ESCROW AGREEMENT FOR STIPULATED PENALTY DEPOSITS
Dated as of February 17, 2025
among
TORCHLIGHT MINING CORP. (as Depositor)
THE UNITED STATES OF AMERICA, acting through the U.S. Department of Justice, Environment and Natural Resources Division, Environmental Enforcement Section (as the Government)
and
LARCHFIELD TRUST COMPANY, N.A. (as Escrow Agent)
In connection with Civil Action No. 9:24-cv-00087-DWM United States of America and State of Montana v. Torchlight Mining Corp. et al. U.S. District Court for the District of Montana, Missoula Division Before the Honorable Donald W. Molloy, United States District Judge
Consent Decree lodged February 19, 2025
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This ESCROW AGREEMENT FOR STIPULATED PENALTY DEPOSITS (this "Agreement") is entered into as of February 17, 2025 (the "Execution Date"), by and among:
(1) TORCHLIGHT MINING CORP., a corporation incorporated under the Canada Business Corporations Act, with its principal U.S. office at 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601, acting on behalf of itself and jointly and severally with its U.S. subsidiaries named herein (the "Depositor" or "TMC");
(2) THE UNITED STATES OF AMERICA, acting through the U.S. Department of Justice, Environment and Natural Resources Division, Environmental Enforcement Section (the "United States" or the "Government"); and
(3) LARCHFIELD TRUST COMPANY, N.A., a national banking association organized under the laws of the United States, with its principal office at 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202 (the "Escrow Agent").
The Depositor, the Government, and the Escrow Agent are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. The Litigation and Consent Decree. On January 18, 2024, the United States, together with the States of Montana, Nevada, and West Virginia, filed a complaint in the United States District Court for the District of Montana, Missoula Division, captioned United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM (the "Civil Action"), against: (i) Torchlight Mining Corp., a corporation incorporated under the Canada Business Corporations Act; (ii) Torchlight Mining (U.S.) Inc., a Delaware corporation, EIN 83-2047156; (iii) Torchlight Specialty Chemicals, Inc., a Delaware corporation, EIN 47-3819204; (iv) Ridgecrest Mine Holdings, LLC, a Montana limited liability company, Montana Secretary of State ID E1042738; and (v) Bonanza Creek Mining, LLC, a Nevada limited liability company, Nevada Secretary of State Entity No. E0518294731 (collectively, the "Defendants"). The complaint alleges violations of: Section 301 of the Clean Water Act, 33 U.S.C. § 1311; Sections 3004 and 3005 of the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6924 and 6925; and Section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9607, at four facilities operated or formerly operated by the Defendants: (a) the Ridgecrest Copper-Molybdenum Mine, located near Drummond, Granite County, Montana (the "Ridgecrest Site"); (b) the Gallatin Chemical Works, located in Belgrade, Gallatin County, Montana (the "Gallatin Site"); (c) the Bonanza Creek Gold Mine, located in Lander County, Nevada (the "Bonanza Creek Site"); and (d) the Kanawha Bend Chemical Plant, located in Institute, Kanawha County, West Virginia (the "Kanawha Bend Site" and, together with the Ridgecrest Site, Gallatin Site, and Bonanza Creek Site, each a "Site" and collectively, the "Sites"). The parties to the Civil Action have negotiated and executed a Consent Decree dated February 19, 2025 (the "Consent Decree"), which is being lodged with the Court for a public comment period of thirty (30) days in accordance with 28 C.F.R. § 50.7, with anticipated entry by the Court on or about May 15, 2025, and an Effective Date of June 14, 2025 (thirty (30) days following entry, pursuant to Section IV of the Consent Decree).
B. Stipulated Penalty Provisions. Section XII of the Consent Decree provides for the assessment and payment of stipulated penalties for violations of its terms at the following rates: one thousand five hundred dollars ($1,500) per day per violation for each of the first thirty (30) days of noncompliance; three thousand dollars ($3,000) per day per violation for each day of noncompliance from the thirty-first (31st) day through the sixtieth (60th) day; and five thousand five hundred dollars ($5,500) per day per violation for each day of noncompliance thereafter. The Consent Decree further requires the Depositor to establish and maintain an escrow account for the deposit of stipulated penalty amounts as and when demanded by the Government, to ensure the availability of funds for prompt satisfaction of stipulated penalty obligations and to provide security during the pendency of any dispute resolution proceedings relating thereto.
C. Appointment of Escrow Agent. Larchfield Trust Company, N.A., has been selected by the Depositor and approved by the Government to serve as Escrow Agent for the stipulated penalty deposits required under the Consent Decree. Larchfield Trust Company, N.A. also serves, in a separate capacity, as trustee of the Remediation Trust Fund established under that certain Trust Agreement No. LTC-REM-2025-1177, dated February 17, 2025 (the "Remediation Trust Agreement"), between Torchlight Mining Corp. and Larchfield Trust Company, N.A. as trustee. The Remediation Trust Agreement is a separate and distinct arrangement from this Escrow Agreement, and the obligations and funds arising under each shall be maintained independently. David Henshaw, Trust Officer of Larchfield Trust Company, N.A., shall serve as the primary trust officer with administrative responsibility for this escrow arrangement.
D. Purpose. The Parties desire to establish the procedures for the deposit, holding, investment, and disbursement of stipulated penalty funds as required by the Consent Decree, and the Escrow Agent is willing to accept appointment and to perform the duties set forth herein, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Business Day" means any day other than a Saturday, Sunday, or any day on which nationally chartered banks in the United States are authorized or required by law or executive order to be closed (a "federal banking holiday").
"Consent Decree" means the Consent Decree entered (or to be entered) in Civil Action No. 9:24-cv-00087-DWM, United States of America and State of Montana v. Torchlight Mining Corp. et al., in the United States District Court for the District of Montana, Missoula Division, as the same may be amended, modified, or supplemented from time to time in accordance with its terms.
"Court" means the United States District Court for the District of Montana, Missoula Division, or any successor court having jurisdiction over the Civil Action.
"Demand Notice" means a written notice from the Government to the Depositor and the Escrow Agent demanding the deposit of stipulated penalties into the Escrow Account, substantially in the form attached hereto as Exhibit B.
"Deposit Amount" means the amount of stipulated penalties specified in a Demand Notice or a Joint Instruction to be deposited into the Escrow Account.
"Depositor" means Torchlight Mining Corp. and, jointly and severally, each of its U.S. subsidiaries named as defendants in the Consent Decree, namely: Torchlight Mining (U.S.) Inc., a Delaware corporation (EIN 83-2047156); Torchlight Specialty Chemicals, Inc., a Delaware corporation (EIN 47-3819204); Ridgecrest Mine Holdings, LLC, a Montana limited liability company (Montana Secretary of State ID E1042738); and Bonanza Creek Mining, LLC, a Nevada limited liability company (Nevada Secretary of State Entity No. E0518294731).
"Disbursement Instruction" means a Joint Instruction or a Court Order directing the Escrow Agent to disburse funds from the Escrow Account, substantially in the form attached hereto as Exhibit C (in the case of a Joint Instruction).
"Effective Date" means the Effective Date of the Consent Decree as defined therein, which is anticipated to be June 14, 2025.
"EPA" means the United States Environmental Protection Agency.
"Escrow Account" means the segregated interest-bearing account established and maintained by the Escrow Agent pursuant to Article II of this Agreement.
"Escrow Agent" means Larchfield Trust Company, N.A., in its capacity as escrow agent hereunder, and any successor escrow agent appointed in accordance with this Agreement.
"Escrow Funds" means all amounts deposited in the Escrow Account from time to time, together with all accrued interest and investment earnings thereon, less any amounts disbursed from the Escrow Account in accordance with this Agreement.
"Government" means the United States of America, acting through the U.S. Department of Justice, Environment and Natural Resources Division, Environmental Enforcement Section, and its authorized representatives.
"Joint Instruction" means a written instruction signed by both the Depositor (or its authorized representative) and the Government (or its authorized representative), directing the Escrow Agent to take specified action with respect to the Escrow Funds, substantially in the form attached hereto as Exhibit C.
"Stipulated Penalties" means the penalties assessed pursuant to the stipulated penalty provisions set forth in Section XII of the Consent Decree, at the rates specified therein.
All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to them in the Consent Decree. In the event of a conflict between a definition set forth in this Agreement and a definition set forth in the Consent Decree, the definition in the Consent Decree shall control.
Section 1.2 — Construction
The following rules of construction shall apply to this Agreement:
(a) The headings and titles of Articles and Sections in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of any provision hereof.
(b) References to any federal or state statute or regulation shall be deemed to include all amendments, successor statutes, and successor regulations thereto.
(c) The term "including" (and its grammatical variations) means "including, without limitation," and shall not be construed to limit any general statement to the specific or similar items or matters immediately following it.
(d) References to "days" shall mean calendar days unless expressly stated to be "Business Days."
(e) References to "writing" or "written" shall include electronic communications (including email) to the extent permitted by this Agreement.
(f) The singular shall include the plural and vice versa, and the use of any gender shall include all genders, in each case as the context may require.
ARTICLE II — ESTABLISHMENT OF ESCROW ACCOUNT
Section 2.1 — Opening of Escrow Account
Within five (5) Business Days following the Effective Date of the Consent Decree, the Escrow Agent shall establish and maintain a segregated escrow account at Larchfield Trust Company, N.A., which shall be titled:
"Torchlight Mining Corp. — Stipulated Penalty Escrow Account, Civil Action No. 9:24-cv-00087-DWM"
The Escrow Account shall be an interest-bearing account, and the Escrow Agent shall invest the Escrow Funds in accordance with Article IV of this Agreement. Upon the opening of the Escrow Account, the Escrow Agent shall promptly provide written confirmation of such opening, including the account number, to both the Depositor and the Government at the addresses specified in Article X. The Escrow Agent shall also provide the wire transfer instructions for the Escrow Account as set forth in Exhibit D hereto, as may be updated from time to time by written notice from the Escrow Agent to the other Parties.
Section 2.2 — Segregation of Funds
The Escrow Funds shall at all times be held separate and apart from all other funds and assets of the Escrow Agent, the Depositor, the Government, or any other person or entity. Without limiting the foregoing:
(a) The Escrow Funds shall not be commingled with any other funds held by the Escrow Agent, whether in its individual capacity or in any fiduciary capacity, including, without limitation, the funds held under the Remediation Trust Agreement (Trust No. LTC-REM-2025-1177) or any other account maintained by Larchfield Trust Company, N.A.
(b) The Escrow Funds are not assets of the Depositor and shall not be subject to claims of the Depositor's general creditors, except as may be provided herein, by the Consent Decree, or by an order of the Court. The Depositor's interest in the Escrow Funds shall be limited to the right to receive disbursement of Escrow Funds in accordance with the terms of this Agreement.
(c) The Escrow Agent shall maintain books and records for the Escrow Account that are separate from its books and records for all other accounts and trusts administered by the Escrow Agent.
Section 2.3 — Tax Identification
For all tax reporting purposes in connection with the Escrow Account, including the filing of Internal Revenue Service Forms 1099, the Escrow Agent shall use the employer identification number of Torchlight Mining (U.S.) Inc. (EIN 83-2047156), unless the Government directs otherwise in writing. The Depositor shall be responsible for all federal, state, and local tax obligations arising from interest and investment earnings credited to the Escrow Funds, and the Depositor shall timely pay all such taxes. The Escrow Agent shall have no responsibility for the calculation or payment of any taxes relating to the Escrow Funds and shall file such tax information returns as may be required by applicable law using the information provided by the Depositor.
ARTICLE III — DEPOSITS
Section 3.1 — Deposits Upon Demand
Upon receipt of a Demand Notice from the Government, the Depositor shall deposit the Deposit Amount specified therein into the Escrow Account within ten (10) Business Days following the date of such Demand Notice. Each Demand Notice shall specify:
(a) the nature of the violation or violations giving rise to the stipulated penalty assessment;
(b) the applicable stipulated penalty rate (one thousand five hundred dollars ($1,500) per day per violation, three thousand dollars ($3,000) per day per violation, or five thousand five hundred dollars ($5,500) per day per violation, as applicable under Section XII of the Consent Decree);
(c) the period of noncompliance for which stipulated penalties are being assessed, including the beginning and ending dates;
(d) the total Deposit Amount demanded; and
(e) the Site or Sites to which the violation or violations relate (i.e., Ridgecrest, Gallatin, Bonanza Creek, and/or Kanawha Bend).
The Escrow Agent shall have no duty or obligation to verify the accuracy or validity of any Demand Notice or to determine whether a violation has in fact occurred. The Escrow Agent's sole obligation upon receipt of a Demand Notice shall be to receive and hold the Deposit Amount in the Escrow Account upon its deposit by the Depositor.
Section 3.2 — Deposits Pending Dispute Resolution
If the Depositor contests the Government's assessment of stipulated penalties as set forth in a Demand Notice, the Depositor shall nonetheless deposit the full Deposit Amount specified in the Demand Notice into the Escrow Account within ten (10) Business Days following the date of such Demand Notice, pending resolution of the dispute through the dispute resolution mechanism set forth in the Consent Decree. The dispute resolution mechanism under the Consent Decree provides for: (i) a period of thirty (30) days for informal negotiation between the Depositor and the Government; (ii) if informal negotiation does not resolve the dispute, a formal decision by EPA within thirty (30) days following the close of the informal negotiation period; and (iii) if the Depositor disagrees with EPA's formal decision, judicial review by the Court, with a petition for judicial review to be filed within thirty (30) days following receipt of EPA's formal decision.
The deposit of the contested Deposit Amount into the Escrow Account shall not constitute an admission of liability by the Depositor or a waiver of the Depositor's right to contest the Government's assessment of stipulated penalties through the dispute resolution process. The Depositor shall provide the Escrow Agent with written notice contemporaneously with any contested deposit, identifying the deposit as contested and referencing the applicable Demand Notice. The Escrow Agent shall maintain a record of all contested deposits as a separate line item in its account records, pending resolution of the dispute.
Section 3.3 — Method of Deposit
All deposits into the Escrow Account shall be made by wire transfer of immediately available United States dollar funds to the Escrow Account, using the wire transfer instructions set forth in Exhibit D hereto or as otherwise communicated by the Escrow Agent in writing from time to time. The Depositor shall include in the wire transfer reference line the following information: "TMC Stipulated Penalty Escrow — Civil Action No. 9:24-cv-00087-DWM — [Demand Notice Date]." No deposits shall be made by check, draft, or other instrument unless agreed to in advance in writing by the Escrow Agent.
Section 3.4 — Confirmation of Deposits
The Escrow Agent shall confirm receipt of each deposit into the Escrow Account in writing (which may include electronic communication via email) to both the Depositor and the Government within two (2) Business Days following receipt of such deposit. Each confirmation shall include: (a) the date of receipt of the deposit; (b) the amount received; and (c) the running balance of the Escrow Funds as of the date of the confirmation, including a breakdown of principal deposits and accrued investment earnings. The Escrow Agent shall additionally provide monthly account statements to the Depositor and the Government, delivered on or before the tenth (10th) Business Day following the end of each calendar month, reflecting all deposits, disbursements, investment transactions, and earnings for such month.
ARTICLE IV — INVESTMENT OF ESCROW FUNDS
Section 4.1 — Permitted Investments
The Escrow Funds shall be invested solely in the following categories of investments (collectively, "Permitted Investments"):
(a) direct obligations of the United States of America (including United States Treasury bills, notes, and bonds);
(b) obligations the principal and interest of which are unconditionally guaranteed by the United States of America;
(c) certificates of deposit issued by a nationally chartered bank with total assets in excess of ten billion dollars ($10,000,000,000), provided that the aggregate amount of certificates of deposit issued by any single institution (other than Larchfield Trust Company, N.A.) shall not exceed the amount insured by the Federal Deposit Insurance Corporation without the prior written consent of both the Depositor and the Government;
(d) money market funds that invest exclusively in the obligations described in clauses (a) and (b) above, including, without limitation, money market funds managed or offered by Larchfield Trust Company, N.A. or its affiliates; or
(e) such other investments as may be jointly agreed in writing by the Depositor and the Government.
Investment maturities of Permitted Investments shall not exceed ninety (90) days without the prior written consent of both the Depositor and the Government. The Escrow Agent shall liquidate any investment in a timely manner to ensure the availability of Escrow Funds for disbursement in accordance with Article V without penalty or loss of principal to the extent commercially practicable.
Section 4.2 — Investment Direction
In the absence of written investment instructions jointly provided by the Depositor and the Government, the Escrow Agent shall invest the Escrow Funds in a government money market fund that qualifies as a Permitted Investment under Section 4.1(d) above. The Depositor and the Government acknowledge that the Escrow Agent or its affiliates may receive fees or other compensation in connection with money market funds or other investments in which Escrow Funds are invested, and the Parties hereby consent to such arrangements. The Escrow Agent shall not be liable for any loss of principal or interest resulting from investments made in accordance with this Article IV, including any loss resulting from market fluctuations, changes in interest rates, or the default of any issuer of Permitted Investments, provided that such investments were made in compliance with this Article IV.
Section 4.3 — Earnings
All interest and investment earnings accruing on the Escrow Funds shall be credited to and become part of the Escrow Funds. Such earnings shall be reinvested in Permitted Investments in accordance with Section 4.1 and Section 4.2 above. Upon the disbursement of Escrow Funds, the allocation of earnings as between the Government and the Depositor shall be determined in accordance with the applicable Disbursement Instruction or Court Order. In the absence of specific direction regarding the allocation of earnings, earnings shall be disbursed on a pro rata basis in proportion to the principal amounts being disbursed to each recipient.
ARTICLE V — DISBURSEMENTS
Section 5.1 — Disbursement to the United States
Upon receipt of a Joint Instruction or a final, non-appealable order of the Court (a "Court Order") directing payment of Escrow Funds to the United States, the Escrow Agent shall disburse the amount specified therein from the Escrow Account to the United States by wire transfer of immediately available funds to the account designated by the U.S. Department of Justice in the Joint Instruction or Court Order. Such disbursement shall be effected within five (5) Business Days following the Escrow Agent's receipt of the Joint Instruction or Court Order, as applicable. The wire transfer instructions for the DOJ/EPA stipulated penalty receipt account shall be as set forth in Exhibit D hereto, or as otherwise specified in the applicable Joint Instruction or Court Order. The Escrow Agent shall provide written confirmation of each such disbursement to both the Depositor and the Government within two (2) Business Days following the date of disbursement.
Section 5.2 — Disbursement to the Depositor (Return of Contested Amounts)
If the dispute resolution process under the Consent Decree results in a final determination (whether by agreement of the Depositor and the Government, by formal EPA decision not subject to further review, or by Court Order) that the Depositor does not owe all or a portion of a contested stipulated penalty amount previously deposited into the Escrow Account, the Escrow Agent shall disburse the applicable amount, together with a pro rata share of accrued investment earnings attributable to such amount (calculated from the date of deposit through the date of disbursement), to the Depositor upon receipt of a Joint Instruction or Court Order directing such disbursement. Such disbursement shall be made by wire transfer of immediately available funds to an account designated in writing by the Depositor, using the wire transfer instructions set forth in Exhibit D hereto or as otherwise specified by the Depositor. Disbursement to the Depositor shall be effected within five (5) Business Days following the Escrow Agent's receipt of the applicable Joint Instruction or Court Order.
Section 5.3 — Partial Disbursements
Where a dispute is resolved as to only a portion of the Deposit Amount associated with a particular Demand Notice, the Escrow Agent shall disburse the resolved portion in accordance with the Joint Instruction or Court Order directing such disbursement (whether to the Government or to the Depositor, as applicable), and the remainder of the contested Deposit Amount shall continue to be held in the Escrow Account pending further resolution. The Escrow Agent shall adjust its records to reflect the partial disbursement and the remaining balance attributable to the unresolved portion. The Escrow Agent shall have no obligation to determine the merits of any dispute or to allocate funds between resolved and unresolved amounts except as expressly directed in the Joint Instruction or Court Order.
Section 5.4 — No Disbursement Without Proper Authorization
The Escrow Agent shall make no disbursement from the Escrow Account except upon receipt of a Joint Instruction or a Court Order in accordance with this Agreement. The Escrow Agent shall have no obligation or authority to disburse Escrow Funds based solely on a unilateral instruction from either the Depositor or the Government. In the event of conflicting instructions from the Depositor and the Government, or in the event the Escrow Agent receives instructions that are ambiguous or that the Escrow Agent in good faith believes may expose it to liability, the Escrow Agent may, in its sole discretion, take either or both of the following actions:
(a) refrain from taking any action until the Escrow Agent receives a Joint Instruction or Court Order that resolves the conflict or ambiguity; or
(b) commence an interpleader action in the Court and deposit the Escrow Funds (or the disputed portion thereof) with the Court, whereupon the Escrow Agent shall be relieved of all further duties and obligations with respect to such deposited funds.
The costs and expenses of any interpleader action (including reasonable attorneys' fees) shall be borne by the Depositor, subject to the indemnification provisions of Article VIII, except to the extent the Court orders otherwise.
Section 5.5 — Allocation Among Sites
Where stipulated penalties assessed in a Demand Notice relate to violations at more than one Site, the Demand Notice shall specify the allocation of the Deposit Amount among the applicable Sites (Ridgecrest, Gallatin, Bonanza Creek, and/or Kanawha Bend). Similarly, each Disbursement Instruction shall specify the allocation of disbursement amounts among the Sites to the extent applicable. In the absence of a specific allocation in the Demand Notice or Disbursement Instruction, the Deposit Amount or disbursement amount shall be attributed to the Site or Sites as determined by the Government in the Demand Notice. The Escrow Agent shall maintain records reflecting the allocation of Escrow Funds by Site, to the extent such allocation information is provided to the Escrow Agent by the Parties.
ARTICLE VI — ESCROW AGENT DUTIES AND PROTECTIONS
Section 6.1 — Standard of Care
The Escrow Agent shall perform its duties under this Agreement with the care, skill, and diligence that a reasonably prudent corporate trustee would exercise in the administration of escrow arrangements of a similar nature and scope. Notwithstanding the foregoing, the Escrow Agent shall be a stakeholder only with respect to the Escrow Funds and shall have no duty to investigate or determine the validity, accuracy, or sufficiency of any Demand Notice, Joint Instruction, Court Order, or other document delivered to it hereunder. The Escrow Agent's duties and obligations shall be limited to those expressly set forth in this Agreement, and no implied duties or obligations shall be read into this Agreement.
Section 6.2 — Reliance on Documents
The Escrow Agent may rely upon, and shall be fully protected in acting or refraining from acting upon, any written notice, instruction, certificate, demand, request, consent, receipt, or other document believed by the Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or persons, and the Escrow Agent shall have no duty to make any investigation or inquiry as to any statement contained in any such document and may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. The Escrow Agent may consult with legal counsel of its own choosing (including in-house counsel) with respect to any question arising under this Agreement, and the Escrow Agent shall not be liable for any action taken or omitted in good faith upon the advice of such counsel.
Section 6.3 — No Obligation to Institute Proceedings
The Escrow Agent shall not be required to institute or defend any legal or administrative proceedings in connection with this Agreement, the Consent Decree, or the Escrow Funds, unless the Escrow Agent has been indemnified to its reasonable satisfaction against the costs and expenses (including reasonable attorneys' fees) of such proceedings. Nothing in this Section 6.3 shall be construed to limit the Escrow Agent's right to commence an interpleader action pursuant to Section 5.4 of this Agreement.
Section 6.4 — Resignation
The Escrow Agent may resign from its duties and obligations under this Agreement by giving not less than sixty (60) days' prior written notice to the Depositor and the Government. Such resignation shall become effective upon the appointment of a successor escrow agent by Joint Instruction of the Depositor and the Government and the transfer of the Escrow Funds to such successor escrow agent. If the Depositor and the Government have not appointed a successor escrow agent within sixty (60) days following receipt of the Escrow Agent's notice of resignation, the Escrow Agent may petition the Court for the appointment of a successor escrow agent or may deposit the Escrow Funds with the Court, and upon such deposit, the Escrow Agent shall be relieved of all further duties and obligations under this Agreement (except for obligations that expressly survive termination).
Section 6.5 — Removal
The Escrow Agent may be removed by Joint Instruction of the Depositor and the Government, with or without cause, upon not less than thirty (30) days' prior written notice to the Escrow Agent. Upon removal, the same succession procedures set forth in Section 6.4 shall apply. The removed Escrow Agent shall cooperate reasonably with the successor escrow agent in effecting the transfer of the Escrow Funds and all related books and records, and shall deliver to the successor escrow agent all Escrow Funds then held hereunder within ten (10) Business Days following the effective date of the removal (or such longer period as may be necessary to liquidate investments without material loss).
Section 6.6 — Limitation of Liability
The Escrow Agent shall not be liable for any act or omission taken in good faith and in accordance with this Agreement, except to the extent that such act or omission constitutes the Escrow Agent's own gross negligence, willful misconduct, or bad faith. Without limiting the generality of the foregoing:
(a) The Escrow Agent shall have no responsibility for the adequacy or sufficiency of any deposit made (or not made) by the Depositor or for the Depositor's compliance with the Consent Decree.
(b) The Escrow Agent shall not be liable for any loss arising from the investment of Escrow Funds in Permitted Investments in accordance with Article IV, including any loss of principal or interest due to market fluctuations or issuer default.
(c) The Escrow Agent shall not be liable for delays in the performance of its duties caused by conditions beyond its reasonable control, including acts of God, interruption of communication facilities, failure of power supply, flood, fire, labor disputes, war, civil unrest, or acts of governmental authority.
(d) The Escrow Agent shall not be deemed a fiduciary of the Depositor or the Government except to the extent expressly provided in this Agreement.
ARTICLE VII — COMPENSATION AND EXPENSES OF ESCROW AGENT
Section 7.1 — Fees
The Depositor shall pay the Escrow Agent fees for its services under this Agreement in accordance with the fee schedule attached hereto as Exhibit A and incorporated herein by reference. Such fees shall be payable quarterly in arrears, within thirty (30) days following the Escrow Agent's delivery of an invoice to the Depositor. The fee schedule may be amended from time to time by written agreement between the Depositor and the Escrow Agent, with written notice to the Government.
Section 7.2 — Expenses
The Depositor shall reimburse the Escrow Agent for all reasonable out-of-pocket expenses incurred by the Escrow Agent in the performance of its duties under this Agreement, including, without limitation: (a) reasonable legal fees and expenses of outside counsel retained by the Escrow Agent in connection with any interpleader action or other legal proceedings arising under this Agreement; (b) wire transfer fees charged by correspondent banks; (c) postage and courier charges; and (d) costs of preparing and filing tax information returns relating to the Escrow Account. Reimbursable expenses shall be invoiced by the Escrow Agent to the Depositor on a quarterly basis and shall be payable within thirty (30) days of invoice.
Section 7.3 — Source of Payment
All fees and expenses payable to the Escrow Agent under this Article VII shall be paid by the Depositor directly and shall not be charged against, deducted from, or set off against the Escrow Funds. Notwithstanding the foregoing, if the Depositor fails to pay any invoice for fees or expenses within thirty (30) days following the date of such invoice, the Escrow Agent may, upon fifteen (15) days' prior written notice to both the Depositor and the Government, deduct the amount of such unpaid fees and expenses from the Escrow Funds. Any such deduction shall be reported by the Escrow Agent in the next monthly account statement provided to the Parties.
ARTICLE VIII — INDEMNIFICATION
Section 8.1 — Depositor's Indemnification of Escrow Agent
The Depositor shall indemnify, defend, and hold harmless the Escrow Agent and its directors, officers, employees, and agents from and against any and all claims, demands, actions, suits, judgments, losses, liabilities, damages, costs, and expenses (including reasonable attorneys' fees and disbursements) arising out of or in connection with this Agreement or the Escrow Agent's performance of its duties hereunder, except to the extent that such claims, losses, liabilities, costs, or expenses are finally determined by a court of competent jurisdiction to have been caused by the Escrow Agent's gross negligence, willful misconduct, or bad faith. The indemnification obligations under this Section 8.1 shall include, without limitation, indemnification for costs and expenses incurred by the Escrow Agent in connection with any interpleader action commenced pursuant to Section 5.4 and any costs incurred in responding to subpoenas, court orders, or regulatory inquiries relating to the Escrow Account.
Section 8.2 — Survival
The indemnification obligations of the Depositor under this Article VIII shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent, and shall continue in full force and effect with respect to any claims or losses arising out of events occurring during the term of this Agreement, regardless of when such claims are asserted or such losses are incurred.
ARTICLE IX — AUTHORIZED REPRESENTATIVES
Section 9.1 — Depositor's Authorized Representatives
The following individuals are authorized to execute and deliver Demand Notices, Joint Instructions, Disbursement Instructions, investment instructions, and all other notices and communications on behalf of the Depositor under this Agreement:
(a) Miriam Soo-Hwan Park, General Counsel, Torchlight Mining Corp., 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601; telephone: (406) 555-3200; email: mspark@torchlightmining.com.
(b) Carolyn Bracebridge, Chief Financial Officer, Torchlight Mining Corp., 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601; telephone: (406) 555-3215; email: cbracebridge@torchlightmining.com.
(c) Harrison Wexford, Partner, Calderwood & Harkness LLP, as outside counsel authorized to transmit instructions on behalf of the Depositor, provided that the Depositor has delivered to the Escrow Agent a prior written authorization (on file with the Escrow Agent as of the Execution Date) confirming Mr. Wexford's authority to act on the Depositor's behalf. The Escrow Agent shall be entitled to rely on such written authorization until notified otherwise in writing by the Depositor.
Section 9.2 — Government's Authorized Representatives
The following individuals are authorized to execute and deliver Demand Notices, Joint Instructions, Disbursement Instructions, and all other notices and communications on behalf of the Government under this Agreement:
(a) Philip Orenstein, Trial Attorney, Environmental Enforcement Section, Environment and Natural Resources Division, U.S. Department of Justice, P.O. Box 7611, Washington, D.C. 20044-7611; telephone: (202) 555-8470; email: philip.orenstein@usdoj.gov.
(b) Margaret Coulson, Lead Case Attorney, Office of Enforcement and Compliance Assurance, U.S. Environmental Protection Agency, William Jefferson Clinton Building, 1200 Pennsylvania Avenue, N.W., Mail Code 2249A, Washington, D.C. 20460; telephone: (202) 555-6390; email: coulson.margaret@epa.gov.
Section 9.3 — Escrow Agent's Authorized Representatives
The following individual is authorized to execute and deliver confirmations, account statements, and all other notices and communications on behalf of the Escrow Agent under this Agreement:
David Henshaw, Trust Officer, Larchfield Trust Company, N.A., 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202; telephone: (704) 555-4100; email: dhenshaw@larchfieldtrust.com.
Section 9.4 — Changes in Authorized Representatives
Any Party may change its authorized representative(s) by delivering written notice to the other Parties in accordance with Article X, specifying the name, title, address, telephone number, and email address of the new authorized representative(s). Such change shall be effective upon receipt of the written notice by all other Parties. No change in an authorized representative shall be effective as to the Escrow Agent until the Escrow Agent has actually received the written notice of such change.
ARTICLE X — NOTICES
Section 10.1 — Method of Notice
All notices, instructions, demands, consents, waivers, and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered by one or more of the following methods:
(a) personal delivery;
(b) nationally recognized overnight courier service (such as Severin Partners LLC, Halcyon Partners LLC, or Tarrant & Co.);
(c) certified United States mail, return receipt requested, postage prepaid; or
(d) email transmission, provided that a confirmation copy is sent on the same day by nationally recognized overnight courier service.
Notices shall be deemed to have been received and to be effective: (i) if delivered by personal delivery, on the date of delivery; (ii) if sent by overnight courier, on the next Business Day following the date of deposit with the courier; (iii) if sent by certified mail, on the date of actual receipt as evidenced by the return receipt; and (iv) if sent by email with an overnight courier confirmation copy, on the date of the email transmission, provided the confirmation copy is deposited with the courier on the same day. If any notice would otherwise be deemed received on a day that is not a Business Day, such notice shall be deemed received on the next succeeding Business Day.
Section 10.2 — Notice Addresses
Notices shall be delivered to the following addresses (or to such other addresses as a Party may designate by written notice in accordance with this Section):
If to the Depositor:
Torchlight Mining Corp.
Attn: Miriam Soo-Hwan Park, General Counsel
750 Copper Ridge Boulevard, Suite 200 Helena, Montana 59601 Telephone: (406) 555-3200
Email: mspark@torchlightmining.com
With a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP
Attn: Harrison Wexford, Partner
One Liberty Plaza, 165 Broadway, 38th Floor New York, New York 10006 Telephone: (212) 555-7800
Email: hwexford@calderwoodharkness.com
If to the Government:
U.S. Department of Justice Environment and Natural Resources Division Environmental Enforcement Section
Attn: Philip Orenstein, Trial Attorney
P.O. Box 7611 Washington, D.C. 20044-7611 Telephone: (202) 555-8470
Email: philip.orenstein@usdoj.gov
With a copy to:
U.S. Environmental Protection Agency Office of Enforcement and Compliance Assurance
Attn: Margaret Coulson, Lead Case Attorney
William Jefferson Clinton Building 1200 Pennsylvania Avenue, N.W. Mail Code 2249A Washington, D.C. 20460 Telephone: (202) 555-6390
Email: coulson.margaret@epa.gov
If to the Escrow Agent:
Larchfield Trust Company, N.A.
Attn: David Henshaw, Trust Officer
200 South Tryon Street, Suite 1100 Charlotte, North Carolina 28202 Telephone: (704) 555-4100
Email: dhenshaw@larchfieldtrust.com
ARTICLE XI — TERM AND TERMINATION
Section 11.1 — Effective Date
This Agreement shall become effective upon the Effective Date of the Consent Decree (anticipated to be June 14, 2025). Prior to the Effective Date, the Parties shall have no rights or obligations under this Agreement other than the obligation of the Escrow Agent to establish the Escrow Account in accordance with Section 2.1 (which obligation shall arise upon the Effective Date) and the Parties' obligations under the General Provisions set forth in Article XIII. Notwithstanding the foregoing, this Agreement shall be fully binding upon the Parties as of the Execution Date with respect to the Parties' agreement to the terms and conditions set forth herein, subject to the occurrence of the Effective Date.
Section 11.2 — Termination
This Agreement shall terminate upon the earliest to occur of the following events:
(a) the disbursement of all Escrow Funds in accordance with this Agreement, such that the balance of the Escrow Account is zero dollars ($0.00);
(b) the termination of the Consent Decree as to all four Sites, which shall occur upon: (i) certification of completion of all remedial construction at each Site by the EPA and the independent monitor appointed under the Consent Decree; and (ii) the expiration of a period of not less than five (5) years following the date of such certification at the last Site to achieve certification, during which all long-term monitoring and maintenance obligations have been satisfied, all of as provided in Section XVIII of the Consent Decree; or
(c) the written agreement of all Parties to terminate this Agreement.
Upon termination of this Agreement, any Escrow Funds remaining in the Escrow Account shall be disbursed to the Depositor by wire transfer of immediately available funds to an account designated by the Depositor, unless otherwise directed by a Court Order. The Escrow Agent shall provide a final accounting of the Escrow Account to the Depositor and the Government within thirty (30) days following the date of termination.
Section 11.3 — Survival
The provisions of Article VI (Escrow Agent Duties and Protections), Article VII (Compensation and Expenses of Escrow Agent), and Article VIII (Indemnification) shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent, and shall continue in full force and effect with respect to matters arising during the term of this Agreement.
ARTICLE XII — RELATIONSHIP TO CONSENT DECREE AND OTHER AGREEMENTS
Section 12.1 — Incorporation of Consent Decree Terms
This Agreement is entered into pursuant to and is subject to the terms and conditions of the Consent Decree in Civil Action No. 9:24-cv-00087-DWM. The provisions of this Agreement are intended to implement and facilitate the stipulated penalty escrow mechanism required by the Consent Decree. In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Consent Decree, the terms of the Consent Decree shall control and govern. The Parties shall interpret this Agreement, to the extent possible, in a manner consistent with the Consent Decree.
Section 12.2 — Distinction from Remediation Trust Agreement
This Escrow Agreement is separate and distinct from the Remediation Trust Agreement (Trust No. LTC-REM-2025-1177) between Torchlight Mining Corp. and Larchfield Trust Company, N.A. (as trustee), dated February 17, 2025, which establishes an eighty million dollar ($80,000,000) remediation trust fund for environmental remediation obligations at the Sites as required by the Consent Decree. The Escrow Funds held under this Agreement shall not be commingled with, applied to, or otherwise treated as part of the remediation trust fund established under the Remediation Trust Agreement, and vice versa. The obligations of the Escrow Agent under this Agreement are separate and distinct from its obligations as trustee under the Remediation Trust Agreement, and neither arrangement shall create cross-default or cross-collateralization obligations with respect to the other.
Section 12.3 — Distinction from Surety Bond
This Escrow Agreement is separate and distinct from the surety bond (Bond No. ISA-ENV-2025-08934) issued by Ironbark Surety of America, Inc. in the penal amount of one hundred sixty-five million dollars ($165,000,000) in favor of the United States and the States of Montana, Nevada, and West Virginia as obligees, as required by the financial assurance provisions of the Consent Decree. The financial assurance package under the Consent Decree — comprising the surety bond in the amount of $165,000,000 and the remediation trust fund in the amount of $80,000,000, for total financial assurance of $245,000,000 — addresses remediation cost assurance and is distinct from the stipulated penalty escrow mechanism established under this Agreement. The Escrow Funds held hereunder shall not be counted toward or credited against the Depositor's financial assurance obligations under the Consent Decree, and the surety bond and remediation trust fund shall not be available for satisfaction of stipulated penalty obligations.