Contract analysis

I. Introduction and Purpose This memorandum analyzes the five principal negotiation issues raised in the first redline of the Executive Employment Agreement (the "Agreement") received from Victoria R. Saldana of Harlan & Mosley LLP ("Harlan & Mosley") on December 1, 2023, on behalf of Marcus J. Ellender ("Ellender" or the "Candidate"), the finalist candidate for the position of Chief Financial Officer of Redstone Gam

II. Summary of Candidate's Counterproposal Positions Before turning to the detailed analysis, we provide below a summary overview of the five areas in which Harlan & Mosley's redline departs from the first draft of the Agreement. The redline was otherwise largely consistent with the initial draft, and we note that the Candidate has not challenged the proposed base salary ($650,000), the annual bonus target percentage

III. Issue 1: Restrictive Covenant Scope and Duration A. Current Draft Position The first draft of the Agreement contains a comprehensive set of post-employment restrictive covenants, which were drafted to afford RGC the broadest reasonable protections consistent with Nevada law. The specific provisions are as follows: Non-Competition (Section 8(a)): Ellender would be prohibited for a period of eighteen (18) months f

IV. Issue 2: Equity Acceleration on Termination Without Cause A. Current Draft Position The first draft of the Agreement provides for the following treatment of equity awards upon a termination of employment by RGC without Cause (as defined): Restricted Stock Units (RSUs). Ellender would receive an initial grant of 35,000 RSUs under the Redstone Gaming Corp. 2021 Omnibus Equity Incentive Plan (the "Equity Plan"), ves

V. Issue 3: Signing Bonus Clawback Period A. Current Draft Position The first draft of the Agreement provides for a one-time signing bonus of $300,000, payable within thirty (30) days of the Candidate's start date, subject to the following clawback provision: If Ellender voluntarily terminates his employment with RGC within thirty-six (36) months of his start date (other than a resignation for Good Reason, as defined

VI. Issue 4: Good Reason Definition A. Current Draft Position

Section 5(e) of the first draft of the Agreement defines "Good Reason" to include the following triggering events: (i) A material reduction in the Executive's base salary, defined as a reduction of more than ten percent (10%) of the Executive's then-current base salary, unless such reduction is part of a Company-wide reduction in base salaries affecting all senior executives; (ii) A material reduction in the Executiv

VII. Issue 5: Guaranteed Minimum Bonus in Year One A. Current Draft Position

Section 4(b) of the first draft of the Agreement provides for an annual cash bonus with the following parameters: • Target: 85% of base salary ($552,500 at the current $650,000 base salary) • Maximum: 170% of base salary ($1,105,000 at the current base salary) • Determination: Entirely within the discretion of the Compensation Committee, based on achievement of corporate and individual performance metrics to be estab

VIII. Overall Negotiation Strategy and Priority Ranking Based on the foregoing analysis, we recommend the following priority ranking of the five contested issues, from highest to lowest importance to RGC, together with an overall negotiation strategy: Priority Ranking. 1. Restrictive Covenant Scope and Duration — HIGHEST PRIORITY. The non-competition restrictions are critical to protecting RGC's competitive position

2. Equity Acceleration — HIGH PRIORITY. Full single-trigger acceleration of all unvested equity upon a non-CIC termination without Cause creates significant financial exposure (up to approximately $2,101,000 in the worst case), establishes a problematic precedent for future equity grant negotiations, and invites negative scrutiny from proxy advisory firms and institutional shareholders. We recommend maintaining pro-r

3. Signing Bonus Clawback — MODERATE PRIORITY. The clawback issue is important but represents a lower-stakes negotiation point compared to the restrictive covenant and equity acceleration issues. We recommend conceding to a twenty-four month clawback period, with the Good Reason/Without Cause exception, as a goodwill gesture that demonstrates RGC's willingness to compromise. This concession should be positioned strat

4. Good Reason Definition — MODERATE PRIORITY. Accepting the concept of a reporting-structure trigger in the Good Reason definition, with narrowed language, is a relatively low-cost concession that addresses a legitimate commercial concern. The proposed narrow formulation ("Executive no longer reports directly to the Chief Executive Officer") is unlikely to be triggered in practice absent a significant organizational

5. Guaranteed Minimum Bonus — MODERATE PRIORITY. The guaranteed minimum bonus proposal should be rejected in its current form due to pay-for-performance philosophy concerns and shareholder optics risk. However, the Candidate's underlying concern about mid-year start timing is legitimate and should be addressed through one of the alternative structures described in Section VII.D above. The pro-rated guarantee at targe