75-21-11 of the Act. In either scenario, the measure of damages would be the same.

In a bid-rigging case, the standard measure of actual damages is the "overcharge" — that is, the difference between the price actually paid by the purchaser under the rigged bids and the price that would have prevailed in a genuinely competitive market absent the conspiracy. Determining the but-for competitive price requires economic analysis and is typically the subject of expert testimony.

Based on publicly available academic research and data from comparable enforcement actions in the fuel-supply sector, overcharges in bid-rigging cases involving fuel supply and related commodities have typically ranged from approximately 8% to 12% of total contract value. Some studies have found overcharges as high as 15% to 20% in cases involving long-running conspiracies in highly concentrated markets, but we use the more conservative 8%–12% range for purposes of this preliminary assessment.

Using the FY 2023 total annual contract value of $125.40 million as a proxy for each fiscal year's contract value (recognizing that actual annual values vary based on fuel prices and volumes), the treble-damages exposure can be estimated as follows:

Low-End Estimate (8% overcharge):

Actual damages: $125.40 million × 3 years × 8% = $30.096 million Treble damages: $30.096 million × 3 = $90.288 million (rounded to $90.29 million)

High-End Estimate (12% overcharge):

Actual damages: $125.40 million × 3 years × 12% = $45.144 million Treble damages: $45.144 million × 3 = $135.432 million (rounded to $135.43 million)

An important note regarding the allocation of damages among co-conspirators: DFS's aggregate awarded contract value over the three relevant fiscal-year cycles was approximately $198.6 million, which represents approximately 52.8% of the estimated total awarded value across all three co-respondents ($198.6 million ÷ $376.2 million). However, this proportional share is largely irrelevant for purposes of assessing DEH's and DFS's maximum exposure, because under Meridian law — consistent with well-established federal antitrust principles — co-conspirators in a bid-rigging case are jointly and severally liable for the full amount of treble damages. This means that Meridian DOT could seek to collect the entire treble-damages award from DFS and DEH alone, without regard to the relative shares of Galloway and Ridgeline, if those co-respondents are unable or unwilling to satisfy a judgment.

In practice, of course, a plaintiff typically seeks recovery from all available defendants, and contribution among co-conspirators may be available in certain circumstances (though the availability of contribution among antitrust co-conspirators is limited under both federal and most state antitrust law). The joint-and-several-liability exposure is nevertheless a critical factor in assessing DEH's overall risk, as it means that the company's maximum treble-damages exposure is the full $90.29 million to $135.43 million range, not merely its proportionate share.

C. Debarment (Meridian Code Ann. § 31-7-211)

Under Meridian Code Annotated § 31-7-211, a finding that a contractor has engaged in bid rigging on a state procurement contract may result in mandatory debarment from all Meridian state procurement for a period of up to five (5) years. Debarment is an administrative remedy imposed by the Meridian State Procurement Review Board and is independent of any civil or criminal penalties. The statute provides that debarment shall be imposed upon any contractor found to have "knowingly engaged in bid rigging, bid rotation, or the submission of complementary bids" in connection with any state contract.

The potential scope of a debarment order is significant. The debarment would apply directly to DFS as the entity that submitted the bids at issue. However, the statute also authorizes the Procurement Review Board to extend the debarment to affiliates and related entities of the debarred contractor if the Board determines that those affiliates are "owned or controlled by, or are under common ownership or control with" the debarred entity. This means that a debarment order could potentially extend to all DEH affiliates that hold or pursue Meridian state contracts, including Dunmore Refining & Logistics LLC and Dunmore Renewables Corp., to the extent those entities are involved in Meridian state procurement.

The revenue at risk from a potential debarment is substantial:

• DFS's Meridian DOT fuel-supply contracts: approximately $66.2 million per year (based on $198.6 million over 3 years).

• DFS's other Meridian state and municipal fuel-supply contracts (including contracts with the Meridian Department of General Services, Meridian State University system, and various municipal fleet-fueling agreements): estimated annual revenue of approximately $23 million.

• Total annual Meridian state revenue at risk: approximately $89.2 million per year.

• Over a maximum five-year debarment period, total revenue at risk: approximately $446 million.

We note that the debarment exposure should be understood as revenue at risk rather than as a direct financial liability comparable to penalties or damages. The actual financial impact of a debarment would depend on the extent to which DFS could redeploy its capacity to other markets and customers. Nevertheless, the loss of approximately $89.2 million in annual Meridian state revenue would represent a significant operational impact, particularly given the competitive dynamics of the government fuel-supply market and the lead time required to develop replacement revenue streams.

Additionally, debarment from Meridian state procurement could trigger collateral consequences in other jurisdictions. A number of states maintain cross-debarment provisions or reciprocal debarment agreements under which a debarment in one state may result in automatic or expedited debarment proceedings in other states. Similarly, federal procurement regulations (FAR 9.406-2) permit discretionary debarment by federal agencies based on a state-level debarment determination, which could put at risk DFS's federal fuel-supply contracts, if any. These cascading effects significantly amplify the overall business risk associated with debarment.

D. Credit Agreement Implications

DEH's $750 million Senior Secured Revolving Credit Agreement, dated March 15, 2023 (the "Credit Agreement"), is maintained between DEH as borrower, Pinnacle National Bank, N.A. as administrative agent, and the lenders party thereto. Pinnacle National Bank is headquartered at 101 Congress Avenue, Austin, Texas 78701; the bank's relationship manager for the DEH account is Craig Underhill, Managing Director.

Section 6.01(h) of the Credit Agreement requires DEH to notify the administrative agent within fifteen (15) business days of becoming aware of any "Litigation Event." The Credit Agreement defines a "Litigation Event" as any governmental investigation, litigation, or proceeding (including any antitrust investigation, regulatory inquiry, or enforcement action) that could reasonably be expected to result in liability to DEH or any of its subsidiaries exceeding the Material Adverse Effect ("MAE") threshold. The MAE threshold is defined in Section 1.01 of the Credit Agreement as $25 million in the aggregate.

Given the exposure ranges described in this memorandum — with aggregate potential direct financial exposure (civil penalties plus treble damages) ranging from approximately $94.79 million to $150.43 million, exclusive of debarment revenue loss — the MAE threshold is clearly exceeded by a substantial margin. The investigation thus constitutes a Litigation Event requiring timely notification to the administrative agent.

DEH became aware of the investigation upon receipt of the CID on August 22, 2025. Under the fifteen-business-day notification requirement, the deadline for transmitting notice to Pinnacle National Bank would have been approximately September 12, 2025.

RECOMMENDATION: If notification has not yet been transmitted, DEH should send the required notice to Craig Underhill at Pinnacle National Bank, N.A. immediately. Any further delay in providing the required notice risks constituting an Event of Default under Section 8.01(d) of the Credit Agreement, which provides that a breach of the notification obligations in Section 6.01 that remains uncured for five (5) business days after written notice thereof constitutes an Event of Default. An Event of Default would entitle the administrative agent and the lenders to accelerate all outstanding obligations under the Credit Agreement and exercise other remedies, including enforcement of security interests over DEH's collateral. The consequences of a default under the Credit Agreement would be catastrophic and must be avoided.

We emphasize that the lender notification must be carefully drafted to satisfy DEH's contractual obligations while (a) preserving the attorney-client privilege and work-product protection over this memorandum and all related privileged communications, and (b) avoiding any statements that could be construed as admissions of wrongdoing or liability. Calderwood & Harkness will prepare a draft notification letter for review by Patricia Aldridge and signature by Deepa Narayan, Chief Financial Officer, who is the designated officer for Credit Agreement communications. We recommend that the notification letter describe the investigation in general terms, identify the CID by number and date, note that the investigation is in its early stages, and state that DEH intends to cooperate appropriately and defend itself vigorously.

We also recommend that DEH's legal and finance teams review the Credit Agreement to determine whether the investigation triggers any additional issues, including: (a) representations-and-warranties "bring-down" issues that could affect the ability to draw on the facility; (b) financial covenant implications, including any covenant requiring maintenance of a minimum credit rating or compliance with specified financial ratios that could be affected by an accrual or reserve for the potential liability; and (c) any cross-default provisions that could be triggered by an Event of Default under the Credit Agreement or by the investigation itself.

E. Reputational and Operational Consequences

Beyond the direct financial exposure quantified above, a finding of bid rigging would carry significant reputational and operational consequences for DEH and its subsidiaries. While these consequences are more difficult to quantify, they are no less important to the company's long-term business prospects and should be factored into the overall strategic calculus.

Cross-Default Provisions. An adverse outcome in the investigation, or a failure to comply with notification obligations under the Credit Agreement, could trigger cross-default provisions in other DEH financing arrangements, including any outstanding bond indentures, term loan agreements, or equipment financing facilities. DEH's finance team should conduct a comprehensive review of all financing documents to identify and address any cross-default risks.

Enhanced Regulatory Scrutiny. A finding of antitrust liability would likely subject DEH and DFS to enhanced compliance monitoring by Meridian state regulators, potentially including the imposition of a compliance monitor or mandatory compliance program as a condition of any settlement or consent decree. Such monitoring imposes both direct costs (fees for the monitor or compliance consultant) and indirect costs (management time and attention diverted to compliance activities).

Competitive Position in Other Markets. A public finding of bid rigging would damage DEH's competitive position in public procurement markets beyond Meridian. Government purchasers in other states, as well as federal agencies, routinely consider a bidder's integrity and compliance record in making contract award decisions. Even in the absence of formal debarment, a bid-rigging finding could effectively disqualify DEH and DFS from competitive consideration for government contracts in other jurisdictions.

Risk of Parallel Investigations. An investigation by one state attorney general may prompt similar inquiries by other state attorneys general or by the U.S. Department of Justice Antitrust Division. If the DOJ's Antitrust Division opens a parallel federal investigation, the consequences could be significantly more severe. Federal criminal bid-rigging under the Sherman Act, 15 U.S.C. § 1, carries penalties of up to $100 million for corporations and, critically, individual criminal liability for responsible executives, including imprisonment for up to ten (10) years and individual fines of up to $1 million. The prospect of federal criminal exposure introduces an entirely different order of magnitude of risk and would require a fundamentally different strategic approach, including immediate consideration of whether to seek entry into the DOJ's leniency program. We will continue to monitor for any indications of federal interest in this matter.

Talent Retention and Recruitment. A high-profile antitrust investigation, particularly one involving allegations of bid rigging on government contracts, could adversely impact DEH's ability to attract and retain qualified personnel, particularly within the government-contracts division. Employees in key positions may seek alternative employment to distance themselves from the investigation, and prospective hires may be reluctant to join a company under active antitrust scrutiny.

Auditor Relationship. The investigation may affect DEH's relationship with its independent auditors, Alderton & Knox, CPAs, LLP (engagement partner: Yolanda Matsuda). Depending on the progress and outcome of the investigation, Alderton & Knox may require enhanced disclosures in DEH's financial statements regarding the investigation and the potential liability, including the establishment of a litigation reserve. In more severe scenarios, the auditors could qualify their opinion on DEH's financial statements if they conclude that the potential liability creates a material uncertainty regarding the company's financial position. A qualified audit opinion could, in turn, trigger additional consequences under the Credit Agreement and could adversely affect DEH's access to capital markets.

V. Exposure Summary Table

The following table summarizes the categories and ranges of potential direct financial exposure identified in this memorandum:

These figures do not include: (a) litigation costs, including attorneys' fees, expert witness fees, forensic consulting costs, and e-discovery vendor fees, which could be substantial given the scope of the document review and the complexity of the economic analysis required; (b) potential federal follow-on exposure, which could include criminal fines, individual criminal liability, and additional treble-damages claims by federal purchasing agencies; (c) treble-damages claims by purchasers other than Meridian DOT, if the investigation reveals bid-rigging activity extending beyond the Meridian DOT contracts; or (d) indirect costs such as reputational harm, lost business opportunities, increased cost of capital, and management distraction.

VI. Preliminary Defense Assessment

Based on our preliminary review of the CID and the limited documentation we have reviewed to date, we have identified the following potential defense theories and strategic considerations. We emphasize that this assessment is preliminary and will be refined as the document review progresses and as we develop a more complete understanding of the factual record.

A. Independent Pricing

A core defense theory will be that DFS's bid pricing was the product of independent competitive analysis, not the result of any agreement or coordination with Galloway or Ridgeline. DFS maintains a proprietary pricing tool known as the FuelPricer database, which incorporates range inputs — including commodity spot and futures prices, regional logistics costs, storage and distribution margins, historical demand data, and competitive market intelligence — to generate bid pricing recommendations through a structured cost-plus methodology.

If the documentary record supports the conclusion that DFS's pricing personnel relied on the FuelPricer database and internal pricing models to develop their bids for the Meridian DOT contracts, this evidence would tend to rebut the inference that bid prices were the product of competitor coordination. Sandra Ochoa, DFS's Director of Pricing & Analytics, is the custodian of the FuelPricer system and the architect of the pricing methodology. If credible, her testimony regarding the independent derivation of DFS's bid prices could be a significant element of the defense.

Our immediate priority in the document review is to identify and preserve all records relating to DFS's bid-preparation process, including FuelPricer outputs, internal pricing memoranda, bid-approval workflows, and any communications between pricing personnel and management regarding bid strategy. We will also seek to confirm that the pricing methodology was consistently applied across the relevant contract cycles and was not overridden or modified in a manner suggestive of external coordination.

B. Legitimate Business Contacts

The AG's theory likely relies, at least in part, on evidence of communications between DFS personnel and their counterparts at Galloway and Ridgeline. To the extent such communications can be documented and verified, DEH will need to demonstrate that they occurred in the context of legitimate business relationships and did not involve the exchange of competitively sensitive information such as bid prices, lot preferences, or bidding strategy.

There are several categories of legitimate business interaction among these companies that could explain documented contacts:

• Pipeline-capacity sharing arrangements: DFS, Galloway, and Ridgeline participate in shared pipeline-capacity allocation agreements for fuel transportation in the Southeast U.S. These arrangements are common in the industry and are documented through formal capacity-sharing contracts.

• Industry-association governance: Personnel from all three companies serve on committees of the Southeastern Fuel Distributors Association ("SFDA") and participate in SFDA meetings, conferences, and working groups. These interactions are routine and publicly documented.

• Supply-chain logistics coordination: In certain geographic areas, the three companies coordinate on logistics matters such as terminal access scheduling, tanker truck routing, and emergency supply arrangements. These interactions are driven by operational necessity and do not involve the exchange of pricing or bidding information.

We will need to develop a comprehensive inventory of the legitimate business reasons for any contacts between DFS personnel and their counterparts at Galloway and Ridgeline during the relevant period. This inventory will be essential both for responding to the CID's document requests and for establishing an innocent explanation for communications that the AG may seek to characterize as evidence of coordination.

C. Statistical Flaws in the AG's Evidence

The AG's theory appears to rely significantly on statistical analysis of bidding patterns across the relevant contract cycles. While we have not yet had the opportunity to review the AG's underlying statistical analysis in detail, we note that statistical evidence of bid rigging is inherently subject to methodological challenge. In particular, patterns that superficially appear consistent with bid rotation or complementary bidding may also be consistent with independent competitive behavior in a concentrated market with relatively homogeneous cost structures.

We strongly recommend that DEH retain a forensic economist to conduct an independent analysis of the bidding data and to evaluate the statistical soundness of the AG's evidence. For this engagement, we recommend Dr. Lawrence Voss of Kensington Economic Advisors LLC, headquartered in Boston, Massachusetts. Dr. Voss is a leading expert in antitrust damages quantification and statistical analysis of bidding markets, with particular expertise in the energy sector. He has testified as an expert in numerous federal and state antitrust proceedings and is well-regarded by courts and regulators.

Dr. Voss's analysis would focus on several key questions:

• Whether the observed bidding patterns (including bid-win rotation and pricing margins) are statistically distinguishable from the patterns that would be expected in a legitimately competitive but structurally concentrated market;

• Whether the AG's statistical methodology properly controls for market-specific variables that could independently explain the observed patterns, including commodity-price volatility, regional cost differentials, capacity constraints, and seasonal demand fluctuations;

• Whether the bid-pricing data is consistent with independently derived cost-plus pricing methodologies, as would be predicted by the independent-pricing defense; and

• Whether alternative econometric models and statistical tests yield results inconsistent with the AG's inference of coordination.

If Dr. Voss's analysis demonstrates that the observed bidding patterns are consistent with oligopolistic competition rather than collusion, this evidence could significantly undermine the AG's case.

D. No Agreement / Conscious Parallelism Defense

A fundamental element of any antitrust claim under both federal and Meridian law is the existence of an agreement among competitors. Parallel pricing behavior in a concentrated market — where a small number of competitors independently arrive at similar prices based on similar cost inputs and market conditions — is not, by itself, sufficient to establish the existence of an agreement. This principle, known as the "conscious parallelism" doctrine, has been established by the U.S. Supreme Court in decisions including Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537 (1954), and Thackeray Corporation v. Twombly, 550 U.S. 544 (2007), and has been adopted by Meridian courts.

In this case, the Meridian DOT fuel-supply market is served by only three primary bidders (DFS, Galloway, and Ridgeline), making it a classic oligopoly. In such a market, a degree of pricing parallelism and bid-pattern regularity is expected even in the absence of any agreement, because each competitor is aware of and rationally responds to the likely pricing behavior of the others. DEH will argue that any observed similarities in bidding patterns and pricing are the product of rational oligopolistic interdependence, not a conspiracy.

The critical legal question is whether the AG can establish the existence of "plus factors" — evidence that goes beyond mere parallel conduct and tends to exclude the possibility of independent action. Under Meridian law, following federal precedent, the AG must demonstrate that the evidence, taken as a whole, tends to support the inference of a conspiracy and is inconsistent with an equally plausible inference of independent competitive behavior. Common plus factors include: (a) evidence of direct communication among competitors concerning prices or bid strategies; (b) evidence of acts against individual self-interest that are explicable only by the existence of an agreement; (c) a sudden change in market behavior not explained by market conditions; and (d) evidence from a cooperating witness or documentary evidence of an agreement.

The strength of the conscious-parallelism defense will depend substantially on the nature and quality of the AG's "plus factor" evidence — particularly the communications obtained from the confidential informant and any documentary evidence of direct competitor contact regarding bids. This is the single most important factual question that our document review must address.

E. Preliminary Assessment of Risk Level

We offer the following candid assessment of the overall risk level at this preliminary stage.

The defense has viable theories, including the independent-pricing defense and the conscious-parallelism defense, that could substantially weaken the AG's case if the factual record supports them. The AG's reliance on statistical analysis is inherently subject to challenge, and there is a reasonable prospect that a well-credentialed expert economist could offer a competing interpretation of the bidding data.

However, the defense faces significant headwinds. First, the AG's reference to a confidential informant suggests the existence of insider testimony — potentially from a cooperating individual at Galloway or Ridgeline — who may provide direct evidence of competitor communications concerning bid prices, lot allocation, or bid-rotation strategies. If such testimony exists and is credible, it would constitute a powerful "plus factor" that could be difficult to overcome through statistical or economic analysis alone. Second, if the AG possesses specific documentary evidence of competitor communications — emails, text messages, meeting notes, or other records reflecting discussions of bid prices or contract allocation — such evidence would directly undermine the independent-pricing and conscious-parallelism defenses.

The strength of the AG's case, and correspondingly the severity of DEH's exposure, will become significantly clearer as our document review progresses. In particular, the review of communications involving Terry Kinloch, Sandra Ochoa, and Nolan Prescott during the relevant period will be critical in determining whether there are documents that could be characterized as evidence of coordination.

Our overall risk assessment at this preliminary stage is moderate to high, pending the completion of the document review and further factual development. We will refine this assessment as additional information becomes available.

VII. Next Steps

Based on the analysis set forth in this memorandum, we recommend the following immediate actions:

1. Lender Notification. DEH should transmit the required notification to Craig Underhill, Managing Director, Pinnacle National Bank, N.A., immediately. Calderwood & Harkness will prepare a draft notification letter for review by Patricia Aldridge and signature by Deepa Narayan, CFO. Given the urgency of this matter and the possibility that the contractual notification deadline has already passed, we recommend a target transmittal date of September 15, 2025 — i.e., today's date. If logistical constraints prevent same-day transmittal, the notification should be sent no later than September 16, 2025.

2. Document Collection and Preservation. DEH and DFS should continue the document collection and preservation activities initiated pursuant to the litigation-hold memorandum issued by Calderwood & Harkness on September 3, 2025. Forensic imaging of the email accounts, hard drives, and mobile devices of the key custodians (Kinloch, Ochoa, and Prescott) is scheduled to be performed by Brindoval Analytics LLC, with project manager Daniel Furrow leading the engagement. Forensic imaging is scheduled to commence on September 19, 2025. We will coordinate with Brindoval to ensure that the forensic collection is completed promptly and that the collected data is loaded into a document-review platform for attorney review.

3. Forensic Economist Engagement. We recommend that DEH authorize the engagement of Dr. Lawrence Voss of Kensington Economic Advisors LLC to serve as a consulting expert on the statistical and economic aspects of the investigation. Dr. Voss's initial scope of work would include a review of the publicly available bidding data, a preliminary assessment of the AG's statistical theory, and the development of an alternative econometric analysis of the bidding patterns. We will circulate a proposed engagement letter and budget for Dr. Voss's review.

4. Joint-Defense Coordination. With the Client's prior authorization, we recommend exploring the possibility of entering into a joint-defense agreement with co-respondents' counsel — Whitfield, Strauss & DeVane LLP (Gregory Whitfield, lead partner) for Galloway and Archer Colby LLP (Diane Colby, lead partner) for Ridgeline. A joint-defense arrangement could facilitate the sharing of factual and legal analysis, reduce duplicative work, and strengthen the collective negotiating position of all respondents vis-à-vis the Attorney General. However, a joint-defense arrangement also carries risks, including the risk that a co-respondent may later decide to cooperate with the AG and share joint-defense communications with the government. We will provide a separate memorandum analyzing the benefits and risks of joint-defense coordination before any discussions with co-respondents' counsel are initiated.

5. Individual Liability Assessment. We recommend assessing whether the investigation may implicate individual liability for any current or former DEH or DFS executives, particularly Terry Kinloch, Sandra Ochoa, and Nolan Prescott. If there is a reasonable prospect that any of these individuals could face personal civil or criminal liability, they should be advised of their right to retain separate counsel, and DEH should consider whether to advance their legal fees pursuant to DEH's corporate indemnification provisions and D&O insurance policies. Separate counsel should be retained for any individual whose interests may diverge from those of the company.

6. Insurance Coverage Evaluation. DEH's legal and risk-management teams, in consultation with Calderwood & Harkness, should review DEH's directors-and-officers ("D&O") liability insurance policies, general liability insurance policies, and any specialized professional-liability or government-contracts insurance coverage to determine whether any of these policies provide coverage for the costs of defending the antitrust investigation or for any resulting civil antitrust liability. Timely notice to the applicable insurers should be provided as required by the policy terms. We note that many D&O and general liability policies contain exclusions for antitrust violations, but the scope and applicability of such exclusions vary and should be analyzed on a policy-specific basis.

7. Federal Follow-On Monitoring. We will monitor for any indications that the U.S. Department of Justice Antitrust Division, other state attorneys general, or federal agencies (such as the U.S. Department of Transportation or the General Services Administration) may be initiating parallel investigations or enforcement actions. If there are indications of federal interest, the strategic posture of the defense may need to shift significantly, including consideration of whether to seek entry into the DOJ's Antitrust Division leniency program.

8. Follow-Up Meeting. We recommend scheduling a follow-up meeting with Patricia Aldridge and Malcolm Haverford at the earliest convenient date to discuss this assessment and to receive strategic direction from the Client regarding the issues identified herein. We suggest a meeting during the week of September 22, 2025, either in person at DEH's Houston headquarters or by secure videoconference.

VIII. Conclusion

The Meridian Attorney General's bid-rigging investigation presents substantial financial, operational, and reputational risks to DEH and DFS. Total direct financial exposure from civil penalties and treble damages ranges from approximately $94.79 million to $150.43 million, with an additional $446 million in revenue at risk from potential debarment over a five-year period. The risk of parallel federal or multi-state investigations further amplifies the company's overall exposure. Prompt action on the lender notification, document preservation, and the other steps outlined above is essential to protect the company's interests and to position the defense as effectively as possible at this early stage.

We remain available to discuss this memorandum and the recommended next steps at your convenience.

Respectfully submitted,