Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the impact of the proposed $35,000,000 mezzanine financing from Pinnacle Bridge Mezzanine Opportunities Fund IV, LP ("Pinnacle Bridge" or the "Mezzanine Lender") on the covenants and restrictions contained in the Second Amended and Restated Credit Agreement, dated as of March 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Senio

II. BACKGROUND A. The Senior Credit Facility The Senior Credit Facility is governed by the Second Amended and Restated Credit Agreement, dated as of March 15, 2021, among Redstone Gaming Corp., as borrower, Cornerstone National Bank, N.A., as Administrative Agent, and the lenders from time to time party thereto. The key terms of the Senior Credit Facility are summarized below: Facility Type. Senior secured revolving

III. ANALYSIS OF KEY SENIOR CREDIT FACILITY PROVISIONS A. Section 7.03(b) — Prohibition on Subordinated Indebtedness Provision Summary. Section 7.03(b) of the Senior Credit Agreement prohibits RGC from incurring, creating, assuming, suffering, or permitting to exist any Subordinated Indebtedness (as defined in the Senior Credit Agreement) in an aggregate principal amount exceeding $10,000,000, unless two conditions a

1. Leverage Analysis. The following table summarizes the pro forma impact of the proposed mezzanine financing on RGC's total leverage: The pro forma total net leverage of 3.05x compares favorably to the Maximum Total Net Leverage covenant of 4.50x proposed by Pinnacle Bridge in the mezzanine term sheet, providing approximately 1.45x of headroom (equivalent to approximately $84,250,000 of additional debt capacity befo

2. Fixed Charge Coverage Analysis. The proposed mezzanine term sheet includes a Minimum Fixed Charge Coverage Ratio ("FCCR") covenant of 1.20x. The FCCR is typically calculated as (a) EBITDA less maintenance capital expenditures and cash taxes paid, divided by (b) total debt service (including scheduled principal payments and interest expense on all funded debt, including both senior and subordinated obligations). Fo

3. Minimum Liquidity. The proposed mezzanine term sheet includes a Minimum Liquidity covenant requiring RGC to maintain at least $15,000,000 in Liquidity at all times, with Liquidity defined as the sum of unrestricted cash and cash equivalents plus available, undrawn capacity under the Senior Credit Facility. As of September 30, 2022, RGC's available revolver capacity under the Senior Credit Facility is calculated as

IV. INTERCREDITOR AGREEMENT CONSIDERATIONS C&H has prepared a draft Intercreditor and Subordination Agreement that will establish the relative rights, priorities, and remedies of the Senior Lenders (acting through the Administrative Agent) and the Mezzanine Lender with respect to the obligations of RGC and the collateral securing those obligations. The draft Intercreditor Agreement is scheduled to be circulated to Co

V. PRO FORMA CAPITALIZATION SUMMARY The following table presents the pro forma capitalization of RGC after giving effect to the proposed mezzanine financing: The pro forma total enterprise value of RGC, calculated as the sum of pro forma total funded debt and equity market capitalization, is approximately $639,000,000 ($177,000,000 + $462,000,000). The pro forma total funded debt of $177,000,000 represents approximat

VI. CONSENT PROCESS — STEPS AND TIMELINE Based on our discussions with CNB and our assessment of the requirements of the Senior Credit Agreement, the consent process is expected to proceed in the following steps:

1. C&H to deliver formal consent request letter to CNB. The formal consent request letter will be submitted to CNB (attention: Neil Bradshaw, Relationship Manager), with copies to CNB's outside counsel, and will be accompanied by a copy of the executed non-binding term sheet (dated December 2, 2022) and a summary of the proposed mezzanine structure, including the key economic terms, collateral arrangements, and subor

2. Circulate draft Intercreditor and Subordination Agreement to CNB counsel. The draft Intercreditor Agreement prepared by C&H will be circulated to CNB's outside counsel simultaneously with the formal consent request letter. Target circulation date: December 19, 2022.

3. CNB to review and circulate to Required Lenders. We anticipate that CNB and its counsel will require approximately three to four weeks for initial review of the consent request, the term sheet, and the draft Intercreditor Agreement. During this period, CNB may circulate the materials to the lender syndicate for preliminary input from the Required Lenders.

4. Negotiate intercreditor terms with CNB counsel. Following receipt of CNB counsel's initial markup of the Intercreditor Agreement, we anticipate approximately two to four weeks of negotiation and markup exchanges to reach agreement on all material terms. Key areas of negotiation are expected to include the length of the standstill period, the scope of the payment blockage mechanics, the treatment of PIK interest ac

5. Payment of $50,000 consent processing fee. The $50,000 consent processing fee is payable by RGC to CNB upon formal submission of the consent request. RGC should prepare for this payment and include it as part of the formal submission package.

6. Obtain Required Lender consent. CNB will circulate the final form of the Intercreditor Agreement and the consent request to the lender syndicate for Required Lender approval. The approval process typically requires two to three weeks from circulation, although delays are possible if individual lenders have specific concerns or requests. Target completion: mid-February 2023.

7. Execute Intercreditor and Subordination Agreement. The Intercreditor Agreement will be executed and delivered concurrently with the closing of the mezzanine financing. All parties — CNB (on behalf of the Senior Lenders), RGC, and Pinnacle Bridge — will be signatories. Critical Timing Consideration. The 90-day exclusivity period under the non-binding term sheet with Pinnacle Bridge expires on March 15, 2023. The co

VII. RISK FACTORS AND OPEN ISSUES The following risk factors and open issues have been identified in connection with the proposed mezzanine financing and the required consent process: Consent Risk. CNB and the Required Lenders have discretion under the Senior Credit Agreement to withhold consent to the proposed mezzanine financing or to impose additional conditions as a prerequisite to granting consent. While our pre

VIII. CONCLUSIONS AND RECOMMENDATIONS Based on the foregoing analysis, C&H's conclusions and recommendations are as follows:

1. The proposed $35,000,000 mezzanine financing from Pinnacle Bridge exceeds the $10,000,000 subordinated indebtedness threshold under Section 7.03(b) of the Senior Credit Agreement by $25,000,000. As a consequence, the prior written consent of the Administrative Agent (CNB) and the execution of an Intercreditor and Subordination Agreement in form and substance satisfactory to the Required Lenders are mandatory condi

2. Pro forma total net leverage of approximately 3.05x is well within the Maximum Total Net Leverage covenant of 4.50x proposed by Pinnacle Bridge in the mezzanine term sheet and provides approximately 1.45x of headroom. The 3.05x pro forma leverage also represents a manageable increase from the current net leverage of 2.44x and is expected to be within the existing leverage thresholds under the Senior Credit Facilit

3. The pro forma capitalization and incremental debt service burden (annual cash interest of $3,675,000) appear manageable relative to RGC's LTM EBITDA of $58,100,000. The incremental cash interest represents approximately 6.3% of LTM EBITDA and should not materially impair RGC's ability to service its existing senior debt obligations.

4. C&H recommends that RGC promptly submit the formal consent request and the draft Intercreditor and Subordination Agreement to CNB and its outside counsel in the week of December 19, 2022. Prompt submission is critical to allow sufficient time for the anticipated six-to-eight-week negotiation and approval process to be completed within the 90-day exclusivity window under the Pinnacle Bridge term sheet (expiring Mar

5. The $50,000 consent processing fee should be submitted to CNB concurrently with the formal consent request.

6. Additional covenants and restrictions under the Senior Credit Agreement — including the negative pledge (Section 7.01), restricted payments (Section 7.06), reporting covenants (Section 6.01), and disposition covenants (Section 7.05) — require careful navigation but are expected to be addressed through the combination of the Intercreditor Agreement and the consent letter. The consent request should specifically add

7. C&H will continue to monitor RGC's quarterly financial results for pro forma covenant compliance and will update this analysis when Q2 FY2023 results become available (expected in early February 2023). Any material changes to RGC's financial performance or leverage profile will be promptly communicated to the relevant parties. We are available to discuss this memorandum and its conclusions at your earliest conveni