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MEMORANDUM — PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 787 Seventh Avenue, 42nd Floor New York, NY 10019

January 10, 2022

I. Executive Summary

The purpose of this memorandum is to advise on the continuing obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), arising from the current dormant status of the tender offer (the "Offer") by Aurelius Media Holdings LLC, a Delaware limited liability company ("AMH LLC"), a wholly owned subsidiary of Aurelius Global Media Group PLC, a public limited company organized under the laws of England and Wales ("Aurelius" or "AGMG"), for up to 6,980,050 shares of common stock, par value $0.001 per share (the "Shares"), of Pinnacle Content Holdings, Inc., a Delaware corporation ("Pinnacle" or the "Company"), at a price of $4.01 per Share, net to the seller in cash, without interest and subject to any required tax withholding.

The Offer was commenced on September 8, 2021 and, following one extension, lapsed on November 5, 2021 when the minimum tender condition requiring the valid tender of at least 5,000,000 Shares was not satisfied. As of the expiration of the extended offer period, only approximately 1,420,000 Shares had been validly tendered and not withdrawn, representing approximately 7.1% of the 20,000,000 Shares then outstanding. Amendment No. 2 to the Schedule TO was filed with the Securities and Exchange Commission (the "SEC" or the "Commission") on November 12, 2021, disclosing the lapse of the Offer without acceptance of any tendered Shares, but the Offer was not formally withdrawn or terminated.

Aurelius retains a 980,000-Share open-market position in Pinnacle, representing approximately 4.9% of the Shares outstanding at the time of acquisition and approximately 4.8% of the approximately 20,400,000 Shares currently outstanding. These Shares were acquired through a series of open-market purchases between June 1, 2021 and August 25, 2021, at an average cost of $3.28 per Share, for an aggregate cost of approximately $3,214,400. This position was reported on the Schedule 13D filed by Aurelius with the Commission on August 26, 2021.

As a result of the Offer's dormant — but not formally withdrawn — status, two parallel reporting regimes continue to apply to Aurelius:

(1) The requirements of Regulation 14D promulgated under Section 14(d) of the Exchange Act and the related Schedule TO (File No. 005-92847); and

(2) The beneficial ownership reporting requirements of Section 13(d) of the Exchange Act and Rule 13d-2 thereunder, applicable to the Schedule 13D.

This memorandum addresses each of these reporting regimes in turn, identifies the potential liability exposure arising from non-compliance, and sets forth practical recommendations for periodic compliance reviews and specific near-term action items. In particular, this memorandum identifies the approaching lapse of the $30,000,000 financing commitment from Brindoval National Bank, N.A. on March 31, 2022 as a material change likely requiring the filing of an amendment to the Schedule TO.

This memorandum does not address the broader strategic question of whether Aurelius should revive, formally withdraw, or otherwise modify the Offer. That question is the subject of the separate strategic options memorandum dated December 15, 2021, prepared by James Prentice and Tiffany Rosenthal.

II. Background and Current Status of the Tender Offer

A. Summary of the Offer

The following summarizes the material terms of the Offer as disclosed in the Schedule TO and the related Offer to Purchase:

Offeror. The offeror is Aurelius Media Holdings LLC, a Delaware limited liability company (Delaware Secretary of State file number 7894512), formed for the purpose of effectuating the Offer and related transactions. AMH LLC's sole member is Aurelius Global Media Group PLC, a public limited company organized under the laws of England and Wales (registered number 08541276), the ordinary shares of which are admitted to trading on the London Stock Exchange (LSE: AGMG).

Target. The target of the Offer is Pinnacle Content Holdings, Inc., a Delaware corporation, the common stock of which is registered under Section 12(b) of the Exchange Act and listed on the Nasdaq Global Market under the symbol "PCHL" (SEC CIK 0001847263). Pinnacle is a content creation and distribution company focused on digital media properties, including a library of original and licensed programming.

Shares Sought. The Offer was made for up to 6,980,050 Shares, representing approximately 34.9% of the 20,000,000 Shares then outstanding. If fully subscribed, the Offer would have resulted in Aurelius (together with its existing 980,000-Share position) holding a total of 7,960,050 Shares, representing approximately 39.8% of Pinnacle's outstanding Shares.

Offer Price. The Offer price was $4.01 per Share, net to the seller in cash, without interest and subject to any required tax withholding. This price represented a premium of approximately 17.25% over the undisturbed closing price of $3.42 per Share on August 27, 2021, the last trading day prior to the filing of the Schedule 13D.

Aggregate Deal Value. At the Offer price, the aggregate consideration for all 6,980,050 Shares sought was approximately $27,989,000.50 (6,980,050 × $4.01). Including estimated transaction costs and expenses, the total transaction value was anticipated to be approximately $28,000,000.

Minimum Tender Condition. The Offer was conditioned upon, among other things, the valid tender and non-withdrawal of at least 5,000,000 Shares, representing 25.0% of the then-outstanding Shares (the "Minimum Condition"). The Minimum Condition was not waivable by the offeror.

Financing. The Offer was to be financed through the proceeds of a $30,000,000 senior secured term loan committed by Brindoval National Bank, N.A. (the "Brindoval Facility"), pursuant to a commitment letter dated August 20, 2021 (reference CL-2021-MTC-00487) between Brindoval National Bank, N.A. (as lender), AMH LLC (as borrower), and AGMG (as guarantor). The key terms of the Brindoval Facility included an interest rate of LIBOR plus 3.25% per annum (with a 0.50% LIBOR floor) and a commitment fee of 0.50% per annum on the undrawn amount. The original commitment expired on December 31, 2021. One 90-day extension was exercised pursuant to the terms of the commitment letter, extending the commitment to March 31, 2022. As of the date of this memorandum, approximately $75,000 in commitment fees have been paid. The Brindoval Facility remains entirely unfunded. No further extension has been sought or negotiated.

Depositary. Continental Fiduciary Services, Inc., located at 1 Ashbury Asset Advisors Plaza, 30th Floor, New York, NY 10004, served as depositary for the Offer. The primary contact is Lisa Pryor, Vice President, Corporate Actions.

Information Agent. Ridgeway Proxy Advisors LLC, located at 105 Madison Avenue, Suite 1200, New York, NY 10016, served as information agent for the Offer. The primary contact is Martin Cheswick, Senior Managing Director.

B. Timeline of Key Events

The following is a chronological summary of the key events relevant to the Offer and the associated regulatory filings:

September 8, 2021. AMH LLC filed the Schedule TO with the Commission and commenced the Offer. The Offer to Purchase, the Letter of Transmittal, and related materials were disseminated to Pinnacle shareholders. The initial offer period was set to expire at 11:59 p.m., Eastern Time, on October 8, 2021 (twenty business days from commencement).

September 10, 2021. Pinnacle filed a preliminary Schedule 14D-9 with the Commission, indicating that the Pinnacle board of directors had not yet made a recommendation to its shareholders regarding the Offer.

September 15, 2021. The Federal Trade Commission and the Department of Justice granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect to the Offer (HSR Transaction Number 20211892). The filing fee paid was $45,000. Accordingly, the HSR condition to the Offer was satisfied.

September 22, 2021. The SEC's Division of Corporation Finance, Office of Mergers & Acquisitions (Katherine Wylie, Special Counsel), issued a comment letter to AMH LLC containing four comments relating to the Schedule TO and the Offer to Purchase. The comments addressed, among other matters, the description of Aurelius's plans for Pinnacle following consummation of the Offer, including with respect to board representation.

September 29, 2021. The Pinnacle board of directors adopted a Section 382 Net Operating Loss Preservation Shareholder Rights Plan (the "Rights Plan"). The Rights Plan is triggered upon any person or group acquiring beneficial ownership of 35% or more of Pinnacle's outstanding Shares, at which point each right becomes exercisable for $18.00 per right, entitling all other shareholders to purchase additional Shares at a substantial discount. Continental Fiduciary Services, Inc. was appointed as rights agent. The Rights Plan is set to expire on September 29, 2024, unless earlier terminated, redeemed, or exchanged. In its public announcement, the Pinnacle board stated that the Rights Plan was adopted to preserve the Company's significant net operating loss ("NOL") carryforwards, which were estimated at approximately $47,300,000 for federal income tax purposes. The adoption of the Rights Plan effectively constituted a defensive measure against the Offer, as consummation of the Offer (including Aurelius's existing 980,000-Share position) would have resulted in Aurelius holding approximately 39.8% of Pinnacle's outstanding Shares, exceeding the 35% trigger threshold.

October 1, 2021. Pinnacle filed its definitive Schedule 14D-9 with the Commission. The Schedule 14D-9 disclosed that the Pinnacle board of directors unanimously recommended that Pinnacle shareholders NOT tender their Shares in the Offer. The board cited, among other reasons, the inadequacy of the Offer price, the potential adverse impact on Pinnacle's NOL carryforwards, and concerns regarding Aurelius's strategic intentions for the Company.

October 6, 2021. AMH LLC filed Amendment No. 1 to the Schedule TO, responding to the four comments raised by the SEC staff in the September 22, 2021 comment letter. The amendment included additional disclosure regarding Aurelius's plans for Pinnacle following consummation of the Offer, including its views regarding board representation, and corrected certain other disclosures identified by the staff.

October 8, 2021. The initial twenty-business-day offer period expired. Aurelius determined to extend the Offer and filed an amendment reflecting the extension of the offer period to November 5, 2021.

November 2, 2021. As of a preliminary count provided by the depositary, approximately 1,420,000 Shares had been validly tendered and not withdrawn, representing approximately 7.1% of the then-outstanding Shares. This figure was substantially below the 5,000,000-Share Minimum Condition.

November 5, 2021. The extended offer period expired at 11:59 p.m., Eastern Time. The Minimum Condition was not satisfied. Aurelius did not accept any of the tendered Shares for payment and did not formally withdraw the Offer. All tendered Shares were returned to the tendering holders through the depositary.

November 12, 2021. AMH LLC filed Amendment No. 2 to the Schedule TO disclosing that the Offer had "lapsed without acceptance" because the Minimum Condition had not been satisfied. Importantly, Amendment No. 2 did not include a notice of withdrawal or termination of the Offer. The amendment stated that Aurelius was "evaluating its options with respect to its investment in Pinnacle" and that there could be no assurance that the Offer would be revived, extended, or renewed.

December 2021 – Present. Since the filing of Amendment No. 2, the matter has remained dormant. No withdrawal notice has been filed under Rule 14d-7. No further extensions or amendments to the Offer have been made. No further communications have been exchanged between Aurelius and Pinnacle or their respective counsel.

C. Current Posture

As of the date of this memorandum, the Offer has not been formally withdrawn pursuant to Rule 14d-7 under the Exchange Act. No termination notice has been filed with the depositary or with the Commission. Accordingly, from a regulatory standpoint, the Offer remains in a state of dormancy — it is neither active nor formally concluded.

Aurelius, through AMH LLC, continues to hold 980,000 Shares of Pinnacle common stock. At the time the Schedule 13D was filed on August 26, 2021, Pinnacle had 20,000,000 Shares outstanding, placing Aurelius's beneficial ownership at 4.9%. Since that time, Pinnacle's outstanding share count has increased slightly to approximately 20,400,000 Shares, primarily as a result of issuances under Pinnacle's equity compensation plans (including stock option exercises and restricted stock unit vesting), which dilutes Aurelius's percentage ownership to approximately 4.8% (980,000 ÷ 20,400,000 = 4.804%).

Pinnacle's current share price is approximately $2.85 per Share, representing a decline of approximately 17% from the $3.42 undisturbed price as of August 27, 2021 and a decline of approximately 29% from the $4.01 Offer price. At the current market price, the aggregate value of Aurelius's 980,000-Share position is approximately $2,793,000, compared to the aggregate acquisition cost of approximately $3,214,400, representing an unrealized loss of approximately $421,400.

Aurelius's financial advisor in connection with the Offer, Strathmore Corporation Harcourt Partners (lead banker: Genevieve Tran, Managing Director, Cross-Border M&A), earned a commencement fee of $400,000 upon the filing of the Schedule TO. The $600,000 success fee, contingent upon Aurelius's acquisition of a majority of the Shares sought in the Offer, was not earned and remains unpaid.

Aurelius's UK counsel, Dunmore Asset Advisors Chambers LLP (lead partner: Alistair Drummond), continues to monitor Aurelius's disclosure obligations under the London Stock Exchange listing rules and the UK regulatory framework. As discussed in Section VI.D below, coordination with UK counsel is recommended as part of any disclosure event.

III. Continuing Obligations Under Regulation 14D — Schedule TO

A. Legal Framework: Sections 14(d) and 14(e) of the Exchange Act; Rules 14d-3, 14d-6, 14d-9

The regulatory framework governing tender offers under the Exchange Act imposes a series of filing, disclosure, and anti-fraud obligations on the offeror that remain operative for as long as the tender offer has not been formally withdrawn.

Section 14(d)(1) of the Exchange Act provides that it shall be unlawful for any person to make a tender offer for equity securities of a class registered under Section 12 of the Exchange Act, if after consummation thereof such person would be the beneficial owner of more than 5% of such class, unless at the time copies of the offer or request or invitation are first published or sent or given to security holders, such person has filed with the Commission a statement containing the information required by the Commission's rules and regulations. The filing vehicle for this purpose is the Schedule TO, promulgated under Rule 14d-3.

Rule 14d-3(b) requires the filing party to amend the Schedule TO to reflect any material change in the information set forth or incorporated by reference in the statement previously filed. This amendment obligation is triggered by material changes regardless of whether the tender offer is currently open for acceptance. The rule does not distinguish between active and dormant offers; so long as the filing has not been withdrawn or superseded, it remains subject to the amendment requirement.

Rule 14d-6(d) addresses the procedural requirements for extensions, amendments, and termination of tender offers, including the manner and timing of dissemination of notices thereof to security holders. These provisions work in conjunction with Rule 14d-7, which governs the formal withdrawal mechanics.

Section 14(e) of the Exchange Act is a broad anti-fraud provision that prohibits any person from making any untrue statement of a material fact, or omitting to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. Critically, Section 14(e) is not limited in its application to periods during which a tender offer is actively open for acceptance. It applies to all statements made "in connection with" a tender offer, which courts have construed broadly to encompass the full lifecycle of a tender offer, including periods of dormancy during which a filed Schedule TO remains publicly available on the Commission's EDGAR system.

B. Obligation to File Amendments to Schedule TO Upon Material Changes

Because the Offer has not been formally withdrawn pursuant to Rule 14d-7, the Schedule TO (File No. 005-92847) remains a "live" filing with the Commission. As such, Aurelius — through AMH LLC as the filing person — is obligated to amend the Schedule TO promptly upon any material change in the information previously disclosed therein.

The concept of "materiality" in this context is governed by the well-established standard articulated by the Supreme Court in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), and its progeny: a fact is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding how to act — in the tender offer context, whether to tender, withdraw, or hold securities. This standard applies with equal force to amendments of previously filed disclosure documents as it does to initial filings.

The following categories of changes could trigger an obligation to file an amendment to the Schedule TO:

(i) Change in Intent Regarding the Offer. Any change in Aurelius's intent with respect to the Offer — including a decision to revive, relaunch, formally terminate, modify the terms of, or abandon the Offer — would constitute a material change requiring prompt amendment. Such a change would go to the heart of the information most relevant to Pinnacle shareholders and the market.

(ii) Change in Financing. Any change in the facts regarding the financing of the Offer would be material. As discussed in greater detail in Section III.C below, the Brindoval National Bank commitment letter — disclosed in the Schedule TO and Offer to Purchase as the source of funds for the Offer — is subject to an extended commitment expiration date of March 31, 2022. The lapse of this commitment, without replacement financing, would render the financing-related disclosures in the Schedule TO materially outdated and would likely require an amendment.

(iii) Acquisition or Disposition of Pinnacle Shares. Any material acquisition or disposition of Pinnacle Shares by Aurelius, AMH LLC, or any affiliate would constitute a material change to the information set forth in the Schedule TO regarding the offeror's ownership of target securities.

(iv) Board Representation Plans. The SEC staff's comment letter dated September 22, 2021 specifically focused on Aurelius's disclosure regarding its plans for board representation at Pinnacle. Any change in those plans — whether an abandonment of previously disclosed intentions or the formulation of new plans — could trigger an amendment obligation. Amendment No. 1 to the Schedule TO included enhanced disclosure on this topic, and any deviation from that disclosure would be material.

(v) Financial Condition of the Offeror. Any material change in Aurelius's financial condition that would bear on its ability to consummate the Offer or a revised transaction could require amendment, particularly in light of the financing-related disclosures in the Schedule TO.

(vi) Communications with the Target. Any contact, negotiation, or communication between Aurelius (or its representatives) and Pinnacle's board of directors, management, or counsel (Caldwell Burris & Shoemaker LLP; lead partner: Rebecca Fontaine) regarding the Offer, a standstill arrangement, or any alternative transaction would constitute a material development requiring disclosure.

C. Specific Near-Term Trigger: Lapse of Brindoval Financing Commitment

The most significant near-term reporting event of which we are currently aware is the approaching expiration of the Brindoval National Bank financing commitment. This issue warrants detailed analysis.

The $30,000,000 senior secured term loan commitment from Brindoval National Bank, N.A. (reference CL-2021-MTC-00487) was a central element of the Offer. The Schedule TO and Offer to Purchase described the Brindoval Facility as the source of funds for the Offer, and the specific terms of the commitment letter were summarized in the "Source and Amount of Funds" section of the Offer to Purchase. The availability of committed financing at the time of the Offer's commencement was a material fact that Pinnacle shareholders were entitled to rely upon in evaluating the Offer.

The original commitment expired on December 31, 2021. Pursuant to the terms of the commitment letter, one 90-day extension was exercised by AMH LLC, extending the commitment to March 31, 2022. No further extension has been sought, and our understanding from conversations with Thomas Brierly (Director, Media & Telecom Lending, Brindoval National Bank, N.A., 383 Madison Avenue, New York, NY 10179) is that no further extension right exists under the terms of the commitment letter without Brindoval's affirmative consent. We are not aware of any discussions between Aurelius and Brindoval regarding a replacement or successor commitment.

Upon the lapse of the Brindoval Facility on March 31, 2022 (absent a further extension or replacement commitment), the Schedule TO will contain materially outdated information regarding the financing of the Offer. The Offer to Purchase states that "[t]he Offeror expects to fund the purchase of Shares tendered in the Offer, and to pay related fees and expenses, from the proceeds of [the Brindoval Facility]." If the Brindoval commitment has lapsed and no replacement financing is in place, this statement will be materially misleading to any reader of the Schedule TO who is unaware of the subsequent development.

We accordingly recommend that an amendment to the Schedule TO — designated Amendment No. 3 — be prepared in advance of the March 31, 2022 extended expiration date. The amendment should disclose that the Brindoval National Bank commitment has lapsed and that, as a result, the Offer cannot be consummated without the arrangement of new financing. The draft amendment should be reviewed and approved by this working group no later than March 15, 2022 to allow adequate time for finalization and filing.

Even if Aurelius views the Offer as practically defunct, the anti-fraud provisions of Section 14(e) of the Exchange Act create meaningful exposure if materially outdated financing disclosures remain on file with the Commission without correction. The Schedule TO is publicly available on EDGAR and accessible to any market participant at any time. Allowing materially misleading information to persist in a filed document, even a dormant one, could form the basis for an SEC enforcement inquiry or private litigation.

D. When Routine Target Company Filings Do Not Trigger an Amendment Obligation

It is important to distinguish between developments at the target company that do and do not trigger an amendment obligation for the offeror. Pinnacle, as a reporting company under the Exchange Act, files periodic and current reports with the Commission on a regular basis, including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. These routine filings do not, standing alone, impose any obligation on Aurelius to amend the Schedule TO. The amendment obligation under Rule 14d-3(b) runs to material changes in the information set forth in the Schedule TO itself, not to all material developments at the target company.

However, this principle is subject to an important qualification. Certain significant corporate events at Pinnacle could trigger an amendment obligation if they render previously disclosed information in the Schedule TO materially incomplete or misleading. The following examples illustrate this principle:

(i) Change of Control of Pinnacle. If Pinnacle receives or enters into a competing acquisition proposal — whether a merger agreement, a competing tender offer, or a take-private transaction — this could render materially misleading the Schedule TO's disclosure regarding the purpose of the Offer, Aurelius's plans for Pinnacle, and the competitive landscape. An amendment to the Schedule TO may be required in such circumstances, particularly if Aurelius's response to the competing proposal constitutes a material change in its plans.

(ii) Material Asset Dispositions. If Pinnacle undertakes a sale or disposition of a material portion of its assets — for example, a sale of a significant portion of its content library, which was described in the Schedule TO as a key component of the investment thesis — the Schedule TO's disclosure regarding the basis for the Offer price and Aurelius's strategic rationale for the acquisition could become materially misleading.

(iii) Modification, Renewal, or Termination of the Rights Plan. The Schedule TO disclosed the adoption of the Rights Plan as a significant impediment to the Offer. Any material modification, early termination, or non-renewal of the Rights Plan could affect the feasibility of reviving or restructuring the Offer and could therefore constitute a material change requiring disclosure. The Rights Plan is currently set to expire on September 29, 2024.

(iv) Significant Changes in Share Count. The Schedule TO disclosed that Pinnacle had 20,000,000 Shares outstanding. Pinnacle's current outstanding share count is approximately 20,400,000, an increase attributable to routine equity compensation issuances. While this modest increase (approximately 2%) is unlikely to be independently material, a more significant change — for example, resulting from a secondary offering, a large stock-for-acquisition transaction, or a share repurchase program — could render the Offer's terms and the ownership percentages disclosed in the Schedule TO materially misleading.

(v) Material Litigation. Material litigation involving Pinnacle that bears on the value of the investment — for example, a significant intellectual property dispute or a regulatory enforcement action — could trigger an amendment obligation if it renders the Schedule TO's investment thesis disclosure materially incomplete.

As a practical matter, we recommend that Calderwood & Harkness monitor Pinnacle's SEC filings on an ongoing basis (as discussed further in Section VI.B below) and evaluate each significant filing for any potential implications for the Schedule TO disclosure.

E. Formal Withdrawal vs. Continued Dormancy

Under Rule 14d-7 of the Exchange Act, withdrawal of a tender offer requires the offeror to give written notice of withdrawal to the depositary (in this case, Continental Fiduciary Services, Inc.) and to file an amendment to the Schedule TO disclosing the withdrawal. The notice must specify the name of the person who has made the tender offer, the title of the securities subject to the tender offer, and a concise statement of the reasons for the withdrawal. Upon the filing of a withdrawal amendment, the Schedule TO would be considered concluded, and the ongoing amendment obligations described in Sections III.B through III.D above would cease.

Until such formal withdrawal is effected, the Schedule TO remains an active filing, and the amendment obligations described herein persist. This is the current posture. The failure to formally withdraw means that Aurelius remains subject to ongoing disclosure obligations that would not exist if the Offer had been formally terminated.

We note that a formal withdrawal of the Offer would not eliminate all disclosure obligations. In particular, the Schedule 13D obligations discussed in Section IV below would continue independently, and a formal withdrawal would itself likely constitute a material change requiring an amendment to the Schedule 13D (as it would reflect a change in Aurelius's plans with respect to Pinnacle). However, formal withdrawal would eliminate the Section 14(d)/14(e) overlay and the risk that materially outdated Schedule TO disclosures could give rise to liability.

For analysis of the relative strategic merits of formal withdrawal versus continued dormancy — including the implications for Aurelius's negotiating posture, the signaling effect to the market, the potential impact on Pinnacle's share price, and the interplay with the Rights Plan expiration — reference is made to the separate strategic options memorandum dated December 15, 2021, prepared by James Prentice and Tiffany Rosenthal. This memorandum addresses only the reporting obligation dimension of that decision.

IV. Continuing Obligations Under Section 13(d) — Schedule 13D

A. Legal Framework: Section 13(d) and Rule 13d-2

Section 13(d) of the Exchange Act requires any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is registered pursuant to Section 12 of the Exchange Act, is directly or indirectly the beneficial owner of more than 5% of such class, to file with the Commission, within ten days after such acquisition, a statement on Schedule 13D containing such information and documents as the Commission may require.

Aurelius, through AMH LLC, filed a Schedule 13D with the Commission on August 26, 2021, disclosing its acquisition of 980,000 Shares of Pinnacle common stock (representing 4.9% of the 20,000,000 Shares then outstanding) and its intent to commence the Offer. The Schedule 13D disclosed that the Shares were acquired with the purpose and effect of changing or influencing the control of Pinnacle, as contemplated by the planned tender offer.

Rule 13d-2(a) under the Exchange Act provides that if any material change occurs in the facts set forth in a Schedule 13D, including but not limited to any material increase or decrease in the percentage of the class beneficially owned or any material change in the plans or proposals of the reporting person, the person shall promptly file an amendment to the Schedule 13D disclosing such change. The Commission has interpreted the word "promptly" in this context to mean as soon as reasonably practicable under the circumstances, and the SEC staff has stated informally that amendments should generally be filed within two to three business days of the triggering event or the date on which the filing person becomes aware (or should have become aware) of the material change.

B. Current Beneficial Ownership Analysis

As of the date of this memorandum, Aurelius (through AMH LLC) continues to hold 980,000 Shares of Pinnacle common stock. No additional Shares have been acquired, and no Shares have been disposed of, since the filing of the Schedule 13D.

At the time the Schedule 13D was filed on August 26, 2021, Pinnacle had 20,000,000 Shares outstanding, and Aurelius's 980,000-Share position represented approximately 4.9% of the outstanding Shares. Since that date, Pinnacle's outstanding share count has increased to approximately 20,400,000 Shares, primarily as a result of issuances under Pinnacle's equity compensation plans. As a result, Aurelius's beneficial ownership percentage has been diluted to approximately 4.8% (980,000 ÷ 20,400,000 = 4.804%).

This dilution below the 5% threshold warrants specific analysis. The 5% threshold established by Section 13(d) is a filing trigger — it determines when the initial Schedule 13D must be filed. Once a Schedule 13D has been filed, however, the obligation to amend the Schedule 13D upon material changes persists regardless of whether the filer's beneficial ownership subsequently drops below 5%. This principle is well-established in SEC interpretive guidance and is consistent with the prophylactic purpose of the beneficial ownership reporting regime. Accordingly, the fact that Aurelius's ownership percentage has declined to approximately 4.8% does not relieve Aurelius of its obligation to promptly amend the Schedule 13D upon any material change in the facts previously disclosed.

A filing person's obligation to amend the Schedule 13D generally continues until the filing person disposes of all of the securities that gave rise to the initial filing obligation or files a notice of final amendment indicating that the person has ceased to hold a reportable position and has no further plans or proposals reportable on Schedule 13D. Aurelius has taken neither of these steps.

C. Triggering Events for Schedule 13D Amendments

The following categories of developments would require Aurelius to promptly file an amendment to the Schedule 13D:

(i) Acquisition or Disposition of Pinnacle Shares. Any acquisition or disposition of Pinnacle Shares by Aurelius, AMH LLC, or any person or entity acting in concert with Aurelius would constitute a material change requiring prompt amendment. This includes even a single-share transaction if it reflects a change in Aurelius's investment purpose or a shift in strategy.

(ii) Change in Plans or Proposals. Rule 13d-2(a) specifically identifies a "material change in the plans or proposals" of the reporting person as a triggering event. Any decision by Aurelius to (a) revive or relaunch the Offer, (b) formally withdraw the Offer, (c) seek board representation at Pinnacle or initiate a proxy contest, (d) pursue an alternative acquisition structure such as a negotiated stock purchase agreement or merger, (e) dispose of the existing 980,000-Share position in whole or in part, or (f) abandon all plans regarding Pinnacle and hold the Shares for passive investment purposes, would constitute a material change in plans requiring prompt amendment.

(iii) Change in Source of Funds. Any material change in the source of funds for any future transaction involving Pinnacle securities — including the lapse of the Brindoval National Bank commitment or the arrangement of replacement financing — would constitute a material change to the information disclosed in the Schedule 13D regarding the source and amount of funds.

(iv) New Agreements or Understandings. Any new agreements, arrangements, or understandings between Aurelius and any third party with respect to Pinnacle securities — including joint acquisition agreements, voting arrangements, standstill agreements, or lock-up agreements — would be reportable as material changes.

(v) Communications with the Target. Any contact, negotiation, or communication between Aurelius and Pinnacle's board of directors, management (Jordan Cavanaugh, Chief Executive Officer; Patricia Langford, Chief Financial Officer; Derek Soo, General Counsel), or their external counsel (Caldwell Burris & Shoemaker LLP; lead partner: Rebecca Fontaine; David Kwan, senior associate) regarding the Offer, a standstill arrangement, board seats, or any alternative transaction would constitute a material development requiring amendment. The Schedule 13D is required to disclose any plans or proposals relating to, among other things, an extraordinary corporate transaction involving the target, changes in the board of directors or management, or any action similar to any of the foregoing. Communications with the target on any of these subjects would constitute material changes in the facts set forth in the Schedule 13D.

D. Interaction Between Schedule TO and Schedule 13D

The Schedule TO and Schedule 13D are parallel filings that serve distinct regulatory purposes but contain overlapping information. The Schedule TO is the primary disclosure vehicle under Regulation 14D for the tender offer itself, while the Schedule 13D is the primary disclosure vehicle under Section 13(d) for beneficial ownership and the filing person's plans and proposals. Many material developments — such as a decision to revive the Offer, a change in the source of funds, or an acquisition or disposition of Shares — would trigger amendment obligations under both filing regimes simultaneously.

Care must be taken to ensure consistency between the two disclosures at all times. Information disclosed in one filing that is material to the other must be either cross-referenced or independently disclosed. Inconsistencies between the Schedule TO and Schedule 13D could give rise to liability under Section 14(e) (tender offer anti-fraud), Section 13(d) (beneficial ownership reporting), and, potentially, Rule 10b-5 (general securities fraud) under Section 10(b) of the Exchange Act.

As a practical matter, we recommend that any amendments to the Schedule TO and Schedule 13D be prepared and reviewed in tandem, and that both filings be updated simultaneously whenever a material change triggers an amendment obligation under either regime. This coordination should be a standing item on the agenda for the quarterly internal review recommended in Section VI.A below.

V. Potential Liability Exposure

A. Section 14(e) — Tender Offer Anti-Fraud

Section 14(e) of the Exchange Act makes it unlawful for any person to make any untrue statement of a material fact, or to omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation.

Section 14(e) creates potential liability on two fronts. First, to the extent that the Schedule TO currently contains affirmative statements that have become materially false or misleading due to changed circumstances — most notably, statements regarding the availability of committed financing from Brindoval National Bank — Aurelius could face exposure. The Offer to Purchase, which is an exhibit to the Schedule TO, states in its "Source and Amount of Funds" section that the Offer will be funded from the Brindoval Facility. Once the Brindoval commitment lapses on March 31, 2022, this statement will be materially misleading. Second, to the extent that Aurelius omits to disclose material changes — such as a decision to revive or abandon the Offer — the omission could render the Schedule TO's existing disclosures misleading in light of the circumstances.

Importantly, the fact that the Offer has "lapsed without acceptance," as disclosed in Amendment No. 2, does not eliminate Section 14(e) liability. The Schedule TO remains on file with the Commission and is publicly available on EDGAR. Any market participant who accesses the filing may rely on the information contained therein. If that information is materially outdated and Aurelius has failed to file an appropriate amendment, the elements of a Section 14(e) violation may be present.

The potential consequences of a Section 14(e) violation include SEC enforcement action (which could result in injunctive relief, civil monetary penalties, and disgorgement of profits) and private litigation by Pinnacle shareholders (who could seek damages for losses sustained in reliance on materially misleading Schedule TO disclosures). While the practical likelihood of a private damages action in the current circumstances may be limited — given that the Offer is dormant and no shares have been purchased — the risk is not negligible, particularly in light of the fact that Aurelius continues to hold a significant open-market position in Pinnacle.

B. Section 13(d) — Beneficial Ownership Reporting

Rule 13d-2 under the Exchange Act imposes an obligation of prompt amendment upon any material change in the facts set forth in a Schedule 13D. Failure to promptly amend can result in SEC enforcement action under Sections 13(d) and 21(a) of the Exchange Act.

The Commission has historically taken the beneficial ownership reporting requirements seriously and has brought enforcement actions for late or inadequate Schedule 13D amendments, particularly in circumstances where the filer's undisclosed plans or changes in intent are material to market participants. Notable enforcement actions in this area include In the Matter of Carl C. Icahn (1986), SEC v. Lorin Industries, Inc. (N.D. Ind. 1996), and the more recent series of settled actions arising from the SEC's 2013–2015 beneficial ownership reporting initiative. The staff has made clear that the "promptly" standard requires diligence and that extended delays — particularly where the delayed disclosure relates to changes in acquisition plans — will be scrutinized.

If Aurelius's plans with respect to Pinnacle have evolved since the August 26, 2021 Schedule 13D filing (and the subsequent disclosure of the Offer in the Schedule TO), and if such changes have not been disclosed through a timely amendment, there is potential exposure to SEC enforcement action. This exposure exists independently of, and in addition to, any exposure under Section 14(e) with respect to the Schedule TO.

C. Practical Exposure Assessment

At present, we assess the overall risk of regulatory enforcement or private litigation as relatively low, given the dormant nature of the Offer and the absence of any affirmative changes in Aurelius's plans. However, this assessment is subject to the following important caveats:

First, the risk profile is not static. The passage of time and the accumulation of changed circumstances — including the approaching lapse of the Brindoval National Bank commitment on March 31, 2022, the decline in Pinnacle's share price from $3.42 to approximately $2.85, the increase in Pinnacle's outstanding shares from 20,000,000 to approximately 20,400,000, and the passage of time toward the September 29, 2024 expiration of the Rights Plan — could, individually or in combination, transform what are currently immaterial changes into material ones requiring disclosure.

Second, the risk of SEC scrutiny may increase if Aurelius takes any future action with respect to Pinnacle — such as acquiring additional Shares, commencing a proxy contest, or reviving the Offer — and the Commission concludes in hindsight that Aurelius's plans had changed at an earlier date without timely disclosure. The obligation to disclose changes in plans "promptly" means that any internal deliberations at Aurelius regarding a revised approach to Pinnacle should be flagged to Calderwood & Harkness immediately so that the reporting obligation analysis can be updated in real time.

Third, while the probability of a private damages action under current circumstances is limited, it is not zero. Any Pinnacle shareholder who can demonstrate that he or she relied on materially misleading disclosures in the Schedule TO or Schedule 13D — for example, by purchasing or selling Shares in reliance on Aurelius's disclosed intent or financing position — could potentially assert a claim under Section 14(e), Section 13(d), or Rule 10b-5.

For these reasons, we strongly recommend the implementation of the periodic review protocol and specific action items set forth in Section VI below.

VI. Practical Recommendations

A. Periodic Internal Review Protocol

We recommend establishing a quarterly internal review process to assess whether any material change has occurred that would trigger an amendment obligation with respect to either the Schedule TO or the Schedule 13D. The review should involve the following participants:

• Hugh Pemberton, General Counsel, Aurelius Global Media Group PLC

• Rupert Ashford, Head of Corporate Development, Aurelius Global Media Group PLC

• James Prentice, Partner, Calderwood & Harkness LLP

• Tiffany Rosenthal, Associate, Calderwood & Harkness LLP

• Andrew Fitzpatrick, Associate, Calderwood & Harkness LLP

The first quarterly review should be scheduled for April 2022, following the March 31, 2022 expiration of the Brindoval financing commitment (which may require the filing of Amendment No. 3 to the Schedule TO prior to or shortly after the April review, as discussed in Section VI.C below).

Each quarterly review should cover the following items:

(i) Whether there has been any change in Aurelius's plans, proposals, or intentions with respect to Pinnacle, including any decision to revive the Offer, pursue an alternative transaction, seek board representation, dispose of the existing Share position, or abandon all plans regarding Pinnacle.

(ii) Whether there has been any contact, communication, or negotiation between Aurelius (or any person acting on its behalf) and Pinnacle's board, management, or counsel regarding the Offer, a standstill arrangement, board representation, or any alternative transaction.

(iii) Whether Aurelius, AMH LLC, or any affiliate has acquired or disposed of any Pinnacle Shares since the last review period.

(iv) Whether there have been any material developments at Pinnacle that could render the Schedule TO disclosures materially misleading (based on a review of Pinnacle's public SEC filings, as discussed in Section VI.B below).

(v) The current status of the Brindoval National Bank financing commitment (or any successor or replacement financing arrangement).

(vi) The current status of the Pinnacle Rights Plan, including any modifications, renewals, or early termination, and the approach of the September 29, 2024 expiration date.

Each quarterly review should be documented in a brief written summary prepared by Calderwood & Harkness and distributed to the participants listed above. The summary should include a conclusion as to whether any amendment obligations have been triggered and, if so, the recommended course of action.

B. Monitoring Pinnacle's Public Filings

While routine Pinnacle filings do not independently trigger amendment obligations for the Schedule TO, Calderwood & Harkness should monitor Pinnacle's SEC filings on an ongoing basis to identify developments that could render the Schedule TO disclosures materially misleading or that could create strategic opportunities or risks for Aurelius. Pinnacle's filings can be accessed through the Commission's EDGAR system using CIK 0001847263.

The following filings should be monitored with particular attention:

• Annual Reports (Form 10-K). These should be reviewed for changes in Pinnacle's financial condition, results of operations, outstanding share count, NOL carryforward positions, risk factors, and any disclosure regarding the Offer or the Rights Plan. Pinnacle's fiscal year ends on December 31, and the 10-K is typically filed in late February or early March.

• Quarterly Reports (Form 10-Q). These should be reviewed for interim changes in financial condition, share count, and any material developments disclosed in the notes to the financial statements or management's discussion and analysis. Pinnacle's 10-Qs are typically filed within 40 days of the end of each fiscal quarter.

• Current Reports (Form 8-K). These should be monitored in real time for material agreements (including any acquisition or disposition transactions, debt financings, or amendments to the Rights Plan), changes in leadership (including changes in the CEO, CFO, or board composition), and any other disclosures that could affect the value of Aurelius's investment or the feasibility of a future transaction.

• Proxy Statements (Schedule 14A / DEF 14A). These should be reviewed for board composition changes, director nominations, shareholder proposals (including any proposal to terminate or ratify the Rights Plan), executive compensation developments, and any disclosure regarding Aurelius's ownership position or the Offer.

Andrew Fitzpatrick will be responsible for ongoing monitoring of Pinnacle's SEC filings and will flag any potentially material developments to the quarterly review group.

C. Brindoval Financing Disclosure

As discussed in Section III.C above, the most immediate action item is the preparation of a draft Amendment No. 3 to the Schedule TO to disclose the lapse of the Brindoval National Bank financing commitment. The following steps should be taken:

(i) Andrew Fitzpatrick and Tiffany Rosenthal will prepare a draft Amendment No. 3 disclosing that the $30,000,000 senior secured term loan commitment from Brindoval National Bank, N.A. (reference CL-2021-MTC-00487) has lapsed (or, if applicable, been further extended), and that any future consummation of the Offer or a revised transaction would require the arrangement of new financing. The draft should be circulated for review no later than March 15, 2022.

(ii) James Prentice will coordinate with Thomas Brierly at Brindoval National Bank, N.A. (383 Madison Avenue, New York, NY 10179) to determine whether any further extension of the commitment letter or any replacement or successor commitment is available or under discussion. This coordination should be completed by March 1, 2022, so that the draft amendment can reflect the final status of the financing.

(iii) If no further extension or replacement commitment is obtained, the amendment should be filed promptly following the March 31, 2022 expiration date — ideally within five business days (i.e., no later than approximately April 7, 2022).

(iv) The amendment should be reviewed for consistency with the Schedule 13D disclosures regarding the source of funds, and a conforming amendment to the Schedule 13D should be considered if necessary.

D. UK Disclosure Coordination

Aurelius is a public limited company listed on the London Stock Exchange. Accordingly, its disclosure obligations are not limited to those arising under U.S. federal securities law. Aurelius's UK counsel, Dunmore Asset Advisors Chambers LLP (lead partner: Alistair Drummond), should be consulted on any parallel disclosure obligations that may arise under the following regulatory frameworks:

• LSE Listing Rules. The LSE listing rules may require Aurelius to disclose material changes in its investment in Pinnacle, including changes in the status of the Offer, changes in financing, or a decision to revive or abandon the Offer.

• UK Disclosure Guidance and Transparency Rules. As an issuer of securities admitted to trading on the LSE, Aurelius is subject to the Disclosure Guidance and Transparency Rules ("DTR"), which require the disclosure of inside information as soon as possible. A material change in Aurelius's plans regarding its investment in Pinnacle could constitute inside information for DTR purposes.

• UK Takeover Code. While the UK Takeover Code does not directly apply to a tender offer for a U.S.-listed target company whose place of central management and control is in the United States, Aurelius's status as an LSE-listed company means that the Takeover Panel may assert jurisdiction over certain aspects of the transaction if it involves a "relevant company" under the Code. Dunmore Asset Advisors Chambers LLP has previously confirmed that the Code does not apply to the Offer, but this analysis should be revisited in the event of any material change in circumstances.

Calderwood & Harkness will coordinate with Dunmore Asset Advisors Chambers LLP as needed, and will include UK disclosure considerations as a standing agenda item in the quarterly review.

E. Communication Protocols

To ensure that potential reporting triggers are identified promptly, the following communication protocols should be observed:

(i) Communications from Pinnacle. Any communications from Pinnacle, its board of directors, management, or counsel (Caldwell Burris & Shoemaker LLP; Rebecca Fontaine; David Kwan) should be routed immediately to Calderwood & Harkness (James Prentice and Tiffany Rosenthal) for assessment of potential reporting implications before any substantive response is made. Even informal or preliminary communications — including telephone calls, emails, or in-person meetings — could constitute material changes in the facts set forth in the Schedule TO and Schedule 13D.

(ii) Communications from the SEC. Any communications from the Commission — whether from the Division of Corporation Finance, the Office of Mergers & Acquisitions, or the Division of Enforcement — should be flagged immediately to Calderwood & Harkness. This includes comment letters, informal telephone inquiries, and formal requests for information.

(iii) Third-Party Inquiries. Any inquiries from Pinnacle shareholders, securities analysts, the financial press, or other third parties regarding the status of the Offer should be directed to Hugh Pemberton and Calderwood & Harkness before any response is made. Unscripted responses to such inquiries could inadvertently create new disclosure obligations or constitute statements "in connection with" the Offer for purposes of Section 14(e).

F. Schedule 13D — Potential Step-Down to Schedule 13G

If Aurelius determines, as part of its broader strategic review, to abandon all plans to acquire additional Pinnacle securities and to cease any efforts to change or influence the control of Pinnacle, Aurelius may become eligible to step down from Schedule 13D to Schedule 13G reporting. Schedule 13G is the short-form alternative to Schedule 13D available to investors who hold reportable positions for passive investment purposes and who meet certain eligibility criteria.

Aurelius's current position of 980,000 Shares represents approximately 4.8% of Pinnacle's currently outstanding Shares. If Aurelius can certify that it holds the Shares without any purpose or effect of changing or influencing the control of Pinnacle — and that it is not a member of a group formed for such purpose — it would be eligible to transition from Schedule 13D to Schedule 13G reporting. This transition would substantially reduce Aurelius's ongoing reporting obligations, as Schedule 13G amendments are required only annually (within 45 days after calendar year-end) and upon the occurrence of certain specified events (such as a change in beneficial ownership of more than 5% or a change in the filing person's certification of passive intent), rather than upon any material change as required by Rule 13d-2(a) for Schedule 13D filers.

However, the step-down to Schedule 13G would carry significant strategic implications. To qualify for Schedule 13G, Aurelius would need to certify that it does not hold the Shares with the purpose or effect of changing or influencing the control of Pinnacle. This certification would be fundamentally inconsistent with any plan to revive the Offer, seek board representation, initiate a proxy contest, or pursue any alternative acquisition or control transaction. Making such a certification and subsequently reviving any such plans could expose Aurelius to SEC enforcement action for filing a materially false certification.

Accordingly, the decision to step down to Schedule 13G should be made only if and when Aurelius has affirmatively and definitively determined to abandon all plans regarding Pinnacle and to hold the existing 980,000-Share position solely for passive investment purposes. This decision should be made in coordination with the broader strategic review and should be discussed at the quarterly internal review.

VII. Summary of Action Items

The following table summarizes the key action items identified in this memorandum, the responsible parties, and the applicable deadlines or frequencies:

VIII. Conclusion

While the tender offer by AMH LLC for shares of Pinnacle Content Holdings, Inc. is dormant, it is not dead from a regulatory standpoint. The failure to formally withdraw the Offer pursuant to Rule 14d-7 means that both the Schedule TO (File No. 005-92847) and the Schedule 13D remain live filings with the Commission, each subject to its respective amendment obligations under Regulation 14D and Rule 13d-2.

The most immediate action item is the preparation of Amendment No. 3 to the Schedule TO to disclose the anticipated lapse of the $30,000,000 Brindoval National Bank financing commitment on March 31, 2022. The Section 14(e) anti-fraud provisions of the Exchange Act create meaningful exposure if materially outdated financing disclosures remain on file without correction, and we strongly recommend that this matter be addressed proactively.

Beyond the financing disclosure, the quarterly internal review protocol recommended in this memorandum will ensure that Aurelius remains in compliance with its ongoing reporting obligations as circumstances evolve. This is particularly important in light of several medium-term developments that may prompt a reassessment of Aurelius's strategy with respect to Pinnacle — most notably, the approaching expiration of the Pinnacle shareholder Rights Plan on September 29, 2024, which could remove a significant impediment to a renewed offer or alternative transaction structure. Any such reassessment would carry corresponding disclosure obligations under both the Schedule TO and Schedule 13D regimes, and Calderwood & Harkness should be engaged early in any such deliberations.

We also recommend that Aurelius give consideration, as part of its broader strategic review, to the relative merits of formally withdrawing the Offer versus maintaining the current dormant posture. As noted above, this question is addressed in the separate strategic options memorandum dated December 15, 2021. From a reporting obligation perspective, formal withdrawal would eliminate the ongoing Schedule TO amendment requirements (though Schedule 13D obligations would persist) and would reduce the risk profile associated with materially outdated disclosures remaining on file.

Calderwood & Harkness remains available to discuss any of the matters addressed in this memorandum at the client's convenience. We will continue to monitor developments and will provide updated guidance as circumstances warrant.

Prepared by:

Andrew Fitzpatrick Associate, Mergers & Acquisitions Calderwood & Harkness LLP 787 Seventh Avenue, 42nd Floor New York, NY 10019 Telephone: (212) 555-7400

Email: afitzpatrick@calderwoodharkness.com

Distribution:

James Prentice, Partner, Mergers & Acquisitions, Calderwood & Harkness LLP Sandra Tung, Billing Coordinator, Calderwood & Harkness LLP (for billing file) Tiffany Rosenthal, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP Hugh Pemberton, General Counsel, Aurelius Global Media Group PLC Rupert Ashford, Head of Corporate Development, Aurelius Global Media Group PLC

CONFIDENTIALITY NOTICE: This memorandum is protected by attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressees identified above and should not be disclosed, distributed, or made available to any third party without the prior written consent of Calderwood & Harkness LLP. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.

Date:	January 10, 2022
To:	James Prentice, Partner, Mergers & Acquisitions, Calderwood & Harkness LLP

Tiffany Rosenthal, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP

Hugh Pemberton, General Counsel, Aurelius Global Media Group PLC

From:	Andrew Fitzpatrick, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP
Re:	Ongoing SEC Reporting Obligations — Dormant Tender Offer for Shares of Pinnacle Content Holdings, Inc. (Nasdaq: PCHL)
Matter No.:	1011-00002
Action Item	Res

MEMORANDUM — PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 787 Seventh Avenue, 42nd Floor New York, NY 10019
January 10, 2022
I. Executive Summary
The purpose of this memorandum is to advise on the continuing obligations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), arising from the current dormant status of the tender offer (the "Offer") by Aurelius Media Holdings LLC, a Delaware limited liability company ("AMH LLC"), a wholly owned subsidiary of Aurelius Global Media Group PLC, a public limited company organized under the laws of England and Wales ("Aurelius" or "AGMG"), for up to 6,980,050 shares of common stock, par value $0.001 per share (the "Shares"), of Pinnacle Content Holdings, Inc., a Delaware corporation ("Pinnacle" or the "Company"), at a price of $4.01 per Share, net to the seller in cash, without interest and subject to any required tax withholding.
The Offer was commenced on September 8, 2021 and, following one extension, lapsed on November 5, 2021 when the minimum tender condition requiring the valid tender of at least 5,000,000 Shares was not satisfied. As of the expiration of the extended offer period, only approximately 1,420,000 Shares had been validly tendered and not withdrawn, representing approximately 7.1% of the 20,000,000 Shares then outstanding. Amendment No. 2 to the Schedule TO was filed with the Securities and Exchange Commission (the "SEC" or the "Commission") on November 12, 2021, disclosing the lapse of the Offer without acceptance of any tendered Shares, but the Offer was not formally withdrawn or terminated.
Aurelius retains a 980,000-Share open-market position in Pinnacle, representing approximately 4.9% of the Shares outstanding at the time of acquisition and approximately 4.8% of the approximately 20,400,000 Shares currently outstanding. These Shares were acquired through a series of open-market purchases between June 1, 2021 and August 25, 2021, at an average cost of $3.28 per Share, for an aggregate cost of approximately $3,214,400. This position was reported on the Schedule 13D filed by Aurelius with the Commission on August 26, 2021.
As a result of the Offer's dormant — but not formally withdrawn — status, two parallel reporting regimes continue to apply to Aurelius:
(1) The requirements of Regulation 14D promulgated under Section 14(d) of the Exchange Act and the related Schedule TO (File No. 005-92847); and
(2) The beneficial ownership reporting requirements of Section 13(d) of the Exchange Act and Rule 13d-2 thereunder, applicable to the Schedule 13D.
This memorandum addresses each of these reporting regimes in turn, identifies the potential liability exposure arising from non-compliance, and sets forth practical recommendations for periodic compliance reviews and specific near-term action items. In particular, this memorandum identifies the approaching lapse of the $30,000,000 financing commitment from Brindoval National Bank, N.A. on March 31, 2022 as a material change likely requiring the filing of an amendment to the Schedule TO.
This memorandum does not address the broader strategic question of whether Aurelius should revive, formally withdraw, or otherwise modify the Offer. That question is the subject of the separate strategic options memorandum dated December 15, 2021, prepared by James Prentice and Tiffany Rosenthal.
II. Background and Current Status of the Tender Offer
A. Summary of the Offer
The following summarizes the material terms of the Offer as disclosed in the Schedule TO and the related Offer to Purchase:
Offeror. The offeror is Aurelius Media Holdings LLC, a Delaware limited liability company (Delaware Secretary of State file number 7894512), formed for the purpose of effectuating the Offer and related transactions. AMH LLC's sole member is Aurelius Global Media Group PLC, a public limited company organized under the laws of England and Wales (registered number 08541276), the ordinary shares of which are admitted to trading on the London Stock Exchange (LSE: AGMG).
Target. The target of the Offer is Pinnacle Content Holdings, Inc., a Delaware corporation, the common stock of which is registered under Section 12(b) of the Exchange Act and listed on the Nasdaq Global Market under the symbol "PCHL" (SEC CIK 0001847263). Pinnacle is a content creation and distribution company focused on digital media properties, including a library of original and licensed programming.
Shares Sought. The Offer was made for up to 6,980,050 Shares, representing approximately 34.9% of the 20,000,000 Shares then outstanding. If fully subscribed, the Offer would have resulted in Aurelius (together with its existing 980,000-Share position) holding a total of 7,960,050 Shares, representing approximately 39.8% of Pinnacle's outstanding Shares.
Offer Price. The Offer price was $4.01 per Share, net to the seller in cash, without interest and subject to any required tax withholding. This price represented a premium of approximately 17.25% over the undisturbed closing price of $3.42 per Share on August 27, 2021, the last trading day prior to the filing of the Schedule 13D.
Aggregate Deal Value. At the Offer price, the aggregate consideration for all 6,980,050 Shares sought was approximately $27,989,000.50 (6,980,050 × $4.01). Including estimated transaction costs and expenses, the total transaction value was anticipated to be approximately $28,000,000.
Minimum Tender Condition. The Offer was conditioned upon, among other things, the valid tender and non-withdrawal of at least 5,000,000 Shares, representing 25.0% of the then-outstanding Shares (the "Minimum Condition"). The Minimum Condition was not waivable by the offeror.
Financing. The Offer was to be financed through the proceeds of a $30,000,000 senior secured term loan committed by Brindoval National Bank, N.A. (the "Brindoval Facility"), pursuant to a commitment letter dated August 20, 2021 (reference CL-2021-MTC-00487) between Brindoval National Bank, N.A. (as lender), AMH LLC (as borrower), and AGMG (as guarantor). The key terms of the Brindoval Facility included an interest rate of LIBOR plus 3.25% per annum (with a 0.50% LIBOR floor) and a commitment fee of 0.50% per annum on the undrawn amount. The original commitment expired on December 31, 2021. One 90-day extension was exercised pursuant to the terms of the commitment letter, extending the commitment to March 31, 2022. As of the date of this memorandum, approximately $75,000 in commitment fees have been paid. The Brindoval Facility remains entirely unfunded. No further extension has been sought or negotiated.
Depositary. Continental Fiduciary Services, Inc., located at 1 Ashbury Asset Advisors Plaza, 30th Floor, New York, NY 10004, served as depositary for the Offer. The primary contact is Lisa Pryor, Vice President, Corporate Actions.
Information Agent. Ridgeway Proxy Advisors LLC, located at 105 Madison Avenue, Suite 1200, New York, NY 10016, served as information agent for the Offer. The primary contact is Martin Cheswick, Senior Managing Director.
B. Timeline of Key Events
The following is a chronological summary of the key events relevant to the Offer and the associated regulatory filings:
September 8, 2021. AMH LLC filed the Schedule TO with the Commission and commenced the Offer. The Offer to Purchase, the Letter of Transmittal, and related materials were disseminated to Pinnacle shareholders. The initial offer period was set to expire at 11:59 p.m., Eastern Time, on October 8, 2021 (twenty business days from commencement).
September 10, 2021. Pinnacle filed a preliminary Schedule 14D-9 with the Commission, indicating that the Pinnacle board of directors had not yet made a recommendation to its shareholders regarding the Offer.
September 15, 2021. The Federal Trade Commission and the Department of Justice granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect to the Offer (HSR Transaction Number 20211892). The filing fee paid was $45,000. Accordingly, the HSR condition to the Offer was satisfied.
September 22, 2021. The SEC's Division of Corporation Finance, Office of Mergers & Acquisitions (Katherine Wylie, Special Counsel), issued a comment letter to AMH LLC containing four comments relating to the Schedule TO and the Offer to Purchase. The comments addressed, among other matters, the description of Aurelius's plans for Pinnacle following consummation of the Offer, including with respect to board representation.
September 29, 2021. The Pinnacle board of directors adopted a Section 382 Net Operating Loss Preservation Shareholder Rights Plan (the "Rights Plan"). The Rights Plan is triggered upon any person or group acquiring beneficial ownership of 35% or more of Pinnacle's outstanding Shares, at which point each right becomes exercisable for $18.00 per right, entitling all other shareholders to purchase additional Shares at a substantial discount. Continental Fiduciary Services, Inc. was appointed as rights agent. The Rights Plan is set to expire on September 29, 2024, unless earlier terminated, redeemed, or exchanged. In its public announcement, the Pinnacle board stated that the Rights Plan was adopted to preserve the Company's significant net operating loss ("NOL") carryforwards, which were estimated at approximately $47,300,000 for federal income tax purposes. The adoption of the Rights Plan effectively constituted a defensive measure against the Offer, as consummation of the Offer (including Aurelius's existing 980,000-Share position) would have resulted in Aurelius holding approximately 39.8% of Pinnacle's outstanding Shares, exceeding the 35% trigger threshold.
October 1, 2021. Pinnacle filed its definitive Schedule 14D-9 with the Commission. The Schedule 14D-9 disclosed that the Pinnacle board of directors unanimously recommended that Pinnacle shareholders NOT tender their Shares in the Offer. The board cited, among other reasons, the inadequacy of the Offer price, the potential adverse impact on Pinnacle's NOL carryforwards, and concerns regarding Aurelius's strategic intentions for the Company.
October 6, 2021. AMH LLC filed Amendment No. 1 to the Schedule TO, responding to the four comments raised by the SEC staff in the September 22, 2021 comment letter. The amendment included additional disclosure regarding Aurelius's plans for Pinnacle following consummation of the Offer, including its views regarding board representation, and corrected certain other disclosures identified by the staff.
October 8, 2021. The initial twenty-business-day offer period expired. Aurelius determined to extend the Offer and filed an amendment reflecting the extension of the offer period to November 5, 2021.
November 2, 2021. As of a preliminary count provided by the depositary, approximately 1,420,000 Shares had been validly tendered and not withdrawn, representing approximately 7.1% of the then-outstanding Shares. This figure was substantially below the 5,000,000-Share Minimum Condition.
November 5, 2021. The extended offer period expired at 11:59 p.m., Eastern Time. The Minimum Condition was not satisfied. Aurelius did not accept any of the tendered Shares for payment and did not formally withdraw the Offer. All tendered Shares were returned to the tendering holders through the depositary.
November 12, 2021. AMH LLC filed Amendment No. 2 to the Schedule TO disclosing that the Offer had "lapsed without acceptance" because the Minimum Condition had not been satisfied. Importantly, Amendment No. 2 did not include a notice of withdrawal or termination of the Offer. The amendment stated that Aurelius was "evaluating its options with respect to its investment in Pinnacle" and that there could be no assurance that the Offer would be revived, extended, or renewed.
December 2021 – Present. Since the filing of Amendment No. 2, the matter has remained dormant. No withdrawal notice has been filed under Rule 14d-7. No further extensions or amendments to the Offer have been made. No further communications have been exchanged between Aurelius and Pinnacle or their respective counsel.
C. Current Posture
As of the date of this memorandum, the Offer has not been formally withdrawn pursuant to Rule 14d-7 under the Exchange Act. No termination notice has been filed with the depositary or with the Commission. Accordingly, from a regulatory standpoint, the Offer remains in a state of dormancy — it is neither active nor formally concluded.
Aurelius, through AMH LLC, continues to hold 980,000 Shares of Pinnacle common stock. At the time the Schedule 13D was filed on August 26, 2021, Pinnacle had 20,000,000 Shares outstanding, placing Aurelius's beneficial ownership at 4.9%. Since that time, Pinnacle's outstanding share count has increased slightly to approximately 20,400,000 Shares, primarily as a result of issuances under Pinnacle's equity compensation plans (including stock option exercises and restricted stock unit vesting), which dilutes Aurelius's percentage ownership to approximately 4.8% (980,000 ÷ 20,400,000 = 4.804%).
Pinnacle's current share price is approximately $2.85 per Share, representing a decline of approximately 17% from the $3.42 undisturbed price as of August 27, 2021 and a decline of approximately 29% from the $4.01 Offer price. At the current market price, the aggregate value of Aurelius's 980,000-Share position is approximately $2,793,000, compared to the aggregate acquisition cost of approximately $3,214,400, representing an unrealized loss of approximately $421,400.
Aurelius's financial advisor in connection with the Offer, Strathmore Corporation Harcourt Partners (lead banker: Genevieve Tran, Managing Director, Cross-Border M&A), earned a commencement fee of $400,000 upon the filing of the Schedule TO. The $600,000 success fee, contingent upon Aurelius's acquisition of a majority of the Shares sought in the Offer, was not earned and remains unpaid.
Aurelius's UK counsel, Dunmore Asset Advisors Chambers LLP (lead partner: Alistair Drummond), continues to monitor Aurelius's disclosure obligations under the London Stock Exchange listing rules and the UK regulatory framework. As discussed in Section VI.D below, coordination with UK counsel is recommended as part of any disclosure event.
III. Continuing Obligations Under Regulation 14D — Schedule TO
A. Legal Framework: Sections 14(d) and 14(e) of the Exchange Act; Rules 14d-3, 14d-6, 14d-9
The regulatory framework governing tender offers under the Exchange Act imposes a series of filing, disclosure, and anti-fraud obligations on the offeror that remain operative for as long as the tender offer has not been formally withdrawn.
Section 14(d)(1) of the Exchange Act provides that it shall be unlawful for any person to make a tender offer for equity securities of a class registered under Section 12 of the Exchange Act, if after consummation thereof such person would be the beneficial owner of more than 5% of such class, unless at the time copies of the offer or request or invitation are first published or sent or given to security holders, such person has filed with the Commission a statement containing the information required by the Commission's rules and regulations. The filing vehicle for this purpose is the Schedule TO, promulgated under Rule 14d-3.
Rule 14d-3(b) requires the filing party to amend the Schedule TO to reflect any material change in the information set forth or incorporated by reference in the statement previously filed. This amendment obligation is triggered by material changes regardless of whether the tender offer is currently open for acceptance. The rule does not distinguish between active and dormant offers; so long as the filing has not been withdrawn or superseded, it remains subject to the amendment requirement.
Rule 14d-6(d) addresses the procedural requirements for extensions, amendments, and termination of tender offers, including the manner and timing of dissemination of notices thereof to security holders. These provisions work in conjunction with Rule 14d-7, which governs the formal withdrawal mechanics.
Section 14(e) of the Exchange Act is a broad anti-fraud provision that prohibits any person from making any untrue statement of a material fact, or omitting to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. Critically, Section 14(e) is not limited in its application to periods during which a tender offer is actively open for acceptance. It applies to all statements made "in connection with" a tender offer, which courts have construed broadly to encompass the full lifecycle of a tender offer, including periods of dormancy during which a filed Schedule TO remains publicly available on the Commission's EDGAR system.
B. Obligation to File Amendments to Schedule TO Upon Material Changes
Because the Offer has not been formally withdrawn pursuant to Rule 14d-7, the Schedule TO (File No. 005-92847) remains a "live" filing with the Commission. As such, Aurelius — through AMH LLC as the filing person — is obligated to amend the Schedule TO promptly upon any material change in the information previously disclosed therein.
The concept of "materiality" in this context is governed by the well-established standard articulated by the Supreme Court in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), and its progeny: a fact is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding how to act — in the tender offer context, whether to tender, withdraw, or hold securities. This standard applies with equal force to amendments of previously filed disclosure documents as it does to initial filings.
The following categories of changes could trigger an obligation to file an amendment to the Schedule TO:
(i) Change in Intent Regarding the Offer. Any change in Aurelius's intent with respect to the Offer — including a decision to revive, relaunch, formally terminate, modify the terms of, or abandon the Offer — would constitute a material change requiring prompt amendment. Such a change would go to the heart of the information most relevant to Pinnacle shareholders and the market.
(ii) Change in Financing. Any change in the facts regarding the financing of the Offer would be material. As discussed in greater detail in Section III.C below, the Brindoval National Bank commitment letter — disclosed in the Schedule TO and Offer to Purchase as the source of funds for the Offer — is subject to an extended commitment expiration date of March 31, 2022. The lapse of this commitment, without replacement financing, would render the financing-related disclosures in the Schedule TO materially outdated and would likely require an amendment.
(iii) Acquisition or Disposition of Pinnacle Shares. Any material acquisition or disposition of Pinnacle Shares by Aurelius, AMH LLC, or any affiliate would constitute a material change to the information set forth in the Schedule TO regarding the offeror's ownership of target securities.
(iv) Board Representation Plans. The SEC staff's comment letter dated September 22, 2021 specifically focused on Aurelius's disclosure regarding its plans for board representation at Pinnacle. Any change in those plans — whether an abandonment of previously disclosed intentions or the formulation of new plans — could trigger an amendment obligation. Amendment No. 1 to the Schedule TO included enhanced disclosure on this topic, and any deviation from that disclosure would be material.
(v) Financial Condition of the Offeror. Any material change in Aurelius's financial condition that would bear on its ability to consummate the Offer or a revised transaction could require amendment, particularly in light of the financing-related disclosures in the Schedule TO.
(vi) Communications with the Target. Any contact, negotiation, or communication between Aurelius (or its representatives) and Pinnacle's board of directors, management, or counsel (Caldwell Burris & Shoemaker LLP; lead partner: Rebecca Fontaine) regarding the Offer, a standstill arrangement, or any alternative transaction would constitute a material development requiring disclosure.
C. Specific Near-Term Trigger: Lapse of Brindoval Financing Commitment
The most significant near-term reporting event of which we are currently aware is the approaching expiration of the Brindoval National Bank financing commitment. This issue warrants detailed analysis.
The $30,000,000 senior secured term loan commitment from Brindoval National Bank, N.A. (reference CL-2021-MTC-00487) was a central element of the Offer. The Schedule TO and Offer to Purchase described the Brindoval Facility as the source of funds for the Offer, and the specific terms of the commitment letter were summarized in the "Source and Amount of Funds" section of the Offer to Purchase. The availability of committed financing at the time of the Offer's commencement was a material fact that Pinnacle shareholders were entitled to rely upon in evaluating the Offer.
The original commitment expired on December 31, 2021. Pursuant to the terms of the commitment letter, one 90-day extension was exercised by AMH LLC, extending the commitment to March 31, 2022. No further extension has been sought, and our understanding from conversations with Thomas Brierly (Director, Media & Telecom Lending, Brindoval National Bank, N.A., 383 Madison Avenue, New York, NY 10179) is that no further extension right exists under the terms of the commitment letter without Brindoval's affirmative consent. We are not aware of any discussions between Aurelius and Brindoval regarding a replacement or successor commitment.
Upon the lapse of the Brindoval Facility on March 31, 2022 (absent a further extension or replacement commitment), the Schedule TO will contain materially outdated information regarding the financing of the Offer. The Offer to Purchase states that "[t]he Offeror expects to fund the purchase of Shares tendered in the Offer, and to pay related fees and expenses, from the proceeds of [the Brindoval Facility]." If the Brindoval commitment has lapsed and no replacement financing is in place, this statement will be materially misleading to any reader of the Schedule TO who is unaware of the subsequent development.
We accordingly recommend that an amendment to the Schedule TO — designated Amendment No. 3 — be prepared in advance of the March 31, 2022 extended expiration date. The amendment should disclose that the Brindoval National Bank commitment has lapsed and that, as a result, the Offer cannot be consummated without the arrangement of new financing. The draft amendment should be reviewed and approved by this working group no later than March 15, 2022 to allow adequate time for finalization and filing.
Even if Aurelius views the Offer as practically defunct, the anti-fraud provisions of Section 14(e) of the Exchange Act create meaningful exposure if materially outdated financing disclosures remain on file with the Commission without correction. The Schedule TO is publicly available on EDGAR and accessible to any market participant at any time. Allowing materially misleading information to persist in a filed document, even a dormant one, could form the basis for an SEC enforcement inquiry or private litigation.
D. When Routine Target Company Filings Do Not Trigger an Amendment Obligation
It is important to distinguish between developments at the target company that do and do not trigger an amendment obligation for the offeror. Pinnacle, as a reporting company under the Exchange Act, files periodic and current reports with the Commission on a regular basis, including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. These routine filings do not, standing alone, impose any obligation on Aurelius to amend the Schedule TO. The amendment obligation under Rule 14d-3(b) runs to material changes in the information set forth in the Schedule TO itself, not to all material developments at the target company.
However, this principle is subject to an important qualification. Certain significant corporate events at Pinnacle could trigger an amendment obligation if they render previously disclosed information in the Schedule TO materially incomplete or misleading. The following examples illustrate this principle:
(i) Change of Control of Pinnacle. If Pinnacle receives or enters into a competing acquisition proposal — whether a merger agreement, a competing tender offer, or a take-private transaction — this could render materially misleading the Schedule TO's disclosure regarding the purpose of the Offer, Aurelius's plans for Pinnacle, and the competitive landscape. An amendment to the Schedule TO may be required in such circumstances, particularly if Aurelius's response to the competing proposal constitutes a material change in its plans.
(ii) Material Asset Dispositions. If Pinnacle undertakes a sale or disposition of a material portion of its assets — for example, a sale of a significant portion of its content library, which was described in the Schedule TO as a key component of the investment thesis — the Schedule TO's disclosure regarding the basis for the Offer price and Aurelius's strategic rationale for the acquisition could become materially misleading.
(iii) Modification, Renewal, or Termination of the Rights Plan. The Schedule TO disclosed the adoption of the Rights Plan as a significant impediment to the Offer. Any material modification, early termination, or non-renewal of the Rights Plan could affect the feasibility of reviving or restructuring the Offer and could therefore constitute a material change requiring disclosure. The Rights Plan is currently set to expire on September 29, 2024.
(iv) Significant Changes in Share Count. The Schedule TO disclosed that Pinnacle had 20,000,000 Shares outstanding. Pinnacle's current outstanding share count is approximately 20,400,000, an increase attributable to routine equity compensation issuances. While this modest increase (approximately 2%) is unlikely to be independently material, a more significant change — for example, resulting from a secondary offering, a large stock-for-acquisition transaction, or a share repurchase program — could render the Offer's terms and the ownership percentages disclosed in the Schedule TO materially misleading.
(v) Material Litigation. Material litigation involving Pinnacle that bears on the value of the investment — for example, a significant intellectual property dispute or a regulatory enforcement action — could trigger an amendment obligation if it renders the Schedule TO's investment thesis disclosure materially incomplete.
As a practical matter, we recommend that Calderwood & Harkness monitor Pinnacle's SEC filings on an ongoing basis (as discussed further in Section VI.B below) and evaluate each significant filing for any potential implications for the Schedule TO disclosure.
E. Formal Withdrawal vs. Continued Dormancy
Under Rule 14d-7 of the Exchange Act, withdrawal of a tender offer requires the offeror to give written notice of withdrawal to the depositary (in this case, Continental Fiduciary Services, Inc.) and to file an amendment to the Schedule TO disclosing the withdrawal. The notice must specify the name of the person who has made the tender offer, the title of the securities subject to the tender offer, and a concise statement of the reasons for the withdrawal. Upon the filing of a withdrawal amendment, the Schedule TO would be considered concluded, and the ongoing amendment obligations described in Sections III.B through III.D above would cease.
Until such formal withdrawal is effected, the Schedule TO remains an active filing, and the amendment obligations described herein persist. This is the current posture. The failure to formally withdraw means that Aurelius remains subject to ongoing disclosure obligations that would not exist if the Offer had been formally terminated.
We note that a formal withdrawal of the Offer would not eliminate all disclosure obligations. In particular, the Schedule 13D obligations discussed in Section IV below would continue independently, and a formal withdrawal would itself likely constitute a material change requiring an amendment to the Schedule 13D (as it would reflect a change in Aurelius's plans with respect to Pinnacle). However, formal withdrawal would eliminate the Section 14(d)/14(e) overlay and the risk that materially outdated Schedule TO disclosures could give rise to liability.
For analysis of the relative strategic merits of formal withdrawal versus continued dormancy — including the implications for Aurelius's negotiating posture, the signaling effect to the market, the potential impact on Pinnacle's share price, and the interplay with the Rights Plan expiration — reference is made to the separate strategic options memorandum dated December 15, 2021, prepared by James Prentice and Tiffany Rosenthal. This memorandum addresses only the reporting obligation dimension of that decision.
IV. Continuing Obligations Under Section 13(d) — Schedule 13D
A. Legal Framework: Section 13(d) and Rule 13d-2
Section 13(d) of the Exchange Act requires any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is registered pursuant to Section 12 of the Exchange Act, is directly or indirectly the beneficial owner of more than 5% of such class, to file with the Commission, within ten days after such acquisition, a statement on Schedule 13D containing such information and documents as the Commission may require.
Aurelius, through AMH LLC, filed a Schedule 13D with the Commission on August 26, 2021, disclosing its acquisition of 980,000 Shares of Pinnacle common stock (representing 4.9% of the 20,000,000 Shares then outstanding) and its intent to commence the Offer. The Schedule 13D disclosed that the Shares were acquired with the purpose and effect of changing or influencing the control of Pinnacle, as contemplated by the planned tender offer.
Rule 13d-2(a) under the Exchange Act provides that if any material change occurs in the facts set forth in a Schedule 13D, including but not limited to any material increase or decrease in the percentage of the class beneficially owned or any material change in the plans or proposals of the reporting person, the person shall promptly file an amendment to the Schedule 13D disclosing such change. The Commission has interpreted the word "promptly" in this context to mean as soon as reasonably practicable under the circumstances, and the SEC staff has stated informally that amendments should generally be filed within two to three business days of the triggering event or the date on which the filing person becomes aware (or should have become aware) of the material change.
B. Current Beneficial Ownership Analysis
As of the date of this memorandum, Aurelius (through AMH LLC) continues to hold 980,000 Shares of Pinnacle common stock. No additional Shares have been acquired, and no Shares have been disposed of, since the filing of the Schedule 13D.
At the time the Schedule 13D was filed on August 26, 2021, Pinnacle had 20,000,000 Shares outstanding, and Aurelius's 980,000-Share position represented approximately 4.9% of the outstanding Shares. Since that date, Pinnacle's outstanding share count has increased to approximately 20,400,000 Shares, primarily as a result of issuances under Pinnacle's equity compensation plans. As a result, Aurelius's beneficial ownership percentage has been diluted to approximately 4.8% (980,000 ÷ 20,400,000 = 4.804%).
This dilution below the 5% threshold warrants specific analysis. The 5% threshold established by Section 13(d) is a filing trigger — it determines when the initial Schedule 13D must be filed. Once a Schedule 13D has been filed, however, the obligation to amend the Schedule 13D upon material changes persists regardless of whether the filer's beneficial ownership subsequently drops below 5%. This principle is well-established in SEC interpretive guidance and is consistent with the prophylactic purpose of the beneficial ownership reporting regime. Accordingly, the fact that Aurelius's ownership percentage has declined to approximately 4.8% does not relieve Aurelius of its obligation to promptly amend the Schedule 13D upon any material change in the facts previously disclosed.
A filing person's obligation to amend the Schedule 13D generally continues until the filing person disposes of all of the securities that gave rise to the initial filing obligation or files a notice of final amendment indicating that the person has ceased to hold a reportable position and has no further plans or proposals reportable on Schedule 13D. Aurelius has taken neither of these steps.
C. Triggering Events for Schedule 13D Amendments
The following categories of developments would require Aurelius to promptly file an amendment to the Schedule 13D:
(i) Acquisition or Disposition of Pinnacle Shares. Any acquisition or disposition of Pinnacle Shares by Aurelius, AMH LLC, or any person or entity acting in concert with Aurelius would constitute a material change requiring prompt amendment. This includes even a single-share transaction if it reflects a change in Aurelius's investment purpose or a shift in strategy.
(ii) Change in Plans or Proposals. Rule 13d-2(a) specifically identifies a "material change in the plans or proposals" of the reporting person as a triggering event. Any decision by Aurelius to (a) revive or relaunch the Offer, (b) formally withdraw the Offer, (c) seek board representation at Pinnacle or initiate a proxy contest, (d) pursue an alternative acquisition structure such as a negotiated stock purchase agreement or merger, (e) dispose of the existing 980,000-Share position in whole or in part, or (f) abandon all plans regarding Pinnacle and hold the Shares for passive investment purposes, would constitute a material change in plans requiring prompt amendment.
(iii) Change in Source of Funds. Any material change in the source of funds for any future transaction involving Pinnacle securities — including the lapse of the Brindoval National Bank commitment or the arrangement of replacement financing — would constitute a material change to the information disclosed in the Schedule 13D regarding the source and amount of funds.
(iv) New Agreements or Understandings. Any new agreements, arrangements, or understandings between Aurelius and any third party with respect to Pinnacle securities — including joint acquisition agreements, voting arrangements, standstill agreements, or lock-up agreements — would be reportable as material changes.
(v) Communications with the Target. Any contact, negotiation, or communication between Aurelius and Pinnacle's board of directors, management (Jordan Cavanaugh, Chief Executive Officer; Patricia Langford, Chief Financial Officer; Derek Soo, General Counsel), or their external counsel (Caldwell Burris & Shoemaker LLP; lead partner: Rebecca Fontaine; David Kwan, senior associate) regarding the Offer, a standstill arrangement, board seats, or any alternative transaction would constitute a material development requiring amendment. The Schedule 13D is required to disclose any plans or proposals relating to, among other things, an extraordinary corporate transaction involving the target, changes in the board of directors or management, or any action similar to any of the foregoing. Communications with the target on any of these subjects would constitute material changes in the facts set forth in the Schedule 13D.
D. Interaction Between Schedule TO and Schedule 13D
The Schedule TO and Schedule 13D are parallel filings that serve distinct regulatory purposes but contain overlapping information. The Schedule TO is the primary disclosure vehicle under Regulation 14D for the tender offer itself, while the Schedule 13D is the primary disclosure vehicle under Section 13(d) for beneficial ownership and the filing person's plans and proposals. Many material developments — such as a decision to revive the Offer, a change in the source of funds, or an acquisition or disposition of Shares — would trigger amendment obligations under both filing regimes simultaneously.
Care must be taken to ensure consistency between the two disclosures at all times. Information disclosed in one filing that is material to the other must be either cross-referenced or independently disclosed. Inconsistencies between the Schedule TO and Schedule 13D could give rise to liability under Section 14(e) (tender offer anti-fraud), Section 13(d) (beneficial ownership reporting), and, potentially, Rule 10b-5 (general securities fraud) under Section 10(b) of the Exchange Act.
As a practical matter, we recommend that any amendments to the Schedule TO and Schedule 13D be prepared and reviewed in tandem, and that both filings be updated simultaneously whenever a material change triggers an amendment obligation under either regime. This coordination should be a standing item on the agenda for the quarterly internal review recommended in Section VI.A below.
V. Potential Liability Exposure
A. Section 14(e) — Tender Offer Anti-Fraud
Section 14(e) of the Exchange Act makes it unlawful for any person to make any untrue statement of a material fact, or to omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation.
Section 14(e) creates potential liability on two fronts. First, to the extent that the Schedule TO currently contains affirmative statements that have become materially false or misleading due to changed circumstances — most notably, statements regarding the availability of committed financing from Brindoval National Bank — Aurelius could face exposure. The Offer to Purchase, which is an exhibit to the Schedule TO, states in its "Source and Amount of Funds" section that the Offer will be funded from the Brindoval Facility. Once the Brindoval commitment lapses on March 31, 2022, this statement will be materially misleading. Second, to the extent that Aurelius omits to disclose material changes — such as a decision to revive or abandon the Offer — the omission could render the Schedule TO's existing disclosures misleading in light of the circumstances.
Importantly, the fact that the Offer has "lapsed without acceptance," as disclosed in Amendment No. 2, does not eliminate Section 14(e) liability. The Schedule TO remains on file with the Commission and is publicly available on EDGAR. Any market participant who accesses the filing may rely on the information contained therein. If that information is materially outdated and Aurelius has failed to file an appropriate amendment, the elements of a Section 14(e) violation may be present.
The potential consequences of a Section 14(e) violation include SEC enforcement action (which could result in injunctive relief, civil monetary penalties, and disgorgement of profits) and private litigation by Pinnacle shareholders (who could seek damages for losses sustained in reliance on materially misleading Schedule TO disclosures). While the practical likelihood of a private damages action in the current circumstances may be limited — given that the Offer is dormant and no shares have been purchased — the risk is not negligible, particularly in light of the fact that Aurelius continues to hold a significant open-market position in Pinnacle.
B. Section 13(d) — Beneficial Ownership Reporting
Rule 13d-2 under the Exchange Act imposes an obligation of prompt amendment upon any material change in the facts set forth in a Schedule 13D. Failure to promptly amend can result in SEC enforcement action under Sections 13(d) and 21(a) of the Exchange Act.
The Commission has historically taken the beneficial ownership reporting requirements seriously and has brought enforcement actions for late or inadequate Schedule 13D amendments, particularly in circumstances where the filer's undisclosed plans or changes in intent are material to market participants. Notable enforcement actions in this area include In the Matter of Carl C. Icahn (1986), SEC v. Lorin Industries, Inc. (N.D. Ind. 1996), and the more recent series of settled actions arising from the SEC's 2013–2015 beneficial ownership reporting initiative. The staff has made clear that the "promptly" standard requires diligence and that extended delays — particularly where the delayed disclosure relates to changes in acquisition plans — will be scrutinized.
If Aurelius's plans with respect to Pinnacle have evolved since the August 26, 2021 Schedule 13D filing (and the subsequent disclosure of the Offer in the Schedule TO), and if such changes have not been disclosed through a timely amendment, there is potential exposure to SEC enforcement action. This exposure exists independently of, and in addition to, any exposure under Section 14(e) with respect to the Schedule TO.
C. Practical Exposure Assessment
At present, we assess the overall risk of regulatory enforcement or private litigation as relatively low, given the dormant nature of the Offer and the absence of any affirmative changes in Aurelius's plans. However, this assessment is subject to the following important caveats:
First, the risk profile is not static. The passage of time and the accumulation of changed circumstances — including the approaching lapse of the Brindoval National Bank commitment on March 31, 2022, the decline in Pinnacle's share price from $3.42 to approximately $2.85, the increase in Pinnacle's outstanding shares from 20,000,000 to approximately 20,400,000, and the passage of time toward the September 29, 2024 expiration of the Rights Plan — could, individually or in combination, transform what are currently immaterial changes into material ones requiring disclosure.
Second, the risk of SEC scrutiny may increase if Aurelius takes any future action with respect to Pinnacle — such as acquiring additional Shares, commencing a proxy contest, or reviving the Offer — and the Commission concludes in hindsight that Aurelius's plans had changed at an earlier date without timely disclosure. The obligation to disclose changes in plans "promptly" means that any internal deliberations at Aurelius regarding a revised approach to Pinnacle should be flagged to Calderwood & Harkness immediately so that the reporting obligation analysis can be updated in real time.
Third, while the probability of a private damages action under current circumstances is limited, it is not zero. Any Pinnacle shareholder who can demonstrate that he or she relied on materially misleading disclosures in the Schedule TO or Schedule 13D — for example, by purchasing or selling Shares in reliance on Aurelius's disclosed intent or financing position — could potentially assert a claim under Section 14(e), Section 13(d), or Rule 10b-5.
For these reasons, we strongly recommend the implementation of the periodic review protocol and specific action items set forth in Section VI below.
VI. Practical Recommendations
A. Periodic Internal Review Protocol
We recommend establishing a quarterly internal review process to assess whether any material change has occurred that would trigger an amendment obligation with respect to either the Schedule TO or the Schedule 13D. The review should involve the following participants:
•  Hugh Pemberton, General Counsel, Aurelius Global Media Group PLC
•  Rupert Ashford, Head of Corporate Development, Aurelius Global Media Group PLC
•  James Prentice, Partner, Calderwood & Harkness LLP
•  Tiffany Rosenthal, Associate, Calderwood & Harkness LLP
•  Andrew Fitzpatrick, Associate, Calderwood & Harkness LLP
The first quarterly review should be scheduled for April 2022, following the March 31, 2022 expiration of the Brindoval financing commitment (which may require the filing of Amendment No. 3 to the Schedule TO prior to or shortly after the April review, as discussed in Section VI.C below).
Each quarterly review should cover the following items:
(i) Whether there has been any change in Aurelius's plans, proposals, or intentions with respect to Pinnacle, including any decision to revive the Offer, pursue an alternative transaction, seek board representation, dispose of the existing Share position, or abandon all plans regarding Pinnacle.
(ii) Whether there has been any contact, communication, or negotiation between Aurelius (or any person acting on its behalf) and Pinnacle's board, management, or counsel regarding the Offer, a standstill arrangement, board representation, or any alternative transaction.
(iii) Whether Aurelius, AMH LLC, or any affiliate has acquired or disposed of any Pinnacle Shares since the last review period.
(iv) Whether there have been any material developments at Pinnacle that could render the Schedule TO disclosures materially misleading (based on a review of Pinnacle's public SEC filings, as discussed in Section VI.B below).
(v) The current status of the Brindoval National Bank financing commitment (or any successor or replacement financing arrangement).
(vi) The current status of the Pinnacle Rights Plan, including any modifications, renewals, or early termination, and the approach of the September 29, 2024 expiration date.
Each quarterly review should be documented in a brief written summary prepared by Calderwood & Harkness and distributed to the participants listed above. The summary should include a conclusion as to whether any amendment obligations have been triggered and, if so, the recommended course of action.
B. Monitoring Pinnacle's Public Filings
While routine Pinnacle filings do not independently trigger amendment obligations for the Schedule TO, Calderwood & Harkness should monitor Pinnacle's SEC filings on an ongoing basis to identify developments that could render the Schedule TO disclosures materially misleading or that could create strategic opportunities or risks for Aurelius. Pinnacle's filings can be accessed through the Commission's EDGAR system using CIK 0001847263.
The following filings should be monitored with particular attention:
•  Annual Reports (Form 10-K). These should be reviewed for changes in Pinnacle's financial condition, results of operations, outstanding share count, NOL carryforward positions, risk factors, and any disclosure regarding the Offer or the Rights Plan. Pinnacle's fiscal year ends on December 31, and the 10-K is typically filed in late February or early March.
•  Quarterly Reports (Form 10-Q). These should be reviewed for interim changes in financial condition, share count, and any material developments disclosed in the notes to the financial statements or management's discussion and analysis. Pinnacle's 10-Qs are typically filed within 40 days of the end of each fiscal quarter.
•  Current Reports (Form 8-K). These should be monitored in real time for material agreements (including any acquisition or disposition transactions, debt financings, or amendments to the Rights Plan), changes in leadership (including changes in the CEO, CFO, or board composition), and any other disclosures that could affect the value of Aurelius's investment or the feasibility of a future transaction.
•  Proxy Statements (Schedule 14A / DEF 14A). These should be reviewed for board composition changes, director nominations, shareholder proposals (including any proposal to terminate or ratify the Rights Plan), executive compensation developments, and any disclosure regarding Aurelius's ownership position or the Offer.
Andrew Fitzpatrick will be responsible for ongoing monitoring of Pinnacle's SEC filings and will flag any potentially material developments to the quarterly review group.
C. Brindoval Financing Disclosure
As discussed in Section III.C above, the most immediate action item is the preparation of a draft Amendment No. 3 to the Schedule TO to disclose the lapse of the Brindoval National Bank financing commitment. The following steps should be taken:
(i) Andrew Fitzpatrick and Tiffany Rosenthal will prepare a draft Amendment No. 3 disclosing that the $30,000,000 senior secured term loan commitment from Brindoval National Bank, N.A. (reference CL-2021-MTC-00487) has lapsed (or, if applicable, been further extended), and that any future consummation of the Offer or a revised transaction would require the arrangement of new financing. The draft should be circulated for review no later than March 15, 2022.
(ii) James Prentice will coordinate with Thomas Brierly at Brindoval National Bank, N.A. (383 Madison Avenue, New York, NY 10179) to determine whether any further extension of the commitment letter or any replacement or successor commitment is available or under discussion. This coordination should be completed by March 1, 2022, so that the draft amendment can reflect the final status of the financing.
(iii) If no further extension or replacement commitment is obtained, the amendment should be filed promptly following the March 31, 2022 expiration date — ideally within five business days (i.e., no later than approximately April 7, 2022).
(iv) The amendment should be reviewed for consistency with the Schedule 13D disclosures regarding the source of funds, and a conforming amendment to the Schedule 13D should be considered if necessary.
D. UK Disclosure Coordination
Aurelius is a public limited company listed on the London Stock Exchange. Accordingly, its disclosure obligations are not limited to those arising under U.S. federal securities law. Aurelius's UK counsel, Dunmore Asset Advisors Chambers LLP (lead partner: Alistair Drummond), should be consulted on any parallel disclosure obligations that may arise under the following regulatory frameworks:
•  LSE Listing Rules. The LSE listing rules may require Aurelius to disclose material changes in its investment in Pinnacle, including changes in the status of the Offer, changes in financing, or a decision to revive or abandon the Offer.
•  UK Disclosure Guidance and Transparency Rules. As an issuer of securities admitted to trading on the LSE, Aurelius is subject to the Disclosure Guidance and Transparency Rules ("DTR"), which require the disclosure of inside information as soon as possible. A material change in Aurelius's plans regarding its investment in Pinnacle could constitute inside information for DTR purposes.
•  UK Takeover Code. While the UK Takeover Code does not directly apply to a tender offer for a U.S.-listed target company whose place of central management and control is in the United States, Aurelius's status as an LSE-listed company means that the Takeover Panel may assert jurisdiction over certain aspects of the transaction if it involves a "relevant company" under the Code. Dunmore Asset Advisors Chambers LLP has previously confirmed that the Code does not apply to the Offer, but this analysis should be revisited in the event of any material change in circumstances.
Calderwood & Harkness will coordinate with Dunmore Asset Advisors Chambers LLP as needed, and will include UK disclosure considerations as a standing agenda item in the quarterly review.
E. Communication Protocols
To ensure that potential reporting triggers are identified promptly, the following communication protocols should be observed:
(i) Communications from Pinnacle. Any communications from Pinnacle, its board of directors, management, or counsel (Caldwell Burris & Shoemaker LLP; Rebecca Fontaine; David Kwan) should be routed immediately to Calderwood & Harkness (James Prentice and Tiffany Rosenthal) for assessment of potential reporting implications before any substantive response is made. Even informal or preliminary communications — including telephone calls, emails, or in-person meetings — could constitute material changes in the facts set forth in the Schedule TO and Schedule 13D.
(ii) Communications from the SEC. Any communications from the Commission — whether from the Division of Corporation Finance, the Office of Mergers & Acquisitions, or the Division of Enforcement — should be flagged immediately to Calderwood & Harkness. This includes comment letters, informal telephone inquiries, and formal requests for information.
(iii) Third-Party Inquiries. Any inquiries from Pinnacle shareholders, securities analysts, the financial press, or other third parties regarding the status of the Offer should be directed to Hugh Pemberton and Calderwood & Harkness before any response is made. Unscripted responses to such inquiries could inadvertently create new disclosure obligations or constitute statements "in connection with" the Offer for purposes of Section 14(e).
F. Schedule 13D — Potential Step-Down to Schedule 13G
If Aurelius determines, as part of its broader strategic review, to abandon all plans to acquire additional Pinnacle securities and to cease any efforts to change or influence the control of Pinnacle, Aurelius may become eligible to step down from Schedule 13D to Schedule 13G reporting. Schedule 13G is the short-form alternative to Schedule 13D available to investors who hold reportable positions for passive investment purposes and who meet certain eligibility criteria.
Aurelius's current position of 980,000 Shares represents approximately 4.8% of Pinnacle's currently outstanding Shares. If Aurelius can certify that it holds the Shares without any purpose or effect of changing or influencing the control of Pinnacle — and that it is not a member of a group formed for such purpose — it would be eligible to transition from Schedule 13D to Schedule 13G reporting. This transition would substantially reduce Aurelius's ongoing reporting obligations, as Schedule 13G amendments are required only annually (within 45 days after calendar year-end) and upon the occurrence of certain specified events (such as a change in beneficial ownership of more than 5% or a change in the filing person's certification of passive intent), rather than upon any material change as required by Rule 13d-2(a) for Schedule 13D filers.
However, the step-down to Schedule 13G would carry significant strategic implications. To qualify for Schedule 13G, Aurelius would need to certify that it does not hold the Shares with the purpose or effect of changing or influencing the control of Pinnacle. This certification would be fundamentally inconsistent with any plan to revive the Offer, seek board representation, initiate a proxy contest, or pursue any alternative acquisition or control transaction. Making such a certification and subsequently reviving any such plans could expose Aurelius to SEC enforcement action for filing a materially false certification.
Accordingly, the decision to step down to Schedule 13G should be made only if and when Aurelius has affirmatively and definitively determined to abandon all plans regarding Pinnacle and to hold the existing 980,000-Share position solely for passive investment purposes. This decision should be made in coordination with the broader strategic review and should be discussed at the quarterly internal review.
VII. Summary of Action Items
The following table summarizes the key action items identified in this memorandum, the responsible parties, and the applicable deadlines or frequencies:
VIII. Conclusion
While the tender offer by AMH LLC for shares of Pinnacle Content Holdings, Inc. is dormant, it is not dead from a regulatory standpoint. The failure to formally withdraw the Offer pursuant to Rule 14d-7 means that both the Schedule TO (File No. 005-92847) and the Schedule 13D remain live filings with the Commission, each subject to its respective amendment obligations under Regulation 14D and Rule 13d-2.
The most immediate action item is the preparation of Amendment No. 3 to the Schedule TO to disclose the anticipated lapse of the $30,000,000 Brindoval National Bank financing commitment on March 31, 2022. The Section 14(e) anti-fraud provisions of the Exchange Act create meaningful exposure if materially outdated financing disclosures remain on file without correction, and we strongly recommend that this matter be addressed proactively.
Beyond the financing disclosure, the quarterly internal review protocol recommended in this memorandum will ensure that Aurelius remains in compliance with its ongoing reporting obligations as circumstances evolve. This is particularly important in light of several medium-term developments that may prompt a reassessment of Aurelius's strategy with respect to Pinnacle — most notably, the approaching expiration of the Pinnacle shareholder Rights Plan on September 29, 2024, which could remove a significant impediment to a renewed offer or alternative transaction structure. Any such reassessment would carry corresponding disclosure obligations under both the Schedule TO and Schedule 13D regimes, and Calderwood & Harkness should be engaged early in any such deliberations.
We also recommend that Aurelius give consideration, as part of its broader strategic review, to the relative merits of formally withdrawing the Offer versus maintaining the current dormant posture. As noted above, this question is addressed in the separate strategic options memorandum dated December 15, 2021. From a reporting obligation perspective, formal withdrawal would eliminate the ongoing Schedule TO amendment requirements (though Schedule 13D obligations would persist) and would reduce the risk profile associated with materially outdated disclosures remaining on file.
Calderwood & Harkness remains available to discuss any of the matters addressed in this memorandum at the client's convenience. We will continue to monitor developments and will provide updated guidance as circumstances warrant.
Prepared by:
Andrew Fitzpatrick Associate, Mergers & Acquisitions Calderwood & Harkness LLP 787 Seventh Avenue, 42nd Floor New York, NY 10019 Telephone: (212) 555-7400
Email: afitzpatrick@calderwoodharkness.com
Distribution:
James Prentice, Partner, Mergers & Acquisitions, Calderwood & Harkness LLP Sandra Tung, Billing Coordinator, Calderwood & Harkness LLP (for billing file) Tiffany Rosenthal, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP Hugh Pemberton, General Counsel, Aurelius Global Media Group PLC Rupert Ashford, Head of Corporate Development, Aurelius Global Media Group PLC
CONFIDENTIALITY NOTICE: This memorandum is protected by attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressees identified above and should not be disclosed, distributed, or made available to any third party without the prior written consent of Calderwood & Harkness LLP. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.
Date: | January 10, 2022
To: | James Prentice, Partner, Mergers & Acquisitions, Calderwood & Harkness LLP
Tiffany Rosenthal, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP
Hugh Pemberton, General Counsel, Aurelius Global Media Group PLC
From: | Andrew Fitzpatrick, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP
Re: | Ongoing SEC Reporting Obligations — Dormant Tender Offer for Shares of Pinnacle Content Holdings, Inc. (Nasdaq: PCHL)
Matter No.: | 1011-00002
Action Item | Res

MEMORANDUM — PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

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