REMEDIATION TRUST AGREEMENT
Trust Agreement No. LTC-REM-2025-1177
Dated as of February 17, 2025
between
TORCHLIGHT MINING CORP. a corporation incorporated under the Canada Business Corporations Act ("Grantor")
and
LARCHFIELD TRUST COMPANY, N.A. a national banking association organized under the laws of the United States ("Trustee")
Established in connection with the Consent Decree entered in
United States of America and State of Montana v. Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC
Civil Action No. 9:24-cv-00087-DWM
United States District Court for the District of Montana, Missoula Division
EXECUTION VERSION — This document has been executed by the parties and acknowledged by the U.S. Environmental Protection Agency and the U.S. Department of Justice as of the date set forth above.
RECITALS
WHEREAS:
A. The Grantor. Torchlight Mining Corp. ("TMC" or the "Grantor") is a corporation duly incorporated and validly existing under the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended, dual-listed on the Toronto Stock Exchange (symbol: TRC) and the New York Stock Exchange (symbol: TRC), with its Canadian headquarters located at 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada, and its U.S. headquarters located at 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601. TMC is a diversified mining and specialty chemicals company that conducts its operations in the United States through its wholly owned U.S. subsidiaries, including: (i) Torchlight Mining (U.S.) Inc., a corporation organized under the laws of the State of Delaware (EIN: 83-2047156), which serves as the principal U.S. operating subsidiary for mining activities; (ii) Torchlight Specialty Chemicals, Inc., a corporation organized under the laws of the State of Delaware (EIN: 47-3819204), which operates chemical manufacturing facilities; (iii) Ridgecrest Mine Holdings, LLC, a Montana limited liability company (Montana Secretary of State ID: E1042738), which holds the Ridgecrest Copper-Molybdenum Mine and related mineral rights; and (iv) Bonanza Creek Mining, LLC, a Nevada limited liability company (Nevada Secretary of State Entity No.: E0518294731), which holds the Bonanza Creek Gold Mine and associated properties. TMC and its U.S. subsidiaries are collectively referred to herein as the "Torchlight Entities."
B. The Enforcement Action and Consent Decree. The United States of America, acting through the United States Environmental Protection Agency ("EPA") and the United States Department of Justice ("DOJ"), Environment and Natural Resources Division ("ENRD"), together with the States of Montana, Nevada, and West Virginia (collectively, the "Plaintiffs"), brought an enforcement action against TMC, Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC (collectively, the "Defendants") alleging violations of the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq. (the "Clean Water Act"), the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq. ("RCRA"), and the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601 et seq. ("CERCLA"), at four facilities owned and operated by the Defendants in the States of Montana, Nevada, and West Virginia, specifically:
(i) the Ridgecrest Copper-Molybdenum Mine, located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832 (the "Ridgecrest Site");
(ii) the Gallatin Chemical Works, located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714 (the "Gallatin Site");
(iii) the Bonanza Creek Gold Mine, located at County Road 447, Mile Marker 12, Lander County, Nevada 89820 (the "Bonanza Creek Site"); and
(iv) the Kanawha Bend Chemical Plant, located at 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112 (the "Kanawha Bend Site," and together with the Ridgecrest Site, the Gallatin Site, and the Bonanza Creek Site, the "Sites").
The enforcement action was filed on January 18, 2024, as Civil Action No. 9:24-cv-00087-DWM in the United States District Court for the District of Montana, Missoula Division, and was assigned to the Honorable Donald W. Molloy, Senior United States District Judge. Following extensive settlement negotiations between the parties, an agreement in principle was reached on July 30, 2024, and the substantially agreed text of the Consent Decree was finalized on February 3, 2025. The Consent Decree was lodged with the Court on February 19, 2025, and is expected to be entered by the Court following the requisite public comment period, with entry anticipated on or about May 15, 2025 (the "Consent Decree").
C. Financial Assurance Obligations. Pursuant to Sections VII.A through VII.D of the Consent Decree, the Grantor is required to establish financial assurance in the aggregate amount of Two Hundred Forty-Five Million Dollars ($245,000,000.00) (the "Financial Assurance Amount") to secure the Grantor's obligations to perform the Remediation Activities at each of the four Sites. The financial assurance package required under the Consent Decree consists of two components: (i) a surety bond in the principal amount of One Hundred Sixty-Five Million Dollars ($165,000,000.00) issued by Ironbark Surety of America, Inc., a subsidiary of Ironbark Surety Group, Ltd. (Bond No. ISA-ENV-2025-08934) (the "Surety Bond"), and (ii) this Remediation Trust Fund in the amount of Eighty Million Dollars ($80,000,000.00). The total negotiated remediation cost across all four Sites, expressed in nominal dollars, is Three Hundred Forty-Three Million Five Hundred Thousand Dollars ($343,500,000.00), broken down as follows: Ridgecrest Site — One Hundred Ninety-Eight Million Six Hundred Thousand Dollars ($198,600,000.00) over a thirty (30)-year remediation period; Gallatin Site — Forty-Two Million Eight Hundred Thousand Dollars ($42,800,000.00) over a fifteen (15)-year remediation period; Bonanza Creek Site — Sixty-Three Million Two Hundred Thousand Dollars ($63,200,000.00) over a twenty (20)-year remediation period; and Kanawha Bend Site — Thirty-Eight Million Nine Hundred Thousand Dollars ($38,900,000.00) over a twenty (20)-year remediation period. The net present value of the total negotiated remediation cost, discounted at a rate of three percent (3%) per annum, is Two Hundred Forty-Five Million One Hundred Thousand Dollars ($245,100,000.00), which approximates the Financial Assurance Amount. The allocation of the Financial Assurance Amount between the Surety Bond and this Trust Fund was determined by the Grantor, in consultation with its financial advisor, Northspire Capital Markets, Inc., and approved by EPA, taking into account the Grantor's cash position, creditworthiness, and the surety market's capacity to underwrite environmental remediation obligations of this magnitude.
D. The Trustee. Larchfield Trust Company, N.A. is a national banking association duly chartered under the laws of the United States by the Office of the Comptroller of the Currency ("OCC"), with its principal office located at 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202. Larchfield Trust Company, N.A. is authorized to exercise trust powers and to act as trustee under applicable federal and state law. David Henshaw serves as Trust Officer of Larchfield Trust Company, N.A. and has been designated as the Trust Officer with authority to administer the Trust established by this Agreement.
E. Purpose of the Trust. This Trust is established for the purpose of receiving, holding, investing, and disbursing funds for the purpose of financing the environmental remediation activities required by the Consent Decree at the four Sites identified in Recital B above. The Trust is intended to qualify as a trust fund for purposes of the financial assurance requirements applicable to environmental remediation under RCRA, including without limitation 40 C.F.R. § 264.147 (liability requirements for owners and operators of hazardous waste treatment, storage, and disposal facilities), and CERCLA cost-recovery assurance requirements. The Trust is further intended to comply with the financial assurance provisions set forth in Sections VII.A through VII.D of the Consent Decree and to constitute a valid and enforceable trust for the benefit of the environmental remediation objectives established therein.
F. EPA Approval. This Trust Agreement has been reviewed and approved by the EPA, acting through the Office of Enforcement and Compliance Assurance ("OECA"), represented by Margaret Coulson, Lead EPA Case Attorney, and the relevant EPA Regional offices, including EPA Region 8 (Denver, Colorado) with respect to the Ridgecrest Site and the Gallatin Site (both located in Montana), EPA Region 9 (San Francisco, California) with respect to the Bonanza Creek Site (located in Nevada), and EPA Region 3 (Philadelphia, Pennsylvania) with respect to the Kanawha Bend Site (located in West Virginia). EPA's approval of this Trust Agreement is evidenced by the acknowledgment and approval signature set forth on the signature pages hereof.
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 Grantor and the Trustee hereby 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. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Consent Decree.
(a) "Beneficiary" means the United States of America, acting through the U.S. Environmental Protection Agency, as the beneficiary of the Trust for the benefit of the environmental remediation objectives set forth in the Consent Decree. References to the Beneficiary shall include, as the context requires, the EPA and its authorized representatives, successors, and assigns.
(b) "Consent Decree" means the Consent Decree entered or to be entered in the matter styled United States of America and State of Montana v. Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC, Civil Action No. 9:24-cv-00087-DWM, in the United States District Court for the District of Montana, Missoula Division, together with all exhibits, appendices, and attachments thereto, as the same may be modified, amended, or supplemented from time to time in accordance with its terms.
(c) "Court" means the United States District Court for the District of Montana, Missoula Division, or such other federal court as may exercise jurisdiction over Civil Action No. 9:24-cv-00087-DWM.
(d) "Effective Date" means June 14, 2025, which is thirty (30) days after the expected date of entry of the Consent Decree by the Court on May 15, 2025, as provided in Section IV of the Consent Decree, or such other date as may be established as the effective date under the terms of the Consent Decree.
(e) "EPA" means the United States Environmental Protection Agency and its authorized representatives, successors, and assigns.
(f) "EPA Project Coordinators" means Dr. Samuel Tesfaye, EPA Project Coordinator for the Ridgecrest Site, designated by EPA Region 8, and Jennifer Whitfield, EPA Project Coordinator for the Bonanza Creek Site, designated by EPA Region 9, and their respective successors as designated by the applicable EPA Regional Administrator.
(g) "Financial Assurance Amount" means Two Hundred Forty-Five Million Dollars ($245,000,000.00) in the aggregate, consisting of the Surety Bond in the principal amount of One Hundred Sixty-Five Million Dollars ($165,000,000.00) and the Trust Fund in the amount of Eighty Million Dollars ($80,000,000.00), as such aggregate amount may be adjusted from time to time in accordance with the Consent Decree and Article VIII of this Agreement.
(h) "Grantor" means Torchlight Mining Corp., a corporation incorporated under the Canada Business Corporations Act, and, as the context requires, its U.S. subsidiaries, including Torchlight Mining (U.S.) Inc. (Delaware corporation, EIN: 83-2047156), Torchlight Specialty Chemicals, Inc. (Delaware corporation, EIN: 47-3819204), Ridgecrest Mine Holdings, LLC (Montana LLC, MT SOS ID: E1042738), and Bonanza Creek Mining, LLC (Nevada LLC, NV SOS Entity No.: E0518294731).
(i) "Independent Monitor" means Verdant Analytics, Inc., acting through Dr. Kamal Osei, Senior Managing Director, appointed by the Court as the independent environmental auditor and monitor under the Consent Decree, or such successor independent monitor as may be appointed by the Court.
(j) "Initial Deposit" means the sum of Eighty Million Dollars ($80,000,000.00) to be deposited by the Grantor into the Trust Fund in accordance with Section 2.2 of this Agreement.
(k) "Minimum Balance" has the meaning set forth in Section 5.6 of this Agreement.
(l) "Remediation Activities" means all environmental assessment, investigation, remedial design, remedial action, construction, operation, maintenance, monitoring, reporting, and other activities required under the Consent Decree at any or all of the Sites, including without limitation response actions, removal actions, corrective actions, source control measures, groundwater treatment, surface water treatment, ecological restoration, long-term monitoring, and post-closure care, as such terms are used in the Consent Decree and applicable environmental statutes and regulations.
(m) "Remediation Consultant" means Pinnacle Creek Environmental, LLC, acting through Dr. Astrid Bergmann, P.E., Senior Principal, or such other environmental engineering or consulting firm as may be engaged by the Grantor with the approval of EPA to perform or oversee Remediation Activities at the Sites.
(n) "Sites" means, collectively, the Ridgecrest Site, the Gallatin Site, the Bonanza Creek Site, and the Kanawha Bend Site, as more particularly described in Exhibit A hereto.
(o) "Surety Bond" means the surety bond in the principal amount of One Hundred Sixty-Five Million Dollars ($165,000,000.00) issued by Ironbark Surety of America, Inc. (Bond No. ISA-ENV-2025-08934), as the same may be amended, renewed, replaced, or supplemented from time to time.
(p) "Trust" or "Trust Fund" means the Torchlight Mining Corp. Environmental Remediation Trust Fund established pursuant to this Agreement, Trust Agreement No. LTC-REM-2025-1177.
(q) "Trust Agreement" means this Remediation Trust Agreement, Trust Agreement No. LTC-REM-2025-1177, as the same may be amended or supplemented from time to time in accordance with Article XIV hereof.
(r) "Trustee" means Larchfield Trust Company, N.A., a national banking association organized under the laws of the United States, or any successor trustee appointed in accordance with Article XI of this Agreement.
(s) "Trust Officer" means David Henshaw, Trust Officer of Larchfield Trust Company, N.A., or his designated successor within Larchfield Trust Company, N.A.
Section 1.2 — Interpretation.
(a) References in this Agreement to any statute, regulation, or other law include all amendments thereto and all successor provisions, and all regulations promulgated thereunder, as in effect from time to time.
(b) References in this Agreement to the Consent Decree include all exhibits, appendices, attachments, and modifications thereto, whether existing as of the date hereof or subsequently adopted in accordance with the terms of the Consent Decree.
(c) All dollar amounts referenced in this Agreement are expressed in United States Dollars ("USD") unless otherwise expressly specified. Where Canadian Dollar amounts are referenced, the abbreviation "C$" is used.
(d) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." The words "herein," "hereof," "hereby," and "hereunder" refer to this Agreement as a whole and not to any particular section or provision. References to "Sections," "Articles," and "Exhibits" refer to the sections, articles, and exhibits of this Agreement unless otherwise specified.
(e) The singular includes the plural, and the plural includes the singular, as the context requires. The masculine gender includes the feminine and neuter, and the feminine gender includes the masculine and neuter, as the context requires.
ARTICLE II
ESTABLISHMENT OF TRUST
Section 2.1 — Creation of Trust.
The Grantor hereby establishes an irrevocable trust, designated the "Torchlight Mining Corp. Environmental Remediation Trust Fund," Trust Agreement No. LTC-REM-2025-1177, for the purposes set forth in Article III of this Agreement. The Trust is established in accordance with, and is intended to satisfy, the financial assurance requirements of the Consent Decree, including without limitation the provisions of Section VII thereof. The Trust shall be irrevocable during the term of this Agreement, and the Grantor may not revoke, amend, modify, or terminate the Trust except as expressly permitted by the terms of this Agreement. The Grantor hereby irrevocably transfers, assigns, and conveys to the Trustee, in trust, the Initial Deposit and any additional deposits made hereunder, to be held, invested, and disbursed by the Trustee in accordance with the terms and conditions of this Agreement.
Section 2.2 — Initial Deposit.
The Grantor shall deposit into the Trust Fund the sum of Eighty Million Dollars ($80,000,000.00) (the "Initial Deposit") within ninety (90) days of the Effective Date (i.e., no later than September 12, 2025). The Initial Deposit shall be made by wire transfer of immediately available funds to the Trustee's designated trust account at Larchfield Trust Company, N.A., Charlotte, North Carolina, in accordance with the wire transfer instructions set forth in Exhibit G hereto. The Trustee shall acknowledge receipt of the Initial Deposit in writing to the Grantor and EPA within two (2) business days of receipt. Failure by the Grantor to make the Initial Deposit by the date specified in this Section 2.2 shall constitute a material breach of this Agreement and may give rise to stipulated penalties under Section VII.E of the Consent Decree, which provides for stipulated penalties of One Thousand Five Hundred Dollars ($1,500.00) per day for each of the first thirty (30) days of noncompliance, Three Thousand Dollars ($3,000.00) per day for each day from day thirty-one (31) through day sixty (60) of noncompliance, and Five Thousand Five Hundred Dollars ($5,500.00) per day for each day thereafter.
Section 2.3 — Additional Deposits.
The Grantor shall make additional deposits into the Trust Fund as and when required by Article VIII of this Agreement (Annual Adjustment Mechanism) or as ordered by the Court. In addition, the Grantor may make voluntary additional deposits into the Trust Fund at any time and from time to time, without the prior consent of EPA or the Trustee, provided that the Grantor shall provide written notice to the Trustee and EPA of any voluntary additional deposit not less than five (5) business days prior to the date of such deposit. All additional deposits shall be made by wire transfer of immediately available funds to the Trustee's designated trust account in accordance with the wire transfer instructions set forth in Exhibit G hereto.
Section 2.4 — Trust Property.
The property held in the Trust (the "Trust Property") shall consist of: (a) the Initial Deposit; (b) any additional deposits made by the Grantor pursuant to Section 2.3 of this Agreement; (c) all investment earnings, income, interest, dividends, and other returns generated by the investment of Trust Property in accordance with Article VI of this Agreement; and (d) any property or funds received by the Trust from third-party cost-recovery actions, insurance proceeds, contribution claims, or other sources that are allocated or directed to the Trust Fund in accordance with the Consent Decree or by order of the Court. All Trust Property, however acquired, shall be held, invested, and disbursed by the Trustee solely in accordance with the terms and conditions of this Agreement.
Section 2.5 — Irrevocability.
The Trust is irrevocable. No portion of the Trust Property shall revert to the Grantor or be used for the benefit of the Grantor except upon termination of the Trust in accordance with Article XII of this Agreement. The Grantor shall have no right, title, or interest in or to the Trust Property except as expressly provided in this Agreement. No creditor of the Grantor shall have any right, title, or interest in or to the Trust Property by reason of any claim, lien, encumbrance, judgment, or other obligation against or of the Grantor, except as may be ordered by the Court in connection with the enforcement of the Consent Decree. The Trust Property shall not be subject to attachment, garnishment, execution, or other legal process by any creditor of the Grantor, and neither the Grantor nor any creditor of the Grantor may compel the Trustee to make any distribution or disbursement from the Trust except in accordance with the terms of this Agreement.
ARTICLE III
PURPOSE OF TRUST
Section 3.1 — Sole Purpose.
The Trust Fund shall be used solely and exclusively to finance Remediation Activities at the four Sites as required by the Consent Decree. Without limiting the foregoing, the Trust Fund shall be used to pay for environmental assessment, investigation, remedial design, remedial action, construction, operation, maintenance, monitoring, and reporting activities at the Sites, as well as the costs of environmental engineering consultants, contractors, laboratories, equipment, and materials necessary to perform such Remediation Activities. The Trust Fund shall not be used for the payment of: (i) civil penalties assessed under the Consent Decree, which total Thirty-One Million Five Hundred Thousand Dollars ($31,500,000.00); (ii) supplemental environmental project ("SEP") obligations, which total Twelve Million Dollars ($12,000,000.00); (iii) EPA past-costs reimbursement obligations, which total Eighteen Million One Hundred Thousand Dollars ($18,100,000.00); or (iv) the costs of the Independent Monitor (Verdant Analytics, Inc.), estimated at Four Million Eight Hundred Thousand Dollars ($4,800,000.00) over a five (5)-year period. Each of these obligations is a separate obligation of the Grantor under the Consent Decree and is not secured by the Trust Fund.
Section 3.2 — Allocation Among Sites.
The Trust Fund shall be allocated among the four Sites as set forth in the following table, which reflects the initial allocation as of the date of the Initial Deposit, subject to adjustment as provided in this Section 3.2 and Article VIII of this Agreement:
The initial allocation reflects the relative magnitude of each Site's remediation obligations, the anticipated timing of expenditures at each Site, and the risk profile associated with each Site's remediation program. Re-allocation of Trust Fund amounts among the Sites shall be permitted only with the prior written approval of EPA. Requests for re-allocation shall be submitted by the Grantor to the EPA Project Coordinators with a detailed explanation of the basis for the proposed re-allocation and the impact on the remediation programs at the affected Sites.
Section 3.3 — No Diversion.
Trust Property may not be used for any purpose other than: (a) financing Remediation Activities at the Sites in accordance with the Consent Decree and this Agreement; (b) paying the Trustee's fees and expenses in accordance with Article VII of this Agreement; and (c) paying authorized administrative expenses of the Trust, including without limitation accounting fees, tax preparation costs, and legal expenses directly related to the administration of the Trust. Any other use of Trust Property is strictly prohibited absent a Court order expressly authorizing such use. The Grantor shall not direct, request, or cause the Trustee to disburse Trust Property for any purpose not authorized by this Agreement, and the Trustee shall not comply with any such direction, request, or instruction.
ARTICLE IV
TRUSTEE POWERS AND DUTIES
Section 4.1 — Acceptance of Trusteeship.
Larchfield Trust Company, N.A. hereby accepts its appointment as Trustee under this Agreement and agrees to hold, invest, and disburse the Trust Property in accordance with the terms and conditions of this Agreement, the Consent Decree, and applicable law. The Trustee shall act at all times in a fiduciary capacity with respect to the Trust Property and shall discharge its duties hereunder solely in the interest of the Beneficiary and the purposes of the Trust as set forth in Article III.
Section 4.2 — Standard of Care.
The Trustee shall administer the Trust with the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. In the exercise of this standard of care, the Trustee shall comply with all applicable federal and state laws, regulations, and orders, including without limitation the fiduciary standards applicable to national banking associations exercising trust powers under 12 U.S.C. § 92a and the regulations of the Office of the Comptroller of the Currency, 12 C.F.R. Part 9. The Trustee shall exercise independent judgment in the administration of the Trust and shall not be subject to the direction or control of the Grantor except as expressly provided in this Agreement.
Section 4.3 — Powers of Trustee.
Subject to the terms and conditions of this Agreement, the Trustee shall have the following powers and authority:
(a) To invest and reinvest Trust Property in accordance with the Investment Guidelines set forth in Article VI of this Agreement;
(b) To disburse Trust funds in accordance with the Disbursement Procedures set forth in Article V of this Agreement;
(c) To retain such sub-agents, accountants, tax advisors, investment advisors, and legal counsel as may be reasonably necessary to assist the Trustee in the administration of the Trust, at the Trust's expense (subject to the limitations set forth in Article VII);
(d) To execute, deliver, and file all documents, instruments, certificates, returns, and reports necessary or appropriate to administer the Trust, including without limitation tax returns, regulatory filings, and court filings;
(e) To maintain complete and accurate records of all Trust transactions and to provide reports as required by Article IX of this Agreement;
(f) To open and maintain bank accounts and investment accounts in the name of the Trust as necessary for the administration of the Trust;
(g) To collect and receive all income, dividends, interest, and other distributions payable on Trust Property;
(h) To compromise, settle, or abandon claims of or against the Trust when the Trustee determines, in the exercise of its reasonable judgment, that such action is in the interest of the Trust, provided that any compromise or settlement involving amounts in excess of Fifty Thousand Dollars ($50,000.00) shall require the prior written approval of EPA; and
(i) To take all other actions reasonably necessary or appropriate to carry out the purposes of the Trust and to discharge the Trustee's duties hereunder.
Section 4.4 — Limitation on Trustee's Duties.
Notwithstanding any other provision of this Agreement, the Trustee shall have no duty or obligation to:
(a) Verify the accuracy, completeness, or truthfulness of any disbursement request submitted by the Grantor or EPA, or any supporting documentation provided in connection therewith, and the Trustee shall be entitled to rely upon such requests and documentation without independent investigation;
(b) Monitor the Grantor's compliance with the Consent Decree, including without limitation the Grantor's performance of Remediation Activities at the Sites;
(c) Monitor environmental conditions at any Site, or take any action with respect to environmental contamination or remediation at any Site;
(d) Evaluate the adequacy of the Trust Fund to meet the Grantor's remediation obligations under the Consent Decree, except to the extent expressly required by Article VIII of this Agreement;
(e) Take any action that would cause the Trustee to be deemed an operator, owner, or person in charge of any Site or any hazardous waste facility for purposes of CERCLA, RCRA, the Clean Water Act, or any other environmental statute or regulation; or
(f) Supervise or direct the performance of Remediation Activities by the Grantor, the Remediation Consultant, or any other person or entity.
Section 4.5 — No Commingling.
The Trustee shall maintain Trust Property in one or more segregated accounts, separate and distinct from all other assets of the Trustee, including without limitation the Trustee's corporate assets, fiduciary assets held for other trusts or accounts, and any other funds held by the Trustee in any capacity. The Trust accounts shall be clearly designated and identified as the property of the Torchlight Mining Corp. Environmental Remediation Trust Fund, Trust Agreement No. LTC-REM-2025-1177. Under no circumstances shall Trust Property be commingled with (i) the assets of the Trustee, (ii) the assets of any other trust or account administered by the Trustee, or (iii) any funds held under the Escrow Agreement for Stipulated Penalty Deposits dated February 17, 2025, between the Grantor and Larchfield Trust Company, N.A. as escrow agent.
ARTICLE V
DISBURSEMENT PROCEDURES
Section 5.1 — Disbursement Requests.
The Grantor may submit written disbursement requests to the Trustee for the payment of costs incurred or to be incurred in connection with Remediation Activities at the Sites. Each disbursement request shall be substantially in the form of Exhibit E hereto and shall include the following information:
(a) The total dollar amount of the disbursement requested;
(b) The Site (or Sites) to which the disbursement relates, and the specific sub-account from which the disbursement should be drawn, in accordance with the allocation set forth in Section 3.2 of this Agreement;
(c) A description of the Remediation Activities for which payment is sought, including the applicable provision of the Consent Decree requiring such activities;
(d) The name, address, and wire transfer or payment instructions of the payee or payees to whom the disbursement is to be made;
(e) Supporting invoices, cost documentation, or other evidence of the costs incurred or to be incurred, including invoices from the Remediation Consultant (Pinnacle Creek Environmental, LLC, Dr. Astrid Bergmann, P.E.) or other authorized contractors, vendors, or consultants;
(f) A certification by an authorized officer of the Grantor that the disbursement request is for Remediation Activities required by the Consent Decree, that the costs are reasonable and necessary, and that the disbursement, if approved, will be applied solely to Remediation Activities at the identified Site; and
(g) Evidence of EPA approval, if required under Section 5.2 of this Agreement, or a certification of compliance in lieu thereof.
The Trustee shall process each properly submitted and approved disbursement request within ten (10) business days of receipt, or within such shorter period as may be specified in the request for emergency disbursements under Section 5.3.
Section 5.2 — EPA Approval Requirement.
(a) No disbursement from the Trust Fund in excess of Five Hundred Thousand Dollars ($500,000.00) shall be made by the Trustee without the prior written approval of EPA. The Grantor shall submit a copy of each disbursement request for an amount in excess of Five Hundred Thousand Dollars ($500,000.00) to the EPA Project Coordinators and the Lead EPA Case Attorney simultaneously with its submission to the Trustee. EPA shall have thirty (30) days from the date of its receipt of a complete disbursement request to approve or object to the request. If EPA does not respond within thirty (30) days, the disbursement request shall be deemed approved.
(b) For disbursements of Five Hundred Thousand Dollars ($500,000.00) or less, the Grantor may submit to the Trustee a certification of compliance with the Consent Decree, signed by an authorized officer of the Grantor, in lieu of individual EPA approval. Such certification shall state that the disbursement is for Remediation Activities required by the Consent Decree and that the costs are reasonable, necessary, and consistent with the approved remedial work plans for the applicable Site. Disbursements made under this certification procedure shall be subject to quarterly reconciliation, pursuant to which the Grantor shall provide EPA with a summary of all disbursements made during the preceding calendar quarter, together with supporting documentation. EPA shall have thirty (30) days following receipt of the quarterly reconciliation to object to any disbursement. If EPA objects to any disbursement, the Grantor shall promptly reimburse the Trust Fund in the amount of the objected disbursement, unless the dispute is resolved in the Grantor's favor under the dispute resolution procedures set forth in Article XV.
Section 5.3 — Emergency Disbursements.
In the event of an environmental emergency requiring immediate expenditure of funds for Remediation Activities at any Site — including without limitation releases or threatened releases of hazardous substances, imminent endangerment to human health or the environment, equipment failures at treatment systems, or structural failures at containment facilities — the Grantor may request an expedited disbursement from the Trust Fund by submitting a written request to the Trustee with concurrent notice to EPA (including the applicable EPA Project Coordinator and the Lead EPA Case Attorney). The Trustee shall process such emergency disbursement request within two (2) business days of receipt. EPA approval shall be deemed given if EPA does not object within five (5) business days of receipt of notice. Emergency disbursements under this Section 5.3 shall be capped at Two Million Dollars ($2,000,000.00) per event without the standard EPA approval required under Section 5.2(a). The Grantor shall provide EPA with a detailed written report regarding each emergency disbursement within fifteen (15) days of the disbursement.
Section 5.4 — Disbursements to Third Parties.
The Trustee is authorized to make disbursements directly to approved contractors, consultants, vendors, and other third parties performing or providing goods and services in connection with Remediation Activities at the Sites. Pinnacle Creek Environmental, LLC (Dr. Astrid Bergmann, P.E., Senior Principal) is hereby designated as an approved payee under this Agreement. Additional payees may be designated by the Grantor, with the consent of EPA, by written notice to the Trustee identifying the name, address, tax identification number, and wire transfer instructions of the proposed payee. The Trustee shall not be required to disburse funds to any payee that has not been designated as an approved payee in accordance with this Section 5.4.
Section 5.5 — EPA Direct Access.
In the event that the Grantor fails to perform Remediation Activities as required by the Consent Decree and the Court enters an order directing EPA to undertake such Remediation Activities (or to retain contractors to undertake such Remediation Activities) using Trust Fund assets, EPA may direct the Trustee to disburse funds directly to EPA or to contractors retained by EPA for the performance of Remediation Activities at the Sites. The Trustee shall comply with any such direction from EPA that is accompanied by a certified copy of the relevant Court order. This provision shall be specifically enforceable by the Court, and the Grantor hereby consents to the specific enforcement of this provision. Nothing in this Section 5.5 shall be construed to limit any other remedy available to EPA under the Consent Decree, CERCLA, RCRA, or any other applicable law.
Section 5.6 — Limitation on Disbursements.
(a) No disbursement from the Trust Fund shall cause the Trust Fund balance (including accrued but unpaid investment earnings and excluding accrued but unpaid Trustee fees) to fall below the sum of Five Million Dollars ($5,000,000.00) (the "Minimum Balance"), except with prior Court approval. If a disbursement request would, if honored, cause the Trust Fund balance to fall below the Minimum Balance, the Trustee shall promptly notify the Grantor and EPA in writing and shall not process such disbursement request unless and until (i) the Grantor makes an additional deposit sufficient to maintain the Trust Fund balance at or above the Minimum Balance after giving effect to the requested disbursement, or (ii) the Court enters an order authorizing the disbursement.
(b) Total disbursements from the Trust Fund in any calendar year shall not exceed Twenty Million Dollars ($20,000,000.00) without the prior written approval of EPA. This annual disbursement limitation is subject to adjustment in accordance with the remediation schedule set forth in the Consent Decree and the annual review process described in Article VIII of this Agreement. For purposes of this limitation, disbursements made in connection with emergency events under Section 5.3 shall be counted toward the annual disbursement total.
ARTICLE VI
INVESTMENT GUIDELINES
Section 6.1 — Investment Objective.
The primary investment objective for the Trust Fund is the preservation of capital and the maintenance of sufficient liquidity to meet anticipated Remediation Activity expenditures as they come due in accordance with the remediation schedule established by the Consent Decree. The secondary investment objective is to earn a reasonable rate of return on Trust Property consistent with the primary objective. In pursuing these objectives, the Trustee shall give priority to the safety and liquidity of Trust Property over yield, and shall at all times maintain a portion of the Trust Fund in cash or cash equivalents sufficient to meet anticipated disbursement needs over the succeeding twelve (12) months.
Section 6.2 — Permitted Investments.
Trust Property may be invested and reinvested only in the following categories of investments (the "Permitted Investments"):
(a) Direct obligations of the United States of America (U.S. Treasury bills, notes, and bonds), without maturity restriction;
(b) Obligations of agencies or instrumentalities of the United States of America that are guaranteed as to principal and interest by the full faith and credit of the United States, including without limitation obligations of the Government National Mortgage Association (Ginnie Mae);
(c) Certificates of deposit issued by banks and savings institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC"), in amounts per institution not exceeding the applicable FDIC insurance limits (currently $250,000 per depositor per institution), or in amounts exceeding such limits if such certificates are fully collateralized by U.S. Treasury securities;
(d) Shares of money market mutual funds that invest exclusively in U.S. government securities, provided that such funds are registered under the Investment Company Act of 1940, as amended, and maintain a stable net asset value of $1.00 per share;
(e) General obligation or revenue bonds issued by states, municipalities, or other political subdivisions of the United States, provided that such bonds are rated "A" or higher by at least one nationally recognized statistical rating organization ("NRSRO") at the time of purchase;
(f) Corporate bonds or debentures that are rated "A-" or higher by at least one NRSRO at the time of purchase, with a maturity not exceeding five (5) years from the date of purchase; and
(g) Cash and demand deposits in FDIC-insured accounts.
No investment shall be made in equity securities, derivative instruments (including options, futures, swaps, or forward contracts), structured products, collateralized debt obligations, asset-backed securities (other than U.S. government-guaranteed securities), hedge fund interests, private equity interests, real estate, commodities, or any other investment not expressly listed above.
Section 6.3 — Prohibited Investments.
Notwithstanding Section 6.2, under no circumstances shall Trust Property be invested in:
(a) Securities issued by, or equity or debt interests in, Torchlight Mining Corp. or any of its direct or indirect subsidiaries, affiliates, or related entities;
(b) Securities issued by, or equity or debt interests in, any entity that is a party to the Consent Decree, a defendant in Civil Action No. 9:24-cv-00087-DWM, or a counterparty to any financial assurance instrument provided in connection with the Consent Decree, including without limitation Ironbark Surety of America, Inc., Ironbark Surety Group, Ltd., and their respective affiliates, subsidiaries, and related entities;
(c) Securities issued by, or equity or debt interests in, Meridian Environmental Insurance Company or its affiliates, or any other insurance company from which the Grantor is seeking or may seek coverage for environmental liabilities at the Sites; or
(d) Any security or instrument with a credit rating below investment grade (i.e., below "BBB-" or its equivalent by any NRSRO) at the time of purchase, or any security or instrument that has been downgraded below investment grade while held in the Trust portfolio, which the Trustee shall dispose of within ninety (90) days of such downgrade unless the Trustee determines, in its reasonable judgment, that an orderly disposition over a longer period (not to exceed one hundred eighty (180) days) would be in the best interest of the Trust.
Section 6.4 — Duration Matching.
The Trustee shall manage the investment portfolio's duration to match, to the extent reasonably practicable, the anticipated timing and magnitude of disbursement needs based on the remediation schedule set forth in the Consent Decree and the annual reviews conducted under Article VIII. The weighted-average maturity of the investment portfolio shall not exceed three (3) years at any time. The Trustee shall maintain at least twenty percent (20%) of Trust Property in cash, cash equivalents, or securities maturing within ninety (90) days, to provide adequate liquidity for anticipated near-term disbursement needs and emergency disbursements.
Section 6.5 — Investment Discretion.
The Trustee shall have discretion to select specific investments within the Permitted Investment categories, subject to the overall Investment Guidelines set forth in this Article VI. The Grantor may provide non-binding investment preferences to the Trustee from time to time, and the Trustee shall give reasonable consideration to such preferences, provided that the Trustee shall not be required to follow any preference that, in the Trustee's judgment, would be inconsistent with the Investment Guidelines or the Trustee's fiduciary obligations. The Trustee may engage one or more registered investment advisors to assist in the management of the investment portfolio, at the Trust's expense (subject to the limitations set forth in Article VII).
Section 6.6 — Investment Earnings.
All investment earnings, income, interest, dividends, and other returns generated by the investment of Trust Property shall be retained in the Trust Fund and shall constitute Trust Property for all purposes of this Agreement. Investment earnings shall be available for disbursement for Remediation Activities in accordance with Article V of this Agreement and shall be subject to the same restrictions and conditions as all other Trust Property. Investment earnings shall be credited to the applicable Site sub-accounts on a pro rata basis, based on the relative balances of each sub-account at the time such earnings are credited, unless the Grantor and EPA agree in writing to a different allocation of investment earnings.
ARTICLE VII
TRUSTEE COMPENSATION AND EXPENSES
Section 7.1 — Trustee Fees.
The Trustee shall be entitled to receive an annual fee for its services as Trustee under this Agreement equal to ten basis points (0.10%) of the average daily net asset value of Trust Fund assets under management per annum, payable quarterly in arrears within fifteen (15) days of the end of each calendar quarter. Based on an assumed Trust Fund balance of Eighty Million Dollars ($80,000,000.00), the initial annual fee is estimated at Eighty Thousand Dollars ($80,000.00), or Twenty Thousand Dollars ($20,000.00) per quarter. In no event shall the annual fee be less than the minimum annual fee of Sixty Thousand Dollars ($60,000.00), regardless of the Trust Fund balance. The fee schedule set forth in this Section 7.1 shall be subject to review and potential adjustment by mutual written agreement of the Grantor and the Trustee every three (3) years during the term of the Trust, commencing on the third anniversary of the Effective Date. Any proposed fee adjustment shall be subject to the prior review and approval of EPA.
Section 7.2 — Extraordinary Expenses.
Extraordinary expenses incurred by the Trustee in connection with the administration of the Trust — including without limitation costs of defending the Trust or the Trustee in litigation, costs of complying with Court orders not contemplated at the time of execution of this Agreement, costs of regulatory audits or examinations directed at the Trust, and costs of engaging special counsel or consultants in connection with unusual or complex matters arising out of the Trust administration — shall be reimbursed by the Grantor directly to the Trustee. Extraordinary expenses shall not be payable from Trust Fund assets except with the prior written approval of EPA. The Trustee shall provide the Grantor with reasonable documentation of any extraordinary expenses for which reimbursement is sought, including invoices from third-party service providers.
Section 7.3 — Payment of Fees and Expenses.
The Trustee's regular fees described in Section 7.1 are payable from Trust Fund assets and shall be deducted from the Trust Fund by the Trustee at the end of each calendar quarter, subject to the Minimum Balance requirement set forth in Section 5.6. If the payment of Trustee fees from Trust Fund assets would cause the Trust Fund balance to fall below the Minimum Balance of Five Million Dollars ($5,000,000.00), the Grantor shall pay such fees directly to the Trustee within thirty (30) days of receipt of the Trustee's invoice. The Trustee shall have a first-priority lien on Trust Property with respect to accrued and unpaid fees, subject to the prior claims of EPA under Section 5.5 of this Agreement.
Section 7.4 — Tax Obligations.
The Grantor is and shall remain responsible for all federal, state, and local tax obligations arising from Trust income, including without limitation income taxes on Trust earnings, regardless of whether such earnings have been distributed from the Trust. The Trust is intended to be treated as a grantor trust for federal income tax purposes under Sections 671 through 679 of the Internal Revenue Code of 1986, as amended, with all items of income, deduction, and credit reportable on the tax returns of the Grantor. The Trustee shall prepare and file (or cause to be prepared and filed) all required tax returns for the Trust, including IRS Form 1041 (U.S. Income Tax Return for Estates and Trusts) and Schedule K-1 (Beneficiary's Share of Income, Deductions, Credits, etc.), as applicable, and shall provide copies to the Grantor and its tax advisors in a timely manner. The costs of tax return preparation and filing shall be payable from Trust Fund assets as an administrative expense of the Trust.
ARTICLE VIII
ANNUAL ADJUSTMENT MECHANISM
Section 8.1 — Annual Review.
The Trustee and the Grantor shall conduct an annual review of the adequacy of the Trust Fund within sixty (60) days of each anniversary of the Effective Date for the purpose of determining whether the Trust Fund balance, together with the Surety Bond, is sufficient to meet the Grantor's remaining Remediation Activity obligations under the Consent Decree. Each annual review shall consider the following factors:
(a) Cumulative disbursements from the Trust Fund since inception, by Site;
(b) The remaining estimated costs of completing all Remediation Activities at each Site, as reflected in the most recent cost estimates prepared by the Remediation Consultant (Pinnacle Creek Environmental, LLC) or, if applicable, an independent cost estimate prepared at EPA's direction;
(c) Actual expenditure rates compared to projected expenditure rates under the remediation schedule set forth in the Consent Decree;
(d) Inflation adjustments as provided in Section 8.4 of this Agreement;
(e) Investment performance of the Trust Fund over the preceding period, including total return, income earned, and unrealized gains or losses; and
(f) The current face amount of the Surety Bond and any draws made against the Surety Bond.
The results of each annual review shall be documented in a written Trust Fund Adequacy Certificate, substantially in the form set forth in Exhibit F hereto, signed by an authorized officer of the Grantor and the Trust Officer.
Section 8.2 — EPA Participation in Review.
EPA shall be entitled to participate in each annual review conducted under Section 8.1 of this Agreement. The Grantor shall provide EPA with not less than thirty (30) days' prior written notice of each annual review and shall provide EPA with all information and documentation to be considered in the review. EPA may retain its own financial or technical consultant to evaluate the adequacy of the Trust Fund, including without limitation Cascade Geosciences, Inc. (Dr. Patricia Voss, Principal Scientist), or such other consultant as EPA may designate. The reasonable costs of EPA's consultant in connection with the annual review process shall be borne by the Grantor and shall not be payable from Trust Fund assets. EPA shall have the right to submit written comments and objections with respect to the conclusions of any annual review, and any dispute between the Grantor and EPA regarding the adequacy of the Trust Fund shall be resolved in accordance with the dispute resolution procedures set forth in Article XV of this Agreement.
Section 8.3 — Additional Deposits.
If the annual review conducted under Section 8.1 determines that the Trust Fund balance, together with the current face amount of the Surety Bond, is insufficient to meet the Grantor's remaining Remediation Activity obligations under the Consent Decree, the Grantor shall make additional deposits to the Trust Fund in an amount sufficient to eliminate such insufficiency, within ninety (90) days of the date of the written determination. The aggregate of the Trust Fund balance (including accrued but undisbursed investment earnings) and the Surety Bond face amount shall at all times equal or exceed the then-current estimate of remaining remediation costs on a net present value basis, discounted at the rate specified in the Consent Decree (currently three percent (3%) per annum). Failure by the Grantor to make required additional deposits within the ninety (90)-day period shall constitute a material breach of this Agreement and the Consent Decree and may give rise to stipulated penalties as provided in the Consent Decree.
Section 8.4 — Inflation Adjustment.
Remaining remediation cost estimates used in connection with the annual review process shall be adjusted annually for inflation using the U.S. Bureau of Labor Statistics Producer Price Index for Mining Services (Series ID: PCU21-21-), or such other index as EPA may approve in writing. The inflation adjustment shall be applied as of January 1 of each year, based on the twelve-month percentage change in the applicable index for the preceding calendar year. If the applicable index is discontinued or materially revised, the Grantor and EPA shall agree upon a suitable substitute index; in the absence of agreement, the substitute index shall be determined by the Court.
Section 8.5 — Coordination with Surety Bond.
Adjustments to the Trust Fund level determined through the annual review process shall be coordinated with adjustments to the Surety Bond (Bond No. ISA-ENV-2025-08934) issued by Ironbark Surety of America, Inc. (Thomas Rennick, Account Executive). The combined Financial Assurance Amount of Two Hundred Forty-Five Million Dollars ($245,000,000.00) may be reallocated between the Trust Fund and the Surety Bond with the prior written approval of EPA, provided that the total Financial Assurance Amount is not reduced below the level required by the Consent Decree. Any reallocation shall be documented in a written amendment to this Agreement (with respect to the Trust Fund component) and a corresponding amendment to the Surety Bond (with respect to the Surety Bond component). For example, if the Grantor increases the Trust Fund by Ten Million Dollars ($10,000,000.00), the face amount of the Surety Bond may be reduced by Ten Million Dollars ($10,000,000.00) with EPA approval, so that the combined Financial Assurance Amount remains at the required level.
ARTICLE IX
REPORTING AND RECORDKEEPING
Section 9.1 — Quarterly Statements.
The Trustee shall prepare and provide quarterly statements to the Grantor and EPA within thirty (30) days of the end of each calendar quarter (i.e., within 30 days of March 31, June 30, September 30, and December 31 of each year). Each quarterly statement shall include the following information:
(a) The Trust Fund balance as of the end of the quarter, in the aggregate and by Site sub-account;
(b) A detailed listing of the investment portfolio composition, including the description, par value, market value, and maturity date of each investment held;
(c) The total income earned during the quarter, including interest, dividends, and realized gains or losses;
(d) A summary of all disbursements made during the quarter, including the date, amount, payee, Site, and purpose of each disbursement;
(e) A summary of all deposits received during the quarter;
(f) Trustee fees and administrative expenses charged during the quarter; and
(g) A reconciliation of the beginning and ending Trust Fund balances.
Section 9.2 — Annual Report.
The Trustee shall prepare and provide an annual report to the Grantor and EPA within sixty (60) days of the end of each calendar year (i.e., by March 1 of the following year). The annual report shall include:
(a) Audited financial statements of the Trust Fund for the calendar year, prepared in accordance with generally accepted accounting principles ("GAAP") and audited by an independent certified public accounting firm engaged by the Trustee;
(b) A comprehensive summary of all transactions during the calendar year, including all deposits, disbursements, investment purchases and sales, income received, and fees paid;
(c) An investment performance analysis, including the total return of the Trust portfolio for the year, comparison to relevant benchmarks (e.g., the Westmark Services Inc. U.S. Treasury 1-3 Year Index), and a discussion of material investment decisions;
(d) A comparison of the Trust Fund balance to the remaining estimated remediation costs for each Site, based on the most recent cost estimates available; and
(e) An assessment of Trust Fund adequacy, including the Trust Fund Adequacy Certificate prepared pursuant to Section 8.1 of this Agreement.