ATTORNEY-CLIENT PRIVILEGED / DRAFT — SUBJECT TO REVISION
REMEDIATION TRUST AGREEMENT
DRAFT — January 10, 2025
Calderwood & Harkness LLP Matter No. 1039-00003
Agreement Between
TORCHLIGHT MINING CORP. (Grantor)
and
LARCHFIELD TRUST COMPANY, N.A. (Trustee)
Establishing the
$80,000,000.00 ENVIRONMENTAL REMEDIATION TRUST FUND
Prepared in Connection with the Consent Decree in
United States of America and State of Montana v. Torchlight Mining Corp. et al. Civil Action No. 9:24-cv-00087-DWM United States District Court for the District of Montana Missoula Division
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REMEDIATION TRUST AGREEMENT
This REMEDIATION TRUST AGREEMENT (this "Trust Agreement" or "Agreement"), dated as of January 10, 2025, is entered into by and between:
TORCHLIGHT MINING CORP., a corporation incorporated under the Canada Business Corporations Act ("CBCA"), with its principal office at 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada, and its United States headquarters at 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601 (dual-listed on the Toronto Stock Exchange under the symbol "TRC" and on the New York Stock Exchange under the symbol "TRC") (hereinafter referred to as the "Grantor"),
and
LARCHFIELD TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States, with its principal office located at 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202 (hereinafter referred to as the "Trustee").
Grantor and Trustee are each referred to herein individually as a "Party" and collectively as the "Parties."
This Trust Agreement is entered into with reference to, and in connection with, the Consent Decree anticipated to be lodged in Civil Action No. 9:24-cv-00087-DWM before the Honorable Donald W. Molloy, Senior United States District Judge, United States District Court for the District of Montana, Missoula Division (the "Court"). This Trust Agreement is executed pursuant to the financial assurance requirements set forth in the Consent Decree, the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901 et seq., the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., and the implementing regulations promulgated thereunder, including without limitation 40 C.F.R. Parts 264 and 265.
The Trust Fund established hereunder constitutes a portion of the Two Hundred Forty-Five Million Dollars ($245,000,000.00) aggregate financial assurance package required under the Consent Decree. This Trust Fund shall provide Eighty Million Dollars ($80,000,000.00) toward such aggregate financial assurance obligation, with the remaining One Hundred Sixty-Five Million Dollars ($165,000,000.00) secured by an environmental surety bond issued by Ironbark Surety of America, Inc. (Bond No. ISA-ENV-2025-08934).
The United States Environmental Protection Agency ("EPA") is a third-party beneficiary of this Trust Agreement, with the rights and remedies set forth herein and in the Consent Decree.
RECITALS
WHEREAS, Grantor, together with its United States subsidiaries — Torchlight Mining (U.S.) Inc., a corporation organized under the laws of the State of Delaware (EIN: 83-2047156); Torchlight Specialty Chemicals, Inc., a corporation organized under the laws of the State of Delaware (EIN: 47-3819204); Ridgecrest Mine Holdings, LLC, a limited liability company organized under the laws of the State of Montana (Montana Secretary of State ID: E1042738); and Bonanza Creek Mining, LLC, a limited liability company organized under the laws of the State of Nevada (Nevada Secretary of State Entity No.: E0518294731) — are named as defendants and respondents in Civil Action No. 9:24-cv-00087-DWM, pending in the United States District Court for the District of Montana, Missoula Division;
WHEREAS, the United States of America, acting through the United States Environmental Protection Agency and the United States Department of Justice, Environment and Natural Resources Division, together with the States of Montana, Nevada, and West Virginia as co-plaintiffs, and Grantor and its above-named subsidiaries as defendants and respondents, have negotiated a consent decree (the "Consent Decree") to resolve alleged violations of the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901 et seq., and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., at four facilities owned, operated, or formerly operated by Grantor and its subsidiaries, specifically:
(a) the Ridgecrest Copper-Molybdenum Mine, located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832, for which the negotiated remediation cost is One Hundred Ninety-Eight Million Six Hundred Thousand Dollars ($198,600,000.00) over a period of thirty (30) years;
(b) the Gallatin Chemical Works, located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714, for which the negotiated remediation cost is Forty-Two Million Eight Hundred Thousand Dollars ($42,800,000.00) over a period of fifteen (15) years;
(c) the Bonanza Creek Gold Mine, located at County Road 447, Mile Marker 12, Lander County, Nevada 89820, for which the negotiated remediation cost is Sixty-Three Million Two Hundred Thousand Dollars ($63,200,000.00) over a period of twenty (20) years; and
(d) the Kanawha Bend Chemical Plant, located at 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112, for which the negotiated remediation cost is Thirty-Eight Million Nine Hundred Thousand Dollars ($38,900,000.00) over a period of twenty (20) years;
WHEREAS, the total nominal remediation obligation under the Consent Decree for all four Facilities is Three Hundred Forty-Three Million Five Hundred Thousand Dollars ($343,500,000.00), with a net present value, calculated using a three percent (3%) discount rate, of approximately Two Hundred Forty-Five Million One Hundred Thousand Dollars ($245,100,000.00);
WHEREAS, the Consent Decree requires Grantor to establish financial assurance in the aggregate amount of Two Hundred Forty-Five Million Dollars ($245,000,000.00) no later than September 12, 2025, which date is ninety (90) days after the anticipated Effective Date of the Consent Decree;
WHEREAS, Grantor has elected to satisfy the financial assurance requirement under the Consent Decree through a combination of (i) this irrevocable Trust Fund in the amount of Eighty Million Dollars ($80,000,000.00) and (ii) an environmental surety bond in the amount of One Hundred Sixty-Five Million Dollars ($165,000,000.00) issued by Ironbark Surety of America, Inc. (Bond No. ISA-ENV-2025-08934);
WHEREAS, Grantor desires to establish an irrevocable trust fund for the benefit of the United States Environmental Protection Agency and in furtherance of Grantor's remediation obligations under the Consent Decree at the four Facilities described herein;
WHEREAS, Larchfield Trust Company, N.A. is willing to serve as Trustee of the Trust Fund established pursuant to this Agreement, and represents that it possesses the requisite experience, qualifications, and institutional capacity to administer environmental remediation trust funds of this nature and complexity; and
WHEREAS, this Trust Agreement is intended to satisfy, in part, the financial assurance requirements of 40 C.F.R. Parts 264 and 265, as applicable to corrective action and closure/post-closure care obligations under RCRA, and applicable financial assurance provisions under CERCLA and the Consent Decree;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained 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
As used in this Trust Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Consent Decree.
Section 1.1 "Beneficiary" means the United States Environmental Protection Agency, acting on behalf of the United States of America, in its capacity as the designated beneficiary of the Trust Fund established pursuant to this Agreement.
Section 1.2 "Bonanza Creek Mine" means the Bonanza Creek Gold Mine, located at County Road 447, Mile Marker 12, Lander County, Nevada 89820, as more particularly described in Exhibit A attached hereto.
Section 1.3 "Business Day" means any day other than a Saturday, Sunday, or day on which national banking associations in the State of North Carolina or the State of Montana are authorized or required by law to be closed.
Section 1.4 "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), and all regulations promulgated thereunder.
Section 1.5 "Consent Decree" means the consent decree entered or to be entered in Civil Action No. 9:24-cv-00087-DWM in the United States District Court for the District of Montana, Missoula Division, as the same may be amended or modified from time to time by order of the Court.
Section 1.6 "Court" means the United States District Court for the District of Montana, Missoula Division, or any successor court having jurisdiction over Civil Action No. 9:24-cv-00087-DWM.
Section 1.7 "CWA" means the Clean Water Act, 33 U.S.C. §§ 1251 et seq., and all regulations promulgated thereunder.
Section 1.8 "Effective Date" has the meaning ascribed to such term in the Consent Decree. The Effective Date is anticipated to be June 14, 2025, being thirty (30) days after the anticipated entry date of the Consent Decree on May 15, 2025, subject to such adjustments as may result from the public comment period or Court scheduling.
Section 1.9 "EPA" means the United States Environmental Protection Agency and its successors.
Section 1.10 "EPA Project Coordinators" means (a) Dr. Samuel Tesfaye, EPA Region 8, with respect to the Ridgecrest Copper-Molybdenum Mine and Gallatin Chemical Works; and (b) Jennifer Whitfield, EPA Region 9, with respect to the Bonanza Creek Gold Mine; or in each case, their respective designees as communicated in writing to the Trustee and Grantor. The EPA Project Coordinator for the Kanawha Bend Chemical Plant shall be designated by EPA Region 3 and communicated in writing to the Trustee and Grantor prior to the Effective Date.
Section 1.11 "Facilities" or "Sites" means, collectively, the Ridgecrest Copper-Molybdenum Mine, the Gallatin Chemical Works, the Bonanza Creek Gold Mine, and the Kanawha Bend Chemical Plant, each as more particularly described in Exhibit A attached hereto, and "Facility" or "Site" means any one of them individually.
Section 1.12 "Fiscal Year" means the calendar year, or such other fiscal year as the Trustee may adopt for the Trust Fund for tax reporting purposes, with the consent of Grantor and EPA.
Section 1.13 "Fund" or "Trust Fund" means the Torchlight Mining Corp. Environmental Remediation Trust Fund established pursuant to Section 2.1 of this Agreement, including all deposits, investment income, and other assets held by the Trustee pursuant to this Agreement.
Section 1.14 "Gallatin Chemical Works" means the Gallatin Chemical Works facility, located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714, as more particularly described in Exhibit A attached hereto.
Section 1.15 "Grantor" means Torchlight Mining Corp., a corporation incorporated under the Canada Business Corporations Act, and its successors and assigns, as the context may require.
Section 1.16 "Independent Monitor" means Verdant Analytics, Inc., the court-appointed independent environmental auditor under the Consent Decree, or any successor monitor appointed by the Court in accordance with the provisions of the Consent Decree.
Section 1.17 "Initial Deposit" means the sum of Eighty Million Dollars ($80,000,000.00) to be deposited by Grantor into the Trust Fund in accordance with Section 3.1 of this Agreement.
Section 1.18 "IRC" means the Internal Revenue Code of 1986, as amended, and all regulations promulgated thereunder.
Section 1.19 "Kanawha Bend Chemical Plant" means the Kanawha Bend Chemical Plant facility, located at 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112, as more particularly described in Exhibit A attached hereto.
Section 1.20 "Lead EPA Case Attorney" means Margaret Coulson, Office of Enforcement and Compliance Assurance ("OECA"), United States Environmental Protection Agency, or her designee as communicated in writing to the Trustee and Grantor.
Section 1.21 "OCC" means the Office of the Comptroller of the Currency.
Section 1.22 "Permitted Investments" means those investments authorized under Section 6.2 of this Agreement.
Section 1.23 "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, governmental authority, or other entity.
Section 1.24 "RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as amended, and all regulations promulgated thereunder, including without limitation 40 C.F.R. Parts 264 and 265.
Section 1.25 "Remediation Consultant" means Pinnacle Creek Environmental, LLC, or any successor environmental consultant retained by Grantor and approved in writing by EPA to perform remediation activities at one or more of the Facilities.
Section 1.26 "Remediation Costs" means all costs, expenses, and obligations incurred or to be incurred in connection with remedial actions, corrective actions, removal actions, response actions, long-term monitoring, operation and maintenance, institutional controls, engineering controls, and any and all related activities at the Facilities as required by or consistent with the Consent Decree, including without limitation costs of investigation, design, construction, operation, maintenance, monitoring, reporting, and five-year reviews.
Section 1.27 "Ridgecrest Mine" means the Ridgecrest Copper-Molybdenum Mine, located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832, as more particularly described in Exhibit A attached hereto.
Section 1.28 "Surety Bond" means the environmental surety bond in the amount of One Hundred Sixty-Five Million Dollars ($165,000,000.00) issued by Ironbark Surety of America, Inc., Bond No. ISA-ENV-2025-08934, in favor of EPA, as the same may be amended, supplemented, or replaced from time to time.
Section 1.29 "Trust Agreement" means this Remediation Trust Agreement, including all Exhibits attached hereto, as the same may be amended from time to time in accordance with Article XII.
Section 1.30 "Trust Agreement Number" means LTC-REM-2025-1177, the reference number assigned to this Trust Agreement by the Trustee.
Section 1.31 "Trustee" means Larchfield Trust Company, N.A., a national banking association, or any successor trustee appointed in accordance with Article XI of this Agreement.
Section 1.32 "Trust Officer" means David Henshaw, or his designated successor at Larchfield Trust Company, N.A., who shall serve as the primary point of contact for day-to-day administration of the Trust Fund.
Section 1.33 "U.S. dollars" or "$" means the lawful currency of the United States of America.
ARTICLE II — ESTABLISHMENT OF TRUST
Section 2.1 — Creation of Trust
Grantor hereby establishes, and the Trustee hereby accepts, an irrevocable trust fund, which shall be designated the "Torchlight Mining Corp. Environmental Remediation Trust Fund," Trust Agreement No. LTC-REM-2025-1177 (the "Trust Fund" or "Fund"). The Trust Fund is created for the sole and exclusive purpose of providing financial assurance for Grantor's environmental remediation obligations under the Consent Decree at the four Facilities identified herein and described in Exhibit A. The Trust Fund shall be maintained as a segregated fund, separate and apart from all other assets of the Trustee and all other assets of the Grantor, and shall not be commingled with any other trust fund, escrow, or account administered by the Trustee.
The Trust established hereby is irrevocable, except as otherwise expressly provided in Article XII (Amendment) and Article XIV (Termination) of this Agreement. Grantor expressly waives any right to revoke, rescind, or unilaterally terminate this Trust, except in strict compliance with the provisions of this Agreement, the Consent Decree, and applicable law.
Section 2.2 — Trust Beneficiary
The United States Environmental Protection Agency ("EPA") is the sole beneficiary of the Trust Fund. Grantor has no right to direct, redirect, receive, or reclaim Trust Fund assets except as expressly provided in this Agreement, including upon termination of the Trust Fund in accordance with Section 14.2. EPA shall have the right to direct disbursements from the Trust Fund as provided in Article VII, and the Trustee shall comply with such directions in accordance with the terms of this Agreement. No other Person shall be deemed a beneficiary of the Trust Fund except as expressly set forth herein.
Section 2.3 — Purpose
The Trust Fund assets shall be used exclusively to fund Remediation Costs at the Facilities in accordance with the Consent Decree and this Agreement. No Trust Fund assets shall be used for any purpose other than the payment of Remediation Costs, except for the payment of Trustee fees and expenses as provided in Article V and taxes as provided in Article VIII. The allocation of Trust Fund assets among the four Sites shall be determined by EPA, in consultation with Grantor, based on the remediation schedules, milestones, and cost estimates set forth in the Consent Decree, as such schedules and estimates may be updated from time to time.
The Trust Fund constitutes a component of the total Two Hundred Forty-Five Million Dollars ($245,000,000.00) aggregate financial assurance package required under the Consent Decree, with the balance of the financial assurance obligation being satisfied by the Surety Bond, as more particularly described in Article XIII.
Section 2.4 — Irrevocability
The Trust established pursuant to this Agreement is irrevocable. Grantor may not revoke, terminate, alter, or modify the Trust, in whole or in part, without the prior written consent of EPA and, where required by the Consent Decree or applicable law, the approval of the Court. This irrevocability provision is intended to comply with, and shall be construed in accordance with, the requirements of 40 C.F.R. § 264.143(i) and any successor regulation thereto. Any action taken by Grantor in contravention of this Section 2.4 shall be void ab initio and of no force or effect.
ARTICLE III — INITIAL AND SUBSEQUENT DEPOSITS
Section 3.1 — Initial Deposit
Grantor shall deposit the sum of Eighty Million Dollars ($80,000,000.00) (the "Initial Deposit") into the Trust Fund within ninety (90) days of the Effective Date of the Consent Decree. Based on the anticipated Effective Date of June 14, 2025, the deadline for the Initial Deposit shall be September 12, 2025, unless otherwise adjusted as a result of a change in the Effective Date. The Initial Deposit shall be made by wire transfer of immediately available funds in United States dollars to the Trustee's designated account in accordance with the wire transfer instructions set forth in Exhibit B attached hereto. Grantor shall provide the Trustee with written notice not less than two (2) Business Days prior to the transmission of the Initial Deposit, specifying the date and amount of the wire transfer.
Upon receipt of the Initial Deposit, the Trustee shall promptly (and in no event later than the close of the next Business Day) confirm receipt thereof in writing to Grantor, EPA (attention: Margaret Coulson, Lead EPA Case Attorney), and the Independent Monitor (Verdant Analytics, Inc., attention: Dr. Kamal Osei). The Trustee shall invest the Initial Deposit in accordance with Article VI pending disbursement.
Section 3.2 — Subsequent Deposits
Grantor shall make additional deposits into the Trust Fund as and when required under any of the following circumstances:
(a) Annual Adjustment. The Consent Decree provides for an annual adjustment mechanism, including inflation indexing and updated remedy cost estimates, which may require Grantor to increase the aggregate financial assurance amount. To the extent that any such increase results in a requirement for additional funds to be deposited into the Trust Fund (as opposed to an increase in the Surety Bond), Grantor shall make such additional deposit within sixty (60) days of written notice from EPA specifying the required increase.
(b) EPA Determination of Inadequacy. In the event that EPA determines, based on revised cost estimates, changed site conditions, newly discovered contamination, or other relevant factors, that the aggregate financial assurance is inadequate to cover the remaining Remediation Costs at the Facilities, and EPA directs Grantor to increase the Trust Fund balance, Grantor shall make such additional deposit within sixty (60) days of receipt of EPA's written determination, subject to Grantor's right to dispute such determination in accordance with the dispute resolution provisions of the Consent Decree.
(c) Drawdown Replenishment. In the event that disbursements from the Trust Fund cause the Fund balance to fall below the Minimum Fund Balance specified in Section 3.3, Grantor shall replenish the Trust Fund in accordance with the requirements of Section 3.3.
(d) Surety Bond Offset. In the event that the face amount of the Surety Bond is reduced (whether by partial release, cancellation, or draw), and such reduction results in the aggregate financial assurance falling below the required level under the Consent Decree, Grantor shall make an additional deposit into the Trust Fund sufficient to restore the aggregate financial assurance to the required level, within sixty (60) days of the occurrence of such reduction.
All subsequent deposits shall comply with the requirements of Section 3.4 regarding the form of deposits.
Section 3.3 — Minimum Fund Balance
At no time shall the balance of the Trust Fund (measured as the aggregate fair market value of all Trust Fund assets, including accrued investment income and net of all prior disbursements, fees, expenses, and taxes) fall below Forty Million Dollars ($40,000,000.00) (the "Minimum Fund Balance"), unless:
(a) EPA has consented in writing to a Fund balance below the Minimum Fund Balance; or
(b) the Fund balance has fallen below the Minimum Fund Balance solely as a result of disbursements for approved Remediation Costs in accordance with Article VII, and Grantor is in the process of replenishing the Fund in compliance with this Section 3.3.
In the event that the Fund balance falls below the Minimum Fund Balance for any reason other than those specified in clauses (a) and (b) above, the Trustee shall promptly notify Grantor and EPA in writing of such deficiency. Grantor shall replenish the Trust Fund to an amount no less than the Minimum Fund Balance within sixty (60) days of receipt of such written notice from the Trustee or EPA, whichever is earlier. Failure to replenish the Trust Fund within such sixty (60)-day period shall constitute a breach of this Agreement and may, at EPA's election, constitute a triggering event under the Consent Decree.
Section 3.4 — Form of Deposits
All deposits into the Trust Fund, whether the Initial Deposit or subsequent deposits, shall be made in United States dollars by wire transfer of immediately available funds to the account designated by the Trustee in Exhibit B. No property other than cash or cash equivalents denominated in United States dollars shall be deposited into the Trust Fund without the prior written consent of both EPA and the Trustee. For the avoidance of doubt, Canadian dollar deposits are not permitted; all deposits must be converted to United States dollars prior to transfer, with Grantor bearing any currency exchange risk or cost.
ARTICLE IV — TRUSTEE ACCEPTANCE AND RESPONSIBILITIES
Section 4.1 — Acceptance
Larchfield Trust Company, N.A. hereby accepts the Trust established pursuant to this Agreement and agrees to discharge its duties and responsibilities faithfully and in accordance with the terms of this Agreement, the Consent Decree, and all applicable laws and regulations. By executing this Agreement, the Trustee acknowledges that it has reviewed and is familiar with the terms and conditions of the Consent Decree as they pertain to the financial assurance requirements and the Trustee's obligations hereunder.
Section 4.2 — Fiduciary Duties
The Trustee shall administer the Trust Fund as a fiduciary, in accordance with the terms of this Agreement, the Consent Decree, applicable federal and state trust law (including without limitation the Uniform Prudent Investor Act, to the extent adopted in applicable jurisdictions), and the regulations of the Office of the Comptroller of the Currency ("OCC") governing trust activities of national banks, including 12 C.F.R. Part 9. The Trustee shall exercise the care, skill, prudence, and diligence that a prudent trustee, acting in a like capacity and familiar with the nature and purpose of an environmental remediation trust fund, would exercise under the circumstances then prevailing. The Trustee shall act at all times in the best interests of the Beneficiary and in furtherance of the purposes of the Trust Fund.
Section 4.3 — Recordkeeping
The Trustee shall establish and maintain complete and accurate books, records, and accounts with respect to all deposits into, withdrawals from, investments of, income earned on, fees charged to, and expenses paid from the Trust Fund. Such records shall be maintained in a form and manner consistent with the RCRA financial assurance recordkeeping requirements set forth in 40 C.F.R. §§ 264.143 and 264.151, and shall be preserved for a period of not less than six (6) years following the termination of the Trust Fund, or such longer period as may be required by applicable law or regulation. The Trustee shall make all such records available for inspection and copying by Grantor, EPA, the Independent Monitor, and the Court upon reasonable advance written notice during normal business hours.
Section 4.4 — Reporting
The Trustee shall provide the following reports and notifications:
(a) Quarterly Statements. Within thirty (30) days following the end of each calendar quarter, the Trustee shall furnish a written statement of the Trust Fund to Grantor, EPA (attention: Margaret Coulson, OECA), and the Independent Monitor (Verdant Analytics, Inc., attention: Dr. Kamal Osei, Senior Managing Director). Each quarterly statement shall include a summary of all transactions during the quarter, including deposits received, disbursements made, investments held (including fair market value), income earned, fees and expenses charged, and the ending Fund balance.
(b) Annual Audited Statement. Within ninety (90) days following the end of each calendar year (or such other fiscal year as may be adopted), the Trustee shall furnish an annual audited statement of Trust Fund assets, income, and disbursements, prepared in accordance with generally accepted accounting principles ("GAAP") by an independent certified public accountant selected by the Trustee with the consent of Grantor and EPA. Such annual statement shall be furnished to Grantor, EPA, the Independent Monitor, and the Court.
(c) Prompt Notice of Material Events. The Trustee shall promptly, and in any event within five (5) Business Days, provide written notice to EPA and Grantor of any event that materially affects or may materially affect the Trust Fund, including without limitation (i) any loss in value of Trust Fund investments exceeding five percent (5%) of the Fund balance in any thirty (30)-day period, (ii) any actual or threatened legal proceeding involving the Trust Fund, (iii) any default or potential default by any issuer of a Permitted Investment held by the Fund, or (iv) any change in the Trustee's financial condition or regulatory status that could impair its ability to perform its duties hereunder.
Section 4.5 — No Duty to Monitor Remediation
Notwithstanding anything in this Agreement to the contrary, the Trustee shall have no obligation to monitor, supervise, evaluate, or verify the nature, quality, progress, or adequacy of any remediation activities being conducted or to be conducted at any of the Facilities. The Trustee's duties and responsibilities under this Agreement are strictly limited to the administration, investment, and disbursement of Trust Fund assets in accordance with the terms hereof. The Trustee shall not be responsible for determining whether any requested disbursement is for a legitimate Remediation Cost, provided that the Trustee has received the requisite approvals specified in Article VII prior to making such disbursement.
ARTICLE V — TRUSTEE COMPENSATION AND EXPENSES
Section 5.1 — Trustee Fees
The Trustee shall be entitled to reasonable compensation for its services rendered in connection with the administration of the Trust Fund, in accordance with the fee schedule set forth in Exhibit C attached hereto. Such fee schedule shall include, without limitation, an annual trust administration fee (calculated as a percentage of the average monthly Fund balance), transaction fees for the processing of individual disbursements, and investment management fees. The fee schedule set forth in Exhibit C has been negotiated by the Parties and shall remain in effect for the initial three (3)-year term of the Trustee's service, subject to adjustment thereafter as provided in Exhibit C.
All Trustee fees shall be payable from the Trust Fund on a quarterly basis, unless Grantor elects, by written notice to the Trustee and EPA, to pay such fees directly from Grantor's own funds in order to preserve the Trust Fund balance. Any election by Grantor to pay fees directly shall not relieve the Trust Fund of the obligation to pay such fees in the event that Grantor fails to make timely payment.
Section 5.2 — Expenses
The Trustee shall be entitled to reimbursement from the Trust Fund (or from Grantor directly, if Grantor so elects) for all reasonable and documented out-of-pocket expenses incurred by the Trustee in connection with the administration of the Trust Fund, including without limitation costs of tax preparation and filing, legal counsel engaged by the Trustee in connection with the interpretation or enforcement of this Agreement (subject to the limitation in Section 10.1), postage, wire transfer fees, and costs of printing and distributing reports and statements required hereunder.
Section 5.3 — Payment Priority
Trustee fees and expenses, as described in Sections 5.1 and 5.2, shall constitute a first charge upon the Trust Fund, subordinate only to the payment of any taxes owed by the Trust Fund as provided in Article VIII. All fees and expenses of the Trustee shall be paid prior to any disbursement for Remediation Costs, unless EPA directs otherwise in writing in connection with an emergency or time-critical disbursement under Section 7.2.
ARTICLE VI — INVESTMENT OF TRUST FUND ASSETS
Section 6.1 — Investment Objective
Trust Fund assets shall be invested with the primary objective of preserving capital and maintaining sufficient liquidity to fund Remediation Costs on the schedule established in the Consent Decree. The secondary objective of the investment program shall be to generate reasonable income to the extent consistent with the primary objective of capital preservation and liquidity. The Trustee acknowledges that the Trust Fund is not an investment vehicle and that the safety and availability of principal are of paramount importance.
Section 6.2 — Permitted Investments
Trust Fund assets may be invested only in the following categories of investments (collectively, "Permitted Investments"):
(a) Direct obligations of the United States Government, including United States Treasury bills, notes, and bonds;
(b) Obligations issued or guaranteed by agencies or instrumentalities of the United States Government, including but not limited to obligations of the Federal Home Loan Banks, the Federal Farm Credit Banks, and the Government National Mortgage Association;
(c) Money market mutual funds that invest exclusively in obligations described in clauses (a) and (b) above and that are registered under the Investment Company Act of 1940, as amended;
(d) Certificates of deposit issued by banks insured by the Federal Deposit Insurance Corporation ("FDIC"), provided that (i) the issuing bank has a short-term credit rating of at least A-1 (S&P) or P-1 (Moody's), and (ii) the maturity of any such certificate of deposit shall not exceed twelve (12) months from the date of purchase;
(e) Investment-grade corporate bonds, notes, or commercial paper rated no lower than "A" (or its equivalent) by at least one nationally recognized statistical rating organization ("NRSRO"), as defined in Section 3(a)(62) of the Securities Exchange Act of 1934, provided that the maturity of any such instrument shall not exceed five (5) years from the date of purchase; and
(f) Such other investments as may be agreed upon in writing by Grantor, Trustee, and EPA.
Under no circumstances shall Trust Fund assets be invested in equity securities, derivative instruments (including but not limited to options, futures, swaps, or structured notes), hedge funds, private equity or venture capital funds, real estate, commodities, or any other speculative instruments or strategies.
Section 6.3 — Investment Restrictions
In addition to the limitations on Permitted Investments set forth in Section 6.2, the following investment restrictions shall apply:
(a) Concentration Limit. No more than ten percent (10%) of the aggregate fair market value of the Trust Fund shall be invested in obligations of any single non-governmental issuer at any time.
(b) Weighted Average Maturity. The weighted average maturity of the Trust Fund portfolio shall not exceed three (3) years.
(c) Regulatory Compliance. All investments shall comply with the requirements of 40 C.F.R. § 264.143(i) and any applicable OCC regulations governing the investment of trust assets by national banks.
(d) Liquidity. The Trustee shall maintain at least twenty percent (20%) of the Trust Fund in investments with maturities of ninety (90) days or less, or in money market funds described in Section 6.2(c), to ensure adequate liquidity for anticipated disbursements.
Section 6.4 — Investment Income
All income earned on Trust Fund investments, including interest, dividends, and realized gains, shall be retained in the Trust Fund and treated as part of the corpus of the Trust Fund. Investment income shall not reduce Grantor's obligation to make subsequent deposits if and when required under Section 3.2. For the avoidance of doubt, the accretion of investment income in the Trust Fund does not serve to increase the amount of the Grantor's financial assurance credit attributable to the Trust Fund beyond the amount of actual deposits made by Grantor, unless EPA agrees otherwise in writing.
Section 6.5 — Investment Discretion
Subject to the investment objectives, Permitted Investments categories, and restrictions set forth in this Article VI, the Trustee shall have reasonable discretion to select specific investments and to determine the timing and manner of purchases, sales, and maturities within the portfolio. The Trustee shall give due consideration to any written investment instructions or guidelines provided by Grantor, provided that such instructions are consistent with this Agreement. EPA shall retain the right, exercisable by written notice to the Trustee and Grantor, to object to any investment or category of investments that EPA reasonably determines to be inconsistent with the purposes or requirements of the Trust Fund or the Consent Decree. Upon receipt of such objection, the Trustee shall promptly liquidate or refrain from acquiring the objected-to investment and shall consult with EPA and Grantor to resolve the matter.
ARTICLE VII — DISBURSEMENTS
Section 7.1 — Disbursements for Remediation Costs
The Trustee shall disburse Trust Fund assets for Remediation Costs upon receipt of both of the following:
(a) A written disbursement request from Grantor, substantially in the form of Exhibit D attached hereto, specifying the amount of the requested disbursement, the name of the payee and its payment instructions (including wire transfer information), the Facility or Facilities to which the disbursement relates, a description of the Remediation Costs for which payment is sought, and supporting documentation reasonably necessary to substantiate the request (including invoices, contractor work orders, progress reports, and such other documentation as the Trustee may reasonably require); and
(b) Written approval from EPA, substantially in the form of Exhibit E attached hereto, signed by the Lead EPA Case Attorney (Margaret Coulson) or the designated EPA Project Coordinator for the relevant Facility, confirming that the requested disbursement is for Remediation Costs consistent with the Consent Decree and that EPA has no objection to the disbursement.
Upon receipt of both the Grantor's written disbursement request and EPA's written approval, the Trustee shall process and make the disbursement within ten (10) Business Days. The Trustee shall not be required to make any disbursement in the absence of both the Grantor's request and EPA's approval, except as provided in Section 7.2. In the event of any discrepancy between the amount requested by Grantor and the amount approved by EPA, the Trustee shall disburse the lesser of the two amounts and shall promptly notify both Grantor and EPA of the discrepancy.
Section 7.2 — Direct EPA Disbursement Authority
In the event that Grantor fails to perform its remediation obligations under the Consent Decree, or upon entry of a court order directing disbursement from the Trust Fund, EPA may direct the Trustee to disburse Trust Fund assets directly to EPA, to the United States Treasury, or to third parties performing or to perform remediation work at the Facilities, without the consent, joinder, or approval of Grantor. The Trustee shall comply with any such direction by EPA within five (5) Business Days of receipt thereof, provided that EPA's direction is accompanied by:
(a) A written statement identifying the basis for the direct disbursement request, including, as applicable, reference to Grantor's failure to perform under the Consent Decree, a court order, or other triggering event; and
(b) Specification of the amount to be disbursed, the payee, payment instructions, and the Facility or Facilities to which the disbursement relates.
The Trustee may rely conclusively upon EPA's direction under this Section 7.2 without independent investigation or verification, and the Trustee shall have no liability to Grantor or any other Person for any disbursement made in good faith reliance upon such direction. Grantor acknowledges and agrees that EPA's direct disbursement authority under this Section 7.2 is a material term of this Agreement and is essential to the financial assurance protections provided hereby.
Section 7.3 — Disbursement Allocation Among Sites
Unless EPA directs otherwise in writing, disbursements from the Trust Fund shall be allocated among the four Facilities in approximate proportion to their respective remaining estimated remediation obligations, calculated as follows based on the initial nominal remediation cost estimates set forth in the Consent Decree:
These allocation percentages are indicative and shall be subject to adjustment by EPA at any time by written notice to the Trustee and Grantor, based on updated remediation cost estimates, changes in remediation schedules, site-specific conditions, or the completion of remediation at one or more Facilities.
Section 7.4 — Prohibited Disbursements
Notwithstanding any other provision of this Agreement, Trust Fund assets shall not be used for any of the following purposes:
(a) Payment of civil penalties under the Consent Decree, which total Thirty-One Million Five Hundred Thousand Dollars ($31,500,000.00) in the aggregate, or any stipulated penalties assessed under the Consent Decree;
(b) Funding of Supplemental Environmental Projects ("SEPs") under the Consent Decree, which total Twelve Million Dollars ($12,000,000.00) in the aggregate;
(c) Reimbursement of EPA past costs, which total Eighteen Million One Hundred Thousand Dollars ($18,100,000.00) in the aggregate (consisting of Fourteen Million Three Hundred Thousand Dollars ($14,300,000.00) attributable to the Ridgecrest Mine and Three Million Eight Hundred Thousand Dollars ($3,800,000.00) attributable to the Kanawha Bend Chemical Plant); or
(d) Any other purpose not constituting forward-looking Remediation Costs at the Facilities as defined herein and authorized under the Consent Decree.
The Trust Fund is established exclusively for the purpose of providing financial assurance for forward-looking Remediation Costs, and neither Grantor, EPA, nor any other Person shall direct or authorize the Trustee to make any disbursement inconsistent with this limitation.
Section 7.5 — Disbursement Records
The Trustee shall maintain detailed, contemporaneous records of all disbursements from the Trust Fund, including the date of each disbursement, the amount disbursed, the name of the payee, the purpose of the disbursement (with reference to the applicable Remediation Cost category), the Facility to which the disbursement relates, and copies of the disbursement request, EPA approval, and supporting documentation. Such records shall be maintained in accordance with the recordkeeping requirements of Section 4.3 and shall be made available for inspection and audit by Grantor, EPA, and the Independent Monitor upon reasonable advance written request.
ARTICLE VIII — TAX PROVISIONS
Section 8.1 — Tax Status
The Trust is intended to qualify as a "qualified settlement fund" within the meaning of Section 468B of the Internal Revenue Code of 1986, as amended, and Treasury Regulation § 1.468B-1 et seq., or, in the alternative, as a "grantor trust" within the meaning of Sections 671 through 679 of the IRC, as may be determined based on final guidance from the Internal Revenue Service and the specific structural and operational characteristics of the Trust Fund. Grantor and Trustee shall cooperate in good faith to make all necessary elections, filings, and representations required to establish and maintain the intended tax status of the Trust Fund, and to obtain any necessary IRS private letter rulings or other guidance as may be required or advisable.
Section 8.2 — Tax Identification Number
The Trustee shall apply for and obtain a separate federal employer identification number (EIN) for the Trust Fund within thirty (30) days of the execution of this Agreement. All tax filings and correspondence relating to the Trust Fund shall reference such EIN. The Trustee shall promptly notify Grantor and EPA of the assigned EIN upon receipt.
Section 8.3 — Tax Returns
The Trustee shall be responsible for the preparation and timely filing of all required federal, state, and local income tax returns and information returns with respect to the Trust Fund, including without limitation IRS Form 1041 (or such other form as may be applicable based on the tax status of the Trust). The Trustee may engage qualified tax professionals to assist in the preparation of such returns, and the costs thereof shall be reimbursable as Trust Fund expenses in accordance with Section 5.2. All tax liabilities of the Trust Fund, including federal and state income taxes on investment income, shall be paid from Trust Fund assets, unless Grantor elects to pay such taxes directly.
Section 8.4 — Tax Counsel
Grantor shall be responsible for engaging and compensating tax counsel to advise on the tax treatment, characterization, and reporting of the Trust Fund and contributions thereto. Grantor's current external auditor is Ridgeline Accounting Partners LLP, with Frances Whitmore, CPA, CA, serving as engagement partner. The costs of such tax counsel and advisory services shall be borne by Grantor and shall not be payable from Trust Fund assets, unless Grantor and EPA otherwise agree in writing.
ARTICLE IX — REPRESENTATIONS AND WARRANTIES
Section 9.1 — Grantor Representations and Warranties
Grantor hereby represents and warrants to the Trustee and to EPA, as of the date of this Agreement and as of the date of each deposit into the Trust Fund, that:
(a) Organization and Good Standing. Grantor is a corporation duly organized, validly existing, and in good standing under the Canada Business Corporations Act, and is duly qualified and authorized to conduct business in the United States, including in the States of Montana, Nevada, West Virginia, and Delaware. Grantor's subsidiaries identified in the Recitals are each duly organized, validly existing, and in good standing under the laws of their respective jurisdictions of organization.
(b) Corporate Authority. Grantor has full corporate power and authority to enter into this Trust Agreement, to deposit the Initial Deposit and any subsequent deposits into the Trust Fund, and to perform all of its obligations hereunder. The execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate action, including but not limited to approval by the Board of Directors of Torchlight Mining Corp. (reference is made to the anticipated board resolution to be adopted on or about February 10, 2025). No further corporate approval, consent, or authorization is required for the valid execution and performance of this Agreement by Grantor.
(c) No Conflict. The execution, delivery, and performance of this Agreement by Grantor do not and will not (i) violate or conflict with Grantor's articles of incorporation, bylaws, or other constating documents; (ii) violate any applicable law, regulation, order, judgment, or decree; or (iii) result in a breach of, constitute a default under, or require consent under any material agreement to which Grantor is a party, including without limitation the C$750,000,000 syndicated revolving credit facility with Harborstone National Bank, N.A. (as Agent), dated as of March 15, 2022, as amended, with a maturity date of March 15, 2027 (the "Credit Facility"). Grantor represents that it has obtained, or will obtain prior to the date of the Initial Deposit, any consent required under the Credit Facility in connection with the establishment of the Trust Fund and the deposit of the Initial Deposit.
(d) Title to Deposits. The Initial Deposit and all subsequent deposits made by Grantor into the Trust Fund will be made in United States dollars, in immediately available funds, and will be free and clear of all liens, security interests, pledges, encumbrances, claims, and restrictions of any kind whatsoever. Grantor shall not create or permit to exist any lien or encumbrance on any assets held in the Trust Fund.
(e) Acknowledgment of Purpose. Grantor acknowledges and agrees that the Trust Fund is being established solely to satisfy the financial assurance requirements of the Consent Decree and applicable environmental laws, including RCRA and CERCLA, and that the Trust Fund assets are held for the benefit of EPA as Beneficiary.
Section 9.2 — Trustee Representations and Warranties
The Trustee hereby represents and warrants to Grantor and to EPA, as of the date of this Agreement, that:
(a) Organization and Authority. Larchfield Trust Company, N.A. is a national banking association duly organized, validly existing, and in good standing under the laws of the United States, and is authorized to exercise trust powers pursuant to 12 U.S.C. § 92a and applicable OCC regulations. The Trustee has full power and authority to enter into this Agreement and to perform all of its obligations hereunder.
(b) Experience and Capacity. The Trustee has the requisite institutional experience, staffing, systems, and financial capacity to administer environmental remediation trust funds of the size, complexity, and duration contemplated by this Agreement. The Trustee currently administers or has in the past five (5) years administered environmental trust funds with aggregate assets in excess of Five Hundred Million Dollars ($500,000,000.00).
(c) No Conflict of Interest. The Trustee has no financial interest in, or business relationship with, any party to the Consent Decree (other than this Agreement) that would create a conflict of interest or impair the Trustee's ability to discharge its fiduciary duties impartially and in the best interests of the Beneficiary. The Trustee shall promptly disclose any such conflict that may arise during the term of this Agreement.
(d) Insurance. The Trustee maintains adequate errors and omissions insurance, fidelity bond coverage, and other insurance coverage customary for national banking associations engaged in trust activities, in amounts sufficient to protect the Trust Fund against losses arising from the Trustee's acts or omissions.
ARTICLE X — LIABILITY AND INDEMNIFICATION
Section 10.1 — Trustee Standard of Care
The Trustee shall not be liable for any loss sustained by the Trust Fund or any diminution in the value of Trust Fund assets, except to the extent that such loss or diminution is directly caused by the Trustee's own negligence, willful misconduct, bad faith, or breach of fiduciary duty. Without limiting the generality of the foregoing, the Trustee shall not be liable for (a) losses resulting from the general decline in value of Permitted Investments due to market conditions, interest rate changes, or other factors beyond the Trustee's reasonable control; (b) losses resulting from the insolvency or default of any issuer of a Permitted Investment, provided that the Trustee exercised reasonable care in selecting such investment in accordance with Article VI; or (c) any act or omission taken in good faith reliance upon the advice of legal counsel, tax advisors, or other professionals retained in connection with the administration of the Trust Fund.
Section 10.2 — Indemnification of Trustee
Grantor shall indemnify, defend, and hold the Trustee harmless from and against any and all claims, demands, actions, suits, proceedings, losses, damages, liabilities, judgments, costs, and expenses (including reasonable attorneys' fees and disbursements) that may be asserted against, imposed upon, or incurred by the Trustee arising out of or in connection with this Agreement, the Trust Fund, or the Trustee's performance of its duties hereunder, except to the extent that such claims, losses, or liabilities are directly attributable to the Trustee's own negligence, willful misconduct, bad faith, or breach of fiduciary duty.
The indemnification obligations of Grantor under this Section 10.2 shall survive the resignation or removal of the Trustee, the appointment of a successor trustee, and the termination of this Agreement, and shall continue until the expiration of all applicable statutes of limitation with respect to any claim for which indemnification may be sought.
Section 10.3 — Limitation of Trustee Liability
The Trustee shall not, by virtue of this Agreement or its administration of the Trust Fund, be deemed to be an "owner" or "operator" of any Facility for purposes of RCRA, CERCLA, the CWA, or any other federal, state, or local environmental law or regulation. The Trustee shall not be liable for any environmental contamination, remediation obligation, natural resource damage, or personal injury or property damage claim arising out of or relating to conditions at any of the four Facilities. Nothing in this Agreement shall be construed to impose upon the Trustee any obligation to investigate, monitor, or remediate environmental conditions at any Facility.
Section 10.4 — Reliance by Trustee
The Trustee shall be entitled to rely, and shall be fully protected in relying, upon any notice, instruction, direction, certificate, request, consent, or other document or communication that the Trustee reasonably believes to be genuine and to have been signed, sent, or presented by an authorized representative of Grantor, EPA, or the Court, as applicable. The Trustee shall have no duty to make any independent investigation into the facts or matters stated in any such document or communication, and the Trustee's good faith reliance thereon shall be conclusive evidence of the reasonableness of any action taken or omitted in reliance thereon.