Contract analysis

From: Jonathan Birch III <jbirch@hargovesloane.com> To: Douglas Fairchild <dfairchild@calderwoodharkness.com> Cc: Elise Marchetti <emarchetti@hargovesloane.com> Subject: Re: Redstone Gaming Corp. / Pinnacle Harbor Capital Partners — Draft Cooperation and Standstill Agreement

Thank you for circulating the initial draft of the Cooperation and Standstill Agreement on February 22. We have reviewed it carefully with our client, and I am attaching Pinnacle Harbor's redline markup to the draft (v1). Please find attached: **Cooperation and Standstill Agreement — Redline Markup (PHCP Comments)** (cooperation-standstill-agreement-redline-v2.docx).

Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, and Viktor Kessler have each reviewed the draft in detail. Nadia Johar has also provided input on several of the key provisions. While the draft generally tracks the framework term sheet exchanged on February 14, there are several areas where the draft departs from or does not fully capture the parties' understanding, as well as other prov

The draft proposes an 18-month standstill period running from execution through approximately September 10, 2024 (assuming a March 10, 2023 execution date). Pinnacle Harbor's strong preference — reflected in the redline — is for a 12-month standstill from execution. An 18-month period extends well beyond the 2023 annual meeting (which we anticipate will occur in May 2023) and effectively forecloses PHCP from any enga

The draft includes a 9.9% ownership cap during the standstill period. Pinnacle Harbor proposes raising this cap to 12.5% to allow PHCP flexibility to increase its position if it identifies further value in RGC common stock. At the current share price — stock has been trading in the low $30s range — even the 9.9% cap represents a substantial absolute dollar commitment (9.9% of 104,700,000 shares outstanding equals app

The draft includes a $750,000 cap on reimbursement of Pinnacle Harbor's documented legal expenses. Doug, Pinnacle Harbor's actual documented legal costs to date are substantial. Our fees for the 13D filings (preliminary filed November 10, 2022; amended filing January 6, 2023), the nomination notice process (formal notice December 8, 2022; nomination notice received by the company January 9, 2023), preliminary proxy p

**4. Mutual Director Nomination Process / Board Seat**

We generally accept the concept of one mutually agreed independent director, rather than either of Pinnacle Harbor's original nominees (Dr. Sandra Trevelyan or Hugh Desmond Grayson). However, we need clarification on the joint selection process. Specifically, the draft is vague on the composition and decision-making procedures of the joint committee that will identify the pool of three candidates. We propose that PHC

**5. Strategic Review of Interactive Gaming Division**

We accept the 120-day review period (completion by approximately July 8, 2023, assuming a March 10 execution). However, we object to the language in Section 4(c) of the draft stating there is "no obligation to share conclusions with Pinnacle Harbor." As you know, the strategic review of the interactive gaming division was a core element of Pinnacle Harbor's original demands and a central concession motivating this se

We accept the obligation to vote in favor of RGC management director nominees during the standstill period. However, we request that the voting commitment on "all other proposals" be narrowed to Board-recommended proposals only. PHCP should retain discretion to vote as it sees fit on shareholder proposals not endorsed by the Board. This is consistent with standard market practice in cooperation agreements, and I expe

We accept the material breach trigger (uncured for 15 business days after written notice) and the change-of-control trigger as drafted. We do, however, object to the ownership floor termination trigger set at 3.5%. Pinnacle Harbor proposes lowering this threshold to 2.0%. PHCP should not lose the benefit of the agreement's protections — including the board seat and the strategic review commitment — merely because of

We accept mutual non-disparagement during the standstill period. We propose that the non-disparagement provision survive for an additional 6 months following the expiration or termination of the standstill, which we think serves both parties' interests.

We confirm acceptance of Delaware law as the governing law, which is consistent with both RGC's state of incorporation and PHCP's formation as a Delaware limited partnership.

The redline contains various conforming changes, defined-term refinements, and notice provision updates. Among these, we have confirmed Pinnacle Harbor's address as 590 Madison Avenue, 34th Floor, New York, NY 10022, and Hargrove Sloane & Birch LLP's address at 1585 Broadway, 40th Floor, New York, NY 10036 for copy notices. We also request that the agreement identify the parties comprehensively: Redstone Gaming Corp.

I would propose that our teams schedule a call early next week to walk through the open points before the principals meet for what I hope will be a final negotiation session. We should be targeting execution by mid-March to allow sufficient time for the joint press release, 8-K filing, and amended 13D filing before the 2023 annual meeting season. On the communications side, we will need to coordinate nomination withd

I am confident we can bridge the remaining gaps. Please let me know your availability for a call, and we will coordinate with Elise and Claire on scheduling.

**Jonathan "Jon" Birch III** Partner Hargrove Sloane & Birch LLP 1585 Broadway, 40th Floor New York, NY 10036 T: (212) 554-8200 | D: (212) 554-8217 E: jbirch@hargovesloane.com

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