Contract analysis

I. EXECUTIVE SUMMARY This memorandum summarizes Calderwood & Harkness LLP's ("C&H") annotated markup of the initial non-binding term sheet dated November 7, 2022 (the "Term Sheet") received from Pinnacle Bridge Capital Partners, LP ("Pinnacle Bridge"), through its outside counsel, Wainwright Hess & Caldwell LLP ("WHC"), with Margaret "Meg" Forsythe serving as lead partner for Pinnacle Bridge. The Term Sheet was deliv

II. PARTIES AND TRANSACTION OVERVIEW A. Borrower / Issuer The borrower and issuer of the Mezzanine Note will be Redstone Gaming Corp., a Nevada corporation organized under the laws of the State of Nevada and publicly traded on the Nasdaq Global Select Market under the ticker symbol RDGM. The Company's principal executive offices are located at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, Nevada 89103. The Com

III. SUMMARY OF KEY ECONOMIC TERMS A. Instrument and Principal Instrument. The Term Sheet characterizes the proposed instrument as a mezzanine term note that will be subordinated to the Senior Credit Facility and will be unsecured except for a limited collateral pledge described in Section IV below. Principal Amount. The aggregate principal amount of the Mezzanine Note will be $35,000,000, to be funded in a single dr

1. All-in Yield. The all-in 13.50% yield is at the higher end of the range we have observed in recent gaming-sector mezzanine transactions, which have generally priced in the range of 11.50% to 14.00% on an all-in basis depending on subordination depth, collateral coverage, and issuer credit quality. Given the subordinated and largely unsecured nature of the Mezzanine Note, we believe the proposed yield is within an

2. PIK Rate. C&H recommends negotiating the PIK rate down from 3.00% to 2.50% per annum. Alternatively, if Pinnacle Bridge is unwilling to reduce the PIK rate, we recommend negotiating that PIK interest does not compound but instead accrues on a simple interest basis only. The compounding feature meaningfully increases the outstanding principal amount over the five-year term and amplifies the regulatory concern regar

3. Cash Election Mechanic. The Term Sheet provides that the Company "may elect" to pay PIK interest in cash in lieu of payment-in-kind, but does not specify the mechanics of such election. C&H recommends that the definitive Note Purchase Agreement clarify that: (a) the Company's election to pay PIK in cash may be made on a quarter-by-quarter basis at the Company's sole discretion, (b) an election to pay in cash in an

4. Interest Calculation Convention. The Term Sheet is silent on the interest calculation convention. C&H's markup proposes a 360/365 convention (i.e., interest calculated on the basis of actual days elapsed over a 360-day year), which is consistent with the convention used in the Senior Credit Facility. This convention should be specified in the Term Sheet to avoid ambiguity in the definitive documentation. C. Maturi

1. Strike Price Premium. C&H recommends negotiating the strike price premium from 110% to 115% of the 30-day VWAP. Increasing the premium from 110% to 115% would raise the strike price from approximately $9.24 per share to approximately $9.66 per share, reducing the dilutive impact on existing RGC shareholders. At a strike price of $9.66, the warrants would be "out of the money" by a wider margin at current price lev

4. Anti-Dilution Protections. The Term Sheet's reference to "customary anti-dilution adjustments" is insufficiently specific and should be clarified at the term sheet stage to avoid a significant re-negotiation during the drafting of the definitive Warrant Agreement. C&H recommends specifying that the anti-dilution protections will be on a weighted average basis only, and not on a full ratchet basis. Full ratchet ant

5. Registration Rights. The Term Sheet contemplates both demand and piggyback registration rights for the warrant shares. C&H recommends limiting Pinnacle Bridge's registration rights to piggyback registration rights only, with no more than two (2) demand registration rights exercisable only after a twelve (12)-month lock-up period following the funding date. Unlimited demand registration rights would impose potentia

1. Non-Call Period. The 24-month non-call period is standard for mezzanine financings in the gaming sector and across the broader middle-market. We do not recommend seeking a reduction in the non-call period.

2. Change of Control Exception. C&H recommends negotiating for a "change of control" exception to the non-call restriction that would permit the Company to prepay the Mezzanine Note during the non-call period at a price of 101% of par (plus accrued and unpaid interest, including PIK) in the event of a change of control of RGC. Without such an exception, RGC could find itself unable to consummate a strategic transacti

3. Declining Equity Value Exception. C&H also recommends adding a "declining equity value" make-whole exception that would permit early prepayment of the Mezzanine Note if RGC's common stock price declines below the warrant strike price for sixty (60) consecutive trading days. This provision would protect RGC's ability to refinance the Mezzanine Note in a distressed scenario where the warrant component has lost its v

4. Call Premium Schedule. The declining call premium schedule (103/102/101/par) is within market parameters for gaming-sector mezzanine instruments, and we do not recommend further markup of the schedule itself.

IV. COLLATERAL AND SECURITY A. Proposed Collateral The Term Sheet proposes the following collateral package in support of the Mezzanine Note:

1. Equity Pledge. A second-priority pledge of 100% of the equity interests in the following wholly owned subsidiaries of RGC: (a) Redstone Digital Wagering, LLC, a Nevada limited liability company (EIN: 88-0587214), which is the wholly owned subsidiary of RGC that operates the Company's digital wagering platform, including the "RedBet" branded online and mobile sports wagering and iGaming products; and (b) Redstone T

2. IP Assignment. An assignment of certain intellectual property assets related to the "RedBet" proprietary wagering software, including the USPTO trademark application filed in August 2022 (registration pending as of the date of this memorandum).

3. Collateral Agent. The proposed collateral agent for the mezzanine collateral package is Dralvecen Title & Escrow Co., with Karen Prescott, Vice President — Commercial Escrow, serving as the primary contact. It is important to note that the equity pledges described above would be second-priority liens, subordinate to any first-priority liens granted to Cornerstone and the lenders under the Senior Credit Facility. T

1. Gaming License Exclusion. C&H recommends that the Pledge and Security Agreement explicitly exclude gaming licenses from the collateral package. Gaming licenses issued by the Nevada Gaming Control Board, the Arizona Department of Gaming, and the New Mexico Gaming Control Board are non-transferable without regulatory approval, and any attempt to pledge or assign such licenses as collateral may trigger regulatory scr

2. IP Scope. C&H recommends confirming that the IP assignment covers only the RedBet software and related trademarks, and does not extend to RGC's broader corporate brand intellectual property, including the "Redstone Gaming" trade name, corporate logos, and other trademarks not directly related to the digital wagering platform. The Term Sheet is somewhat ambiguous on this point, and clarity should be established now

3. Intercreditor Coordination. The second-priority nature of the equity pledge will require careful coordination with the existing collateral package under the Senior Credit Facility. C&H will review the collateral descriptions in the Credit Agreement and related security documents to confirm that the mezzanine equity pledge is consistent with the permitted liens provisions of the Senior Credit Facility and to identi

4. Future First-Priority Liens. C&H recommends that the Pledge and Security Agreement include a provision permitting RGC to grant additional first-priority liens to the senior lenders (or any permitted refinancing lenders) without the consent of the mezzanine lender, consistent with the subordination framework. This flexibility is important to preserve the Company's ability to refinance or amend the Senior Credit Fac

V. FINANCIAL COVENANTS A. Proposed Covenants The Term Sheet proposes three financial covenants for the Mezzanine Note:

1. Minimum Fixed Charge Coverage Ratio ("FCCR"): 1.20x

2. Maximum Total Net Leverage Ratio: 4.50x

3. Minimum Liquidity: $15,000,000 (defined as unrestricted cash plus available revolving credit facility commitments) Each of these covenants is discussed in detail below, along with C&H's analysis and markup recommendations. B. C&H Analysis and Markup Comments

1. Minimum Fixed Charge Coverage Ratio (1.20x). Current Analysis. Based on RGC's LTM Adjusted EBITDA of $58.1 million and projected annual fixed charges (including, among other items, $3,675,000 in annual cash interest on the Mezzanine Note and existing debt service under the Senior Credit Facility at SOFR + 275 basis points + 10 basis points credit spread adjustment), RGC should be comfortably above the proposed 1.2

2. Maximum Total Net Leverage Ratio (4.50x). Current Analysis. Pro forma for the Mezzanine Note, total net leverage would be: ($142,000,000 + $35,000,000) ÷ $58,100,000 = approximately 3.05x This represents substantial headroom relative to the proposed 4.50x covenant, providing approximately 1.45 turns of cushion. C&H notes that the 4.50x covenant level is appropriate and provides meaningful flexibility for the Compa

3. Minimum Liquidity ($15,000,000). Current Analysis. As of September 30, 2022, the Company's liquidity position is well in excess of the proposed $15,000,000 minimum threshold: • Senior Credit Facility capacity: $200,000,000 • Drawn amount: ($142,000,000) • Available revolving credit facility commitments: $58,000,000 • Plus: unrestricted cash on balance sheet (amount to be confirmed by the Company's treasury group,

1. Reporting Timeline. C&H recommends specifying the reporting timeline in the Term Sheet (or, at a minimum, in the definitive Note Purchase Agreement) as follows: (a) quarterly financial statements and covenant compliance certificates to be delivered within forty-five (45) days of the end of each fiscal quarter, and (b) annual audited financial statements and covenant compliance certificates to be delivered within n

2. Cure Period. C&H recommends including a thirty (30)-day cure period following the delivery of a compliance certificate (or the date on which such certificate was required to have been delivered) before any financial covenant breach constitutes an Event of Default under the Mezzanine Note. This cure period is important to provide the Company with adequate time to evaluate its options, including the exercise of the

VI. REGULATORY CONSIDERATIONS FLAGGED IN MARKUP A. Senior Credit Facility — Cornerstone Consent Requirement As noted above, Section 7.03(b) of the Second Amended and Restated Credit Agreement dated March 15, 2021 (the "Credit Agreement") governing the Senior Credit Facility contains a negative covenant that prohibits the Company from incurring subordinated indebtedness in excess of $10,000,000 without the prior writt

1. C&H recommends that the Term Sheet explicitly condition the exclusivity period and the obligation to close on receipt of Cornerstone's consent under Section 7.03(b) of the Credit Agreement. This condition should be stated as a mutual condition precedent (i.e., failure to obtain Cornerstone consent should excuse both parties' obligation to close, without liability to either party).

2. C&H will prepare and circulate a separate Senior Credit Facility Covenant Compliance Analysis memorandum addressing the Section 7.03(b) consent process in detail, including pro forma covenant compliance under the Credit Agreement (as modified by any waiver or amendment), the expected timeline for obtaining the consent, and any additional conditions that Cornerstone may impose. B. Nevada Gaming Control Board Pinnac

1. C&H recommends including a "regulatory out" provision in the Warrant Agreement that would permit RGC to redeem the warrants at fair market value (determined by an independent appraiser) if the exercise or holding of such warrants would cause Pinnacle Bridge (or any of its principals) to exceed the applicable regulatory ownership thresholds and thereby trigger a finding-of-suitability requirement. This provision pr

2. C&H will prepare and circulate a separate Nevada Gaming Regulatory Analysis memorandum addressing the suitability filing thresholds in greater detail, including an analysis of the specific regulations applicable to institutional lenders holding equity conversion rights in publicly traded Nevada gaming companies. C. Securities Law Considerations The issuance of warrants to Pinnacle Bridge Mezzanine Opportunities Fu

1. C&H recommends including standard investment representations and transfer restrictions in the Warrant Agreement, including representations by Pinnacle Bridge regarding its accredited investor status, its investment intent (i.e., acquisition for investment and not with a view to distribution), its sophistication and access to information, and its understanding of the restricted nature of the warrant shares.

2. A Form D filing will be required to be made with the Securities and Exchange Commission within fifteen (15) days of the first sale of the warrants (i.e., the funding date). C&H will prepare and file the Form D on behalf of RGC.

3. Integration Risk. C&H flags the potential integration risk if RGC is contemplating or may contemplate any subsequent equity offering within the six-month period following the funding date. Under SEC integration analysis, offerings that are part of a single plan of financing may be "integrated" and treated as a single offering, which could potentially disqualify the warrant issuance from the private placement exemp

4. C&H will prepare and circulate a separate Securities Law / Regulation D Private Placement Analysis memorandum addressing these issues in greater detail.

VII. SUBORDINATION MECHANICS The Mezzanine Note will be subordinated to all existing and permitted senior indebtedness of RGC, including the $200,000,000 Cornerstone Senior Secured Revolving Credit Facility. The subordination will be documented in a separate Intercreditor and Subordination Agreement (the "Intercreditor Agreement") to be negotiated and executed among RGC, Pinnacle Bridge (or its agent), and Cornerston

1. Scope of Subordination. The Term Sheet provides that the Mezzanine Note will be subordinated to "all existing and permitted senior indebtedness." C&H recommends narrowing this language to provide that subordination is limited to the Senior Credit Facility and any permitted refinancing thereof (including any replacement facility on substantially similar terms with the same or replacement lenders), and not to all fu

2. Standstill Period. The Term Sheet proposes a 180-day standstill on mezzanine remedies following a payment default under the Senior Credit Facility. During the standstill period, Pinnacle Bridge would be prohibited from exercising remedies (including acceleration, foreclosure on pledged collateral, or commencement of legal proceedings) with respect to the Mezzanine Note, even if an Event of Default has occurred und

3. Payment blockage. The Term Sheet provides for automatic payment blockage on mezzanine interest payments (including scheduled cash interest) upon the occurrence and during the continuance of a payment default under the Senior Credit Facility. C&H recommends the following limitations on the payment blockage provision: (a) The payment blockage period should be limited to no more than 179 consecutive days in any 365-d

4. Turnover Provisions. C&H recommends that the Intercreditor Agreement include turnover provisions requiring Pinnacle Bridge to turn over to Cornerstone any payments received on the Mezzanine Note in violation of the subordination and payment blockage provisions. However, C&H recommends that PIK accrual (which is not a cash payment but rather a book entry increasing the outstanding principal of the Mezzanine Note) n

5. DIP Financing. The Term Sheet is silent on the mezzanine lender's rights in the event of a bankruptcy filing by RGC. C&H recommends that the Intercreditor Agreement include a provision acknowledging the senior lender's right to provide debtor-in-possession ("DIP") financing to RGC in a bankruptcy proceeding without the consent of the mezzanine lender, and providing that the mezzanine lender will not object to any

VIII. EXCLUSIVITY AND BINDING EFFECT Exclusivity Period. The Term Sheet provides for a 90-day exclusivity period commencing on the date of execution of the Term Sheet. Based on a target execution date of early December 2022, the exclusivity period would expire in approximately early March 2023. During the exclusivity period, RGC would agree not to solicit, negotiate, or enter into any alternative mezzanine or subordi

1. Scope of Exclusivity. C&H recommends narrowing the exclusivity provision to cover only mezzanine and subordinated debt financings, and to expressly exclude convertible notes, equity offerings (including public or private offerings of common stock), and any other form of financing that is not structurally equivalent to the proposed Mezzanine Note. This narrowing is important to preserve RGC's flexibility to pursue

2. Termination Right. C&H recommends adding a termination right for RGC if definitive documentation has not been mutually agreed and executed within the 90-day exclusivity period. Upon expiration of the exclusivity period, both parties should be released from their obligations under the Term Sheet (other than surviving provisions) without liability to either party. The Term Sheet as currently drafted does not specify

3. Confidentiality Survival. C&H recommends specifying that the confidentiality obligations survive termination of the Term Sheet for a period of eighteen (18) months following the date of termination, regardless of the reason for termination. The surviving confidentiality obligation should cover all confidential information exchanged between the parties in connection with the proposed transaction, including financia

4. Expense Reimbursement. The Term Sheet provides that RGC will reimburse Pinnacle Bridge's reasonable legal fees and expenses (i.e., fees and expenses of Wainwright Hess & Caldwell LLP) up to a cap of $175,000. C&H recommends the following clarifications: (a) The $175,000 cap should be payable only upon closing of the transaction and not upon termination of the Term Sheet (i.e., no "reverse break fee"). If the trans

IX. CONDITIONS PRECEDENT TO CLOSING (AS IDENTIFIED IN TERM SHEET) The Term Sheet identifies the following conditions precedent to the funding of the Mezzanine Note, all of which must be satisfied or waived (as applicable) at or prior to closing:

1. Execution and delivery of a definitive Note Purchase Agreement in form and substance satisfactory to both parties and their respective counsel.

2. Execution and delivery of a Warrant Agreement in form and substance satisfactory to both parties and their respective counsel.

3. Execution and delivery of a Pledge and Security Agreement granting Pinnacle Bridge a second-priority security interest in the collateral described in Section IV above.

4. Execution and delivery of an Intercreditor and Subordination Agreement among RGC, Pinnacle Bridge (or its agent), and Cornerstone National Bank, N.A. (as Administrative Agent under the Senior Credit Facility), in form and substance satisfactory to all parties thereto.

5. Receipt of the consent of Cornerstone (as Administrative Agent, acting at the direction of the Required Lenders) under Section 7.03(b) of the Credit Agreement to the incurrence of the Mezzanine Note and the execution of the Intercreditor Agreement.

6. Satisfactory completion of Pinnacle Bridge's due diligence review of RGC and its subsidiaries, including financial, legal, regulatory, and operational due diligence.

7. Receipt of legal opinions from C&H (as borrower's counsel) and WHC (as lender's counsel), in customary form, covering authority, enforceability, and no-conflict matters, among others.

8. Receipt of a comfort letter from Harmon & Grayling CPAs, LLP, the Company's independent registered public accounting firm, with Robert Chow serving as engagement partner, in customary form.