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letter-to-caldwell-burris-standstill-proposal.docx DOCUMENT M&A / Corporate

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PRIVILEGED & CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

787 Seventh Avenue, 42nd Floor New York, New York 10019

Telephone: (212) 558-4000 Facsimile: (212) 558-3588

October 11, 2021

Via Email and Sundial Data Systems

Rebecca Fontaine, Esq. Caldwell Burris & Shoemaker LLP 1999 Avenue of the Stars, Suite 2800 Los Angeles, California 90067

Re: Tender Offer by Aurelius Media Holdings LLC for Shares of Pinnacle Content Holdings, Inc.

Dear Ms. Fontaine:

I am James Prentice, a partner in the Mergers & Acquisitions Group of Calderwood & Harkness LLP. This firm serves as U.S. mergers and acquisitions counsel to Aurelius Global Media Group PLC ("Aurelius" or "AGMG") and its wholly owned subsidiary, Aurelius Media Holdings LLC ("AMH LLC" and, together with Aurelius, the "Aurelius Parties"), in connection with the pending tender offer (the "Offer") for shares of common stock, par value $0.001 per share (the "Shares"), of Pinnacle Content Holdings, Inc. ("Pinnacle" or the "Company"). I write this letter on behalf of the Aurelius Parties.

The purpose of this letter is twofold. First, the Aurelius Parties respectfully request that Pinnacle's board of directors (the "Board"), chaired by Mr. Franklin Osei, reconsider its recommendation against the Offer as set forth in the Company's definitive Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange Commission (the "SEC") on October 1, 2021. Second, the Aurelius Parties wish to present a constructive standstill and governance proposal that is specifically designed to address the concerns underlying the Board's adoption of the Section 382 NOL Preservation Shareholder Rights Plan on September 29, 2021, as well as the stated rationale for the Board's negative recommendation.

At the outset, we wish to emphasize that this letter is written in a spirit of collaboration and mutual respect. The Aurelius Parties believe that a cooperative resolution of the issues raised by the Board's Schedule 14D-9 is in the best interests of both companies' shareholders and management teams. We are confident that the proposal outlined below provides a practical framework that addresses the Board's articulated concerns while preserving the ability of Pinnacle shareholders to realize meaningful value through the Offer.

I. Summary of the Offer and Its Merits

As the Board is aware, AMH LLC commenced a tender offer on September 8, 2021, pursuant to a Tender Offer Statement on Schedule TO filed with the SEC (File No. 005-92847), to acquire up to 6,980,050 Shares of Pinnacle common stock, representing approximately 34.9% of the 20,000,000 Shares currently outstanding, at a price of $4.01 per Share, net to the seller in cash, without interest and subject to applicable withholding taxes. The aggregate value of the Offer is approximately $28,000,000.

The Offer represents a substantial and attractive premium for Pinnacle shareholders. The offer price of $4.01 per Share constitutes 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 Aurelius's initial Schedule 13D filing with the SEC on August 26, 2021, which first disclosed Aurelius's investment interest in Pinnacle. The implied 100% equity value of the Company at the Offer price is approximately $80,200,000, which corresponds to a valuation multiple of approximately 5.5× Pinnacle's fiscal year 2020 adjusted EBITDA of $14,600,000. This multiple is reasonable and well within the range of comparable transactions involving independent content production and licensing companies, and it reflects a fair assessment of the value of Pinnacle's content library and licensing revenue streams.

We would also draw the Board's attention to the following aspects of the Offer that underscore its attractiveness and credibility:

Antitrust Clearance. The Offer has received full antitrust clearance. Early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), was granted by the Federal Trade Commission on September 15, 2021 (HSR Transaction Number 20211892). Accordingly, there is no antitrust impediment of any kind to the consummation of the Offer, and Pinnacle shareholders can be assured that this regulatory milestone has been fully satisfied.

Committed Financing. The Offer is fully financed. AMH LLC has obtained a committed $30,000,000 senior secured term loan facility from Brindoval National Bank, N.A. (the "Financing Commitment"), which provides committed capital sufficient to fund the full aggregate purchase price of the Offer plus related transaction expenses. There is no financing contingency, and the Aurelius Parties are prepared to consummate the Offer promptly upon the satisfaction or waiver of the remaining conditions.

Voluntary Participation at a Premium. The Offer provides Pinnacle shareholders with immediate liquidity at a meaningful premium to the market price, without requiring a change of control of the Company. Any shareholder who wishes to participate may do so voluntarily, and those who prefer to retain their Shares are under no obligation or pressure to tender. The Offer preserves the Company's independence, its existing management team, and its ongoing business strategy.

Minimum Tender Condition. The Offer is subject to a minimum tender condition of 5,000,000 Shares, representing 25% of the outstanding Shares. This condition ensures that the Offer proceeds only if a substantial portion of Pinnacle's shareholder base affirmatively elects to participate, providing a meaningful market check on the attractiveness of the Offer price.

II. Aurelius's Strategic Interest in Pinnacle

The Aurelius Parties believe it is important for the Board to understand the strategic context underlying the Offer. Aurelius Global Media Group PLC is a United Kingdom-headquartered, London Stock Exchange-listed (LON: AGMG) diversified media and entertainment conglomerate. As of the date of this letter, Aurelius has a market capitalization of approximately £2.1 billion and reported consolidated revenue of approximately £1.48 billion for the fiscal year ended December 31, 2020. Aurelius's operations span broadcast television networks, digital streaming platforms, film and television production studios, and content licensing businesses across Europe and North America.

Aurelius's interest in Pinnacle is fundamentally strategic in nature. Pinnacle's library of approximately 1,800 hours of scripted and unscripted programming content, together with its growing streaming licensing pipeline and established relationships with major domestic and international distribution platforms, are highly complementary to Aurelius's existing content production and distribution infrastructure. The Aurelius Parties see meaningful opportunities for value creation through content licensing synergies, co-production arrangements, and international distribution partnerships that would benefit both companies and their respective shareholders.

Aurelius has been a shareholder of Pinnacle since June 2021, having acquired 980,000 Shares, representing approximately 4.9% of the outstanding Shares, through open-market purchases at an average price of $3.28 per Share, for an aggregate investment cost of approximately $3,214,400. This initial investment was made after extensive due diligence and reflects Aurelius's long-term conviction in the fundamental value of Pinnacle's content assets, the quality of its management team, and the growth trajectory of its business.

We wish to underscore a point of critical importance: Aurelius does not seek control of Pinnacle. The Offer is deliberately structured as a minority stake acquisition at 34.9% of outstanding Shares, which is below the Company's shareholder rights plan trigger threshold of 35.0%. The Aurelius Parties have no intention of acquiring voting control of the Company, replacing its management, or fundamentally altering its business strategy. Rather, Aurelius seeks to become a significant, long-term, and supportive minority shareholder with a strategic interest in the Company's continued success.

III. Response to the Board's Schedule 14D-9 Recommendation

The Aurelius Parties note with disappointment that the Board's definitive Schedule 14D-9, filed with the SEC on October 1, 2021, recommends that Pinnacle shareholders not tender their Shares in the Offer. Aurelius has carefully and thoroughly reviewed the Schedule 14D-9, including the Board's stated reasons for its recommendation, the analyses performed by the Board's financial advisor, and the various risk factors and other considerations cited therein.

After due consideration, the Aurelius Parties respectfully submit that the Board should reconsider its recommendation in light of the following considerations:

The Offer Provides a Voluntary Premium. The Offer provides shareholders with a voluntary opportunity to realize value at a 17.25% premium to the undisturbed market price. No shareholder is compelled to tender, and any shareholder who believes the Shares are worth more than $4.01 is free to retain them. The Board's recommendation effectively deprives shareholders of the ability to make their own individual investment decisions regarding a premium offer for a minority stake in the Company. The Aurelius Parties believe that Pinnacle's sophisticated shareholder base is fully capable of evaluating the merits of the Offer on its own and should be permitted to do so.

No Change of Control. The Offer does not constitute a change-of-control transaction. At 34.9% of outstanding Shares, Aurelius would be a minority shareholder. The Board would retain full authority over the Company's management and strategic direction. There is no basis for the Board to treat the Offer as though it poses the same risks to shareholders as a hostile takeover bid.

No Adverse Impact on NOL Carryforwards. The Aurelius Parties understand that one of the Board's principal concerns relates to the preservation of Pinnacle's approximately $47,300,000 in federal net operating loss carryforwards ("NOLs") as of December 31, 2020, and the potential impact of a significant change in stock ownership on the Company's ability to utilize those NOLs under Section 382 of the Internal Revenue Code of 1986, as amended. The Aurelius Parties share the Board's interest in preserving these valuable tax assets. Critically, however, Aurelius's target acquisition of 34.9% of outstanding Shares is below the 35% beneficial ownership trigger threshold of the shareholder rights plan. Moreover, as described in detail in Section V below, the Aurelius Parties are prepared to contractually cap their aggregate ownership below that level and to agree to a comprehensive standstill framework that would fully protect the Company's NOL carryforwards.

Shareholder Autonomy. Pinnacle shareholders should be permitted to make their own informed investment decisions regarding a premium offer for a minority stake. The Board's negative recommendation, coupled with the defensive rights plan, has the practical effect of precluding shareholders from choosing to accept a premium offer. The Aurelius Parties respectfully submit that this outcome is not consistent with the Board's fiduciary obligations to act in the best interests of Pinnacle's shareholders.

IV. The Shareholder Rights Plan — Aurelius's Observations

The Aurelius Parties acknowledge that the Board adopted a Section 382 NOL Preservation Shareholder Rights Plan (the "Rights Plan") on September 29, 2021. As publicly disclosed, the Rights Plan has the following material terms:

• A beneficial ownership trigger threshold of 35.0% of outstanding Shares;

• An exercise price of $18.00 per right;

• Continental Fiduciary Services, Inc. as rights agent; and

• A three-year term, expiring on September 29, 2024.

While the Aurelius Parties acknowledge the stated purpose of the Rights Plan — the preservation of Pinnacle's approximately $47,300,000 in federal NOL carryforwards — the timing of the Rights Plan's adoption, coming just twenty-one days after the commencement of the Offer on September 8, 2021, leaves little doubt that the Rights Plan was adopted in direct response to the Offer and functions, in practical effect, as a defensive measure designed to impede the Offer.

As noted above, the Offer was carefully structured by the Aurelius Parties to acquire 34.9% of the outstanding Shares — a level deliberately chosen to fall below any conventional poison pill trigger threshold, including the 35.0% threshold of the Rights Plan — precisely in order to avoid triggering such protections and to demonstrate that the Offer is not a hostile control bid.

The Aurelius Parties acknowledge, however, that if the Offer were fully subscribed and all 6,980,050 Shares sought in the Offer were tendered and accepted for payment, Aurelius's combined beneficial ownership position — consisting of its existing 980,000 open-market Shares plus the 6,980,050 tendered Shares, for a total of 7,960,050 Shares, representing approximately 39.8% of outstanding Shares — would exceed the 35.0% trigger threshold of the Rights Plan. The Aurelius Parties were aware of this mathematical reality at the time the Offer was structured and have been, and remain, prepared to address it through structural adjustments to the Offer, including reducing the number of Shares accepted in the Offer through proration or scale-back mechanisms, as described in greater detail in the standstill proposal set forth in Section V below.

We also note, respectfully, that the Aurelius Parties do not believe the Rights Plan, as adopted, satisfies the enhanced scrutiny standards applicable under Delaware law, including the standards articulated in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), and Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995). The Offer is a non-coercive, voluntary partial tender offer at a meaningful premium, and the Rights Plan — with its 35.0% trigger and three-year term — constitutes a disproportionate response to a non-coercive offer that does not threaten the Company's shareholders. The Aurelius Parties would, however, strongly prefer to resolve this matter cooperatively through the negotiated framework proposed below, rather than through protracted and costly litigation. We believe that course is in the best interests of all parties and their respective stakeholders.

V. Proposed Standstill and Governance Framework

In an effort to address the Board's stated concerns in a constructive and comprehensive manner, the Aurelius Parties propose the following standstill and governance framework (the "Proposed Framework"). The Aurelius Parties believe that the Proposed Framework fully addresses each of the concerns articulated in the Schedule 14D-9 while preserving the ability of Pinnacle shareholders to participate in the Offer:

A. Ownership Cap

The Aurelius Parties, including AMH LLC and any other controlled affiliates, would agree to a hard cap on their aggregate beneficial ownership of Pinnacle common stock at 34.9% of the outstanding Shares (i.e., below the 35.0% trigger threshold of the Rights Plan). Specifically:

(i) If the number of Shares validly tendered and not withdrawn in the Offer, when combined with Aurelius's existing 980,000-Share position, would result in aggregate beneficial ownership exceeding 34.9% of the outstanding Shares, AMH LLC would reduce the number of Shares accepted for payment in the Offer through proration or scale-back, as applicable, so that Aurelius's aggregate beneficial ownership immediately following the closing of the Offer does not exceed 34.9%.

(ii) During the standstill period described in subsection C below, the Aurelius Parties would not acquire additional Shares through open-market purchases, privately negotiated transactions, or any other means, and would not take any action that would result in their aggregate beneficial ownership exceeding 34.9%, in each case without the prior written consent of the Board.

B. Board Representation

The Aurelius Parties recognize the importance of appropriate governance safeguards and, accordingly, propose the following:

(i) During the standstill period, the Aurelius Parties would refrain from seeking more than two (2) seats on Pinnacle's board of directors. The Board currently consists of, among others, Mr. Franklin Osei (Chair), Ms. Jordan Cavanaugh, Mr. Victor Huang, Ms. Miriam Castellano, and Mr. Tyrone Nash.

(ii) The identity of the Aurelius Parties' board designees would be mutually agreed upon by Aurelius and the Board or, at a minimum, would be subject to the Board's reasonable approval. The Aurelius Parties are prepared to propose designees with relevant industry experience and independent standing.

(iii) The Aurelius Parties would not seek to replace the Board Chair, the Chief Executive Officer, or any other officer of the Company, and would support the continuity of the Company's existing management team.

C. Standstill Duration and Restrictions

The standstill agreement would have a term of twenty-four (24) months from the date of execution of the definitive standstill agreement (the "Standstill Period"). During the Standstill Period, the Aurelius Parties would refrain from:

(a) launching, commencing, or proposing any additional tender offer, exchange offer, merger, business combination, recapitalization, restructuring, or other similar transaction involving the Company or its securities;

(b) soliciting proxies or written consents from the Company's shareholders, or becoming a "participant" in any "solicitation" (as such terms are defined in Rule 14a-1 under the Securities Exchange Act of 1934, as amended) with respect to any matter submitted to the Company's shareholders;

(c) seeking to call, or acting alone or in concert with others to requisition, any special meeting of the Company's shareholders, or seeking the removal of any director of the Company;

(d) forming, joining, or in any way participating in a "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) with any other shareholders or beneficial owners of the Company's securities for the purpose of acquiring, holding, voting, or disposing of the Company's securities; or

(e) making any public statement or communication that disparages or is reasonably likely to disparage the Board, the Company's management, or the Company's business strategy, operations, or financial condition.

The standstill agreement would include customary termination provisions, including, without limitation, termination rights upon (i) the public announcement by a third party of a bona fide change-of-control proposal involving the Company, (ii) a material breach by the Board or the Company of the standstill agreement that remains uncured after written notice and a reasonable cure period, or (iii) the mutual written agreement of the parties.

D. Rights Plan Exemption

In exchange for the foregoing commitments, the Aurelius Parties respectfully request that the Board exercise its authority under the Rights Plan to grant a specific exemption for the Offer and for the Aurelius Parties' resulting aggregate beneficial ownership position, provided that such ownership does not exceed 34.9% of the outstanding Shares. The exemption would be limited to the Offer as currently structured or as modified to comply with the 34.9% ownership cap described in subsection A above, and would not constitute a general waiver of the Rights Plan's provisions with respect to any other person or transaction.

E. Revised Schedule 14D-9 Recommendation

The Aurelius Parties would further respectfully request that, following the execution of the definitive standstill agreement and the grant of the Rights Plan exemption, the Board file an amendment to its Schedule 14D-9 to revise its recommendation to either:

(a) recommend that Pinnacle shareholders tender their Shares in the Offer; or

(b) take a neutral position and express no opinion with respect to the Offer, thereby leaving the decision whether to tender or not to tender entirely to the individual judgment of each shareholder.

Either approach, in the view of the Aurelius Parties, would be appropriate given the protections afforded by the Proposed Framework, and either approach would permit Pinnacle shareholders to make their own fully informed decision regarding participation in the Offer.

VI. Benefits to Pinnacle Shareholders

The Aurelius Parties believe that the Proposed Framework, taken as a whole, provides meaningful and tangible benefits to Pinnacle and its shareholders:

• Preservation of Independence. The Proposed Framework preserves Pinnacle's independence as a publicly traded company and ensures continuity of its existing management team and business strategy. There is no change of control, no forced merger, and no restructuring of the Company's operations.

• Voluntary Liquidity at a Premium. Pinnacle shareholders who wish to realize a 17.25% premium over the undisturbed market price are able to do so voluntarily. Those who prefer to retain their Shares and participate in the Company's future value creation are free to do so.

• Protection Against Creeping Control. The 34.9% hard ownership cap and the comprehensive standstill restrictions insulate the Board and the Company's shareholders from any concern about creeping control by the Aurelius Parties. The Board will retain full authority over the Company's affairs throughout the Standstill Period.

• Certainty and Stability. The 24-month Standstill Period provides certainty and stability for Pinnacle's business operations, strategic planning, and relationships with customers, content partners, and employees. The Company will be free to pursue its business plan without the distraction of an adversarial shareholder situation.

• NOL Preservation. Pinnacle's approximately $47,300,000 in federal NOL carryforwards are fully protected because the Aurelius Parties' aggregate ownership will remain below the 35.0% trigger threshold of the Rights Plan and below the Section 382 ownership change threshold. The contractual ownership cap provides an additional layer of protection beyond the Rights Plan itself.

• Proportionate Board Representation. The limitation of two board seats ensures that the Aurelius Parties have a voice proportionate to their significant investment in the Company, without conferring control over the Board or its decisions. The mutual agreement or reasonable approval mechanism for board designees ensures that only qualified, appropriate individuals serve.

VII. Current Offer Timeline and Urgency

The initial twenty (20) business day offer period for the Offer was originally scheduled to expire on October 8, 2021. In order to provide additional time for the Board to consider the Offer and the proposal set forth in this letter, and to allow for meaningful dialogue between the parties' respective counsel regarding the negotiation of a definitive standstill framework, the Aurelius Parties have extended the expiration date of the Offer to November 5, 2021. An amendment to the Schedule TO reflecting this extension has been filed with the SEC.

The Aurelius Parties urge prompt engagement by the Board and its advisors. We believe firmly that the interests of Pinnacle's shareholders are best served by a constructive dialogue between the parties, rather than the adversarial posture that currently characterizes the relationship. A negotiated resolution would avoid the uncertainty, expense, and distraction of potential litigation and would permit both companies to focus on value creation for their respective shareholders.

In that spirit, the Aurelius Parties remain open to meeting in person or by teleconference with the Board, its financial advisor Hargrove Meredith & Co., and its counsel at Caldwell Burris & Shoemaker LLP to discuss the terms of this proposal, address any questions or concerns, and negotiate the definitive standstill documentation. We are prepared to make ourselves available at the Board's convenience, and we are confident that a mutually satisfactory resolution can be achieved expeditiously if both parties approach the discussions in good faith.

VIII. Reservation of Rights

While the Aurelius Parties strongly prefer a negotiated resolution as described above, and while this letter is submitted in a cooperative and good-faith spirit, the Aurelius Parties expressly reserve all of their rights and remedies at law and in equity, including, without limitation:

(a) the right to further extend, amend, or withdraw the Offer in accordance with applicable law and the terms of the Schedule TO;

(b) the right to challenge the Rights Plan and the Board's adoption thereof under Delaware law, including through litigation in the Delaware Court of Chancery or any other court of competent jurisdiction;

(c) the right to pursue alternative transaction structures, including an increase in the Offer price, a modification to the number of Shares sought, or any other structural change to the Offer;

(d) the right to communicate directly with Pinnacle shareholders, including through public filings with the SEC, press releases, investor presentations, or other means permitted by applicable law; and

(e) any and all other rights, claims, and remedies available to the Aurelius Parties, AMH LLC, and their respective affiliates under applicable law, regulation, or contract.

Nothing in this letter shall constitute, or shall be deemed to constitute, a waiver of any right, claim, defense, or remedy available to the Aurelius Parties, AMH LLC, or any of their affiliates or representatives, and all such rights, claims, defenses, and remedies are hereby expressly preserved and reserved. This letter does not create, and shall not be construed to create, any binding obligation or agreement of any kind on the part of any party.

IX. Request for Response

The Aurelius Parties respectfully request a substantive response from the Board, through its counsel at Caldwell Burris & Shoemaker LLP, on or before October 22, 2021. We believe this timeline is reasonable and provides the Board with sufficient time to consider the Proposed Framework in consultation with its financial and legal advisors while also preserving adequate time to negotiate and execute definitive documentation prior to the November 5, 2021 expiration of the Offer.

Upon receipt of a favorable indication from the Board, the Aurelius Parties are prepared to commence negotiation of definitive standstill documentation on an expedited basis. We would propose that Calderwood & Harkness LLP prepare and circulate an initial draft of the standstill agreement within five business days of receiving the Board's response, with the goal of executing definitive documentation within two to three weeks thereafter.

We are, of course, available to discuss any questions, concerns, or counterproposals that the Board or its advisors may have. Our overriding objective is to reach a mutually beneficial resolution that serves the interests of both companies and their shareholders.

We look forward to hearing from you at your earliest convenience.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

James Prentice Partner

Calderwood & Harkness LLP 787 Seventh Avenue, 42nd Floor New York, New York 10019 Telephone: (212) 558-4127 Facsimile: (212) 558-3588

Email: jprentice@calderwoodharkness.com

cc:

Hugh Pemberton, Esq. General Counsel Aurelius Global Media Group PLC 44 Lombard Crescent London EC3V 9BQ United Kingdom

Rupert Ashford Head of Corporate Development Aurelius Global Media Group PLC 44 Lombard Crescent London EC3V 9BQ United Kingdom

PRIVILEGED & CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
787 Seventh Avenue, 42nd Floor New York, New York 10019
Telephone: (212) 558-4000 Facsimile: (212) 558-3588
October 11, 2021
Via Email and Sundial Data Systems
Rebecca Fontaine, Esq. Caldwell Burris & Shoemaker LLP 1999 Avenue of the Stars, Suite 2800 Los Angeles, California 90067
Re: Tender Offer by Aurelius Media Holdings LLC for Shares of Pinnacle Content Holdings, Inc.
Dear Ms. Fontaine:
I am James Prentice, a partner in the Mergers & Acquisitions Group of Calderwood & Harkness LLP. This firm serves as U.S. mergers and acquisitions counsel to Aurelius Global Media Group PLC ("Aurelius" or "AGMG") and its wholly owned subsidiary, Aurelius Media Holdings LLC ("AMH LLC" and, together with Aurelius, the "Aurelius Parties"), in connection with the pending tender offer (the "Offer") for shares of common stock, par value $0.001 per share (the "Shares"), of Pinnacle Content Holdings, Inc. ("Pinnacle" or the "Company"). I write this letter on behalf of the Aurelius Parties.
The purpose of this letter is twofold. First, the Aurelius Parties respectfully request that Pinnacle's board of directors (the "Board"), chaired by Mr. Franklin Osei, reconsider its recommendation against the Offer as set forth in the Company's definitive Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange Commission (the "SEC") on October 1, 2021. Second, the Aurelius Parties wish to present a constructive standstill and governance proposal that is specifically designed to address the concerns underlying the Board's adoption of the Section 382 NOL Preservation Shareholder Rights Plan on September 29, 2021, as well as the stated rationale for the Board's negative recommendation.
At the outset, we wish to emphasize that this letter is written in a spirit of collaboration and mutual respect. The Aurelius Parties believe that a cooperative resolution of the issues raised by the Board's Schedule 14D-9 is in the best interests of both companies' shareholders and management teams. We are confident that the proposal outlined below provides a practical framework that addresses the Board's articulated concerns while preserving the ability of Pinnacle shareholders to realize meaningful value through the Offer.
I. Summary of the Offer and Its Merits
As the Board is aware, AMH LLC commenced a tender offer on September 8, 2021, pursuant to a Tender Offer Statement on Schedule TO filed with the SEC (File No. 005-92847), to acquire up to 6,980,050 Shares of Pinnacle common stock, representing approximately 34.9% of the 20,000,000 Shares currently outstanding, at a price of $4.01 per Share, net to the seller in cash, without interest and subject to applicable withholding taxes. The aggregate value of the Offer is approximately $28,000,000.
The Offer represents a substantial and attractive premium for Pinnacle shareholders. The offer price of $4.01 per Share constitutes 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 Aurelius's initial Schedule 13D filing with the SEC on August 26, 2021, which first disclosed Aurelius's investment interest in Pinnacle. The implied 100% equity value of the Company at the Offer price is approximately $80,200,000, which corresponds to a valuation multiple of approximately 5.5× Pinnacle's fiscal year 2020 adjusted EBITDA of $14,600,000. This multiple is reasonable and well within the range of comparable transactions involving independent content production and licensing companies, and it reflects a fair assessment of the value of Pinnacle's content library and licensing revenue streams.
We would also draw the Board's attention to the following aspects of the Offer that underscore its attractiveness and credibility:
Antitrust Clearance. The Offer has received full antitrust clearance. Early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), was granted by the Federal Trade Commission on September 15, 2021 (HSR Transaction Number 20211892). Accordingly, there is no antitrust impediment of any kind to the consummation of the Offer, and Pinnacle shareholders can be assured that this regulatory milestone has been fully satisfied.
Committed Financing. The Offer is fully financed. AMH LLC has obtained a committed $30,000,000 senior secured term loan facility from Brindoval National Bank, N.A. (the "Financing Commitment"), which provides committed capital sufficient to fund the full aggregate purchase price of the Offer plus related transaction expenses. There is no financing contingency, and the Aurelius Parties are prepared to consummate the Offer promptly upon the satisfaction or waiver of the remaining conditions.
Voluntary Participation at a Premium. The Offer provides Pinnacle shareholders with immediate liquidity at a meaningful premium to the market price, without requiring a change of control of the Company. Any shareholder who wishes to participate may do so voluntarily, and those who prefer to retain their Shares are under no obligation or pressure to tender. The Offer preserves the Company's independence, its existing management team, and its ongoing business strategy.
Minimum Tender Condition. The Offer is subject to a minimum tender condition of 5,000,000 Shares, representing 25% of the outstanding Shares. This condition ensures that the Offer proceeds only if a substantial portion of Pinnacle's shareholder base affirmatively elects to participate, providing a meaningful market check on the attractiveness of the Offer price.
II. Aurelius's Strategic Interest in Pinnacle
The Aurelius Parties believe it is important for the Board to understand the strategic context underlying the Offer. Aurelius Global Media Group PLC is a United Kingdom-headquartered, London Stock Exchange-listed (LON: AGMG) diversified media and entertainment conglomerate. As of the date of this letter, Aurelius has a market capitalization of approximately £2.1 billion and reported consolidated revenue of approximately £1.48 billion for the fiscal year ended December 31, 2020. Aurelius's operations span broadcast television networks, digital streaming platforms, film and television production studios, and content licensing businesses across Europe and North America.
Aurelius's interest in Pinnacle is fundamentally strategic in nature. Pinnacle's library of approximately 1,800 hours of scripted and unscripted programming content, together with its growing streaming licensing pipeline and established relationships with major domestic and international distribution platforms, are highly complementary to Aurelius's existing content production and distribution infrastructure. The Aurelius Parties see meaningful opportunities for value creation through content licensing synergies, co-production arrangements, and international distribution partnerships that would benefit both companies and their respective shareholders.
Aurelius has been a shareholder of Pinnacle since June 2021, having acquired 980,000 Shares, representing approximately 4.9% of the outstanding Shares, through open-market purchases at an average price of $3.28 per Share, for an aggregate investment cost of approximately $3,214,400. This initial investment was made after extensive due diligence and reflects Aurelius's long-term conviction in the fundamental value of Pinnacle's content assets, the quality of its management team, and the growth trajectory of its business.
We wish to underscore a point of critical importance: Aurelius does not seek control of Pinnacle. The Offer is deliberately structured as a minority stake acquisition at 34.9% of outstanding Shares, which is below the Company's shareholder rights plan trigger threshold of 35.0%. The Aurelius Parties have no intention of acquiring voting control of the Company, replacing its management, or fundamentally altering its business strategy. Rather, Aurelius seeks to become a significant, long-term, and supportive minority shareholder with a strategic interest in the Company's continued success.
III. Response to the Board's Schedule 14D-9 Recommendation
The Aurelius Parties note with disappointment that the Board's definitive Schedule 14D-9, filed with the SEC on October 1, 2021, recommends that Pinnacle shareholders not tender their Shares in the Offer. Aurelius has carefully and thoroughly reviewed the Schedule 14D-9, including the Board's stated reasons for its recommendation, the analyses performed by the Board's financial advisor, and the various risk factors and other considerations cited therein.
After due consideration, the Aurelius Parties respectfully submit that the Board should reconsider its recommendation in light of the following considerations:
The Offer Provides a Voluntary Premium. The Offer provides shareholders with a voluntary opportunity to realize value at a 17.25% premium to the undisturbed market price. No shareholder is compelled to tender, and any shareholder who believes the Shares are worth more than $4.01 is free to retain them. The Board's recommendation effectively deprives shareholders of the ability to make their own individual investment decisions regarding a premium offer for a minority stake in the Company. The Aurelius Parties believe that Pinnacle's sophisticated shareholder base is fully capable of evaluating the merits of the Offer on its own and should be permitted to do so.
No Change of Control. The Offer does not constitute a change-of-control transaction. At 34.9% of outstanding Shares, Aurelius would be a minority shareholder. The Board would retain full authority over the Company's management and strategic direction. There is no basis for the Board to treat the Offer as though it poses the same risks to shareholders as a hostile takeover bid.
No Adverse Impact on NOL Carryforwards. The Aurelius Parties understand that one of the Board's principal concerns relates to the preservation of Pinnacle's approximately $47,300,000 in federal net operating loss carryforwards ("NOLs") as of December 31, 2020, and the potential impact of a significant change in stock ownership on the Company's ability to utilize those NOLs under Section 382 of the Internal Revenue Code of 1986, as amended. The Aurelius Parties share the Board's interest in preserving these valuable tax assets. Critically, however, Aurelius's target acquisition of 34.9% of outstanding Shares is below the 35% beneficial ownership trigger threshold of the shareholder rights plan. Moreover, as described in detail in Section V below, the Aurelius Parties are prepared to contractually cap their aggregate ownership below that level and to agree to a comprehensive standstill framework that would fully protect the Company's NOL carryforwards.
Shareholder Autonomy. Pinnacle shareholders should be permitted to make their own informed investment decisions regarding a premium offer for a minority stake. The Board's negative recommendation, coupled with the defensive rights plan, has the practical effect of precluding shareholders from choosing to accept a premium offer. The Aurelius Parties respectfully submit that this outcome is not consistent with the Board's fiduciary obligations to act in the best interests of Pinnacle's shareholders.
IV. The Shareholder Rights Plan — Aurelius's Observations
The Aurelius Parties acknowledge that the Board adopted a Section 382 NOL Preservation Shareholder Rights Plan (the "Rights Plan") on September 29, 2021. As publicly disclosed, the Rights Plan has the following material terms:
• A beneficial ownership trigger threshold of 35.0% of outstanding Shares;
• An exercise price of $18.00 per right;
• Continental Fiduciary Services, Inc. as rights agent; and
• A three-year term, expiring on September 29, 2024.
While the Aurelius Parties acknowledge the stated purpose of the Rights Plan — the preservation of Pinnacle's approximately $47,300,000 in federal NOL carryforwards — the timing of the Rights Plan's adoption, coming just twenty-one days after the commencement of the Offer on September 8, 2021, leaves little doubt that the Rights Plan was adopted in direct response to the Offer and functions, in practical effect, as a defensive measure designed to impede the Offer.
As noted above, the Offer was carefully structured by the Aurelius Parties to acquire 34.9% of the outstanding Shares — a level deliberately chosen to fall below any conventional poison pill trigger threshold, including the 35.0% threshold of the Rights Plan — precisely in order to avoid triggering such protections and to demonstrate that the Offer is not a hostile control bid.
The Aurelius Parties acknowledge, however, that if the Offer were fully subscribed and all 6,980,050 Shares sought in the Offer were tendered and accepted for payment, Aurelius's combined beneficial ownership position — consisting of its existing 980,000 open-market Shares plus the 6,980,050 tendered Shares, for a total of 7,960,050 Shares, representing approximately 39.8% of outstanding Shares — would exceed the 35.0% trigger threshold of the Rights Plan. The Aurelius Parties were aware of this mathematical reality at the time the Offer was structured and have been, and remain, prepared to address it through structural adjustments to the Offer, including reducing the number of Shares accepted in the Offer through proration or scale-back mechanisms, as described in greater detail in the standstill proposal set forth in Section V below.
We also note, respectfully, that the Aurelius Parties do not believe the Rights Plan, as adopted, satisfies the enhanced scrutiny standards applicable under Delaware law, including the standards articulated in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), and Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995). The Offer is a non-coercive, voluntary partial tender offer at a meaningful premium, and the Rights Plan — with its 35.0% trigger and three-year term — constitutes a disproportionate response to a non-coercive offer that does not threaten the Company's shareholders. The Aurelius Parties would, however, strongly prefer to resolve this matter cooperatively through the negotiated framework proposed below, rather than through protracted and costly litigation. We believe that course is in the best interests of all parties and their respective stakeholders.
V. Proposed Standstill and Governance Framework
In an effort to address the Board's stated concerns in a constructive and comprehensive manner, the Aurelius Parties propose the following standstill and governance framework (the "Proposed Framework"). The Aurelius Parties believe that the Proposed Framework fully addresses each of the concerns articulated in the Schedule 14D-9 while preserving the ability of Pinnacle shareholders to participate in the Offer:
A. Ownership Cap
The Aurelius Parties, including AMH LLC and any other controlled affiliates, would agree to a hard cap on their aggregate beneficial ownership of Pinnacle common stock at 34.9% of the outstanding Shares (i.e., below the 35.0% trigger threshold of the Rights Plan). Specifically:
(i) If the number of Shares validly tendered and not withdrawn in the Offer, when combined with Aurelius's existing 980,000-Share position, would result in aggregate beneficial ownership exceeding 34.9% of the outstanding Shares, AMH LLC would reduce the number of Shares accepted for payment in the Offer through proration or scale-back, as applicable, so that Aurelius's aggregate beneficial ownership immediately following the closing of the Offer does not exceed 34.9%.
(ii) During the standstill period described in subsection C below, the Aurelius Parties would not acquire additional Shares through open-market purchases, privately negotiated transactions, or any other means, and would not take any action that would result in their aggregate beneficial ownership exceeding 34.9%, in each case without the prior written consent of the Board.
B. Board Representation
The Aurelius Parties recognize the importance of appropriate governance safeguards and, accordingly, propose the following:
(i) During the standstill period, the Aurelius Parties would refrain from seeking more than two (2) seats on Pinnacle's board of directors. The Board currently consists of, among others, Mr. Franklin Osei (Chair), Ms. Jordan Cavanaugh, Mr. Victor Huang, Ms. Miriam Castellano, and Mr. Tyrone Nash.
(ii) The identity of the Aurelius Parties' board designees would be mutually agreed upon by Aurelius and the Board or, at a minimum, would be subject to the Board's reasonable approval. The Aurelius Parties are prepared to propose designees with relevant industry experience and independent standing.
(iii) The Aurelius Parties would not seek to replace the Board Chair, the Chief Executive Officer, or any other officer of the Company, and would support the continuity of the Company's existing management team.
C. Standstill Duration and Restrictions
The standstill agreement would have a term of twenty-four (24) months from the date of execution of the definitive standstill agreement (the "Standstill Period"). During the Standstill Period, the Aurelius Parties would refrain from:
(a) launching, commencing, or proposing any additional tender offer, exchange offer, merger, business combination, recapitalization, restructuring, or other similar transaction involving the Company or its securities;
(b) soliciting proxies or written consents from the Company's shareholders, or becoming a "participant" in any "solicitation" (as such terms are defined in Rule 14a-1 under the Securities Exchange Act of 1934, as amended) with respect to any matter submitted to the Company's shareholders;
(c) seeking to call, or acting alone or in concert with others to requisition, any special meeting of the Company's shareholders, or seeking the removal of any director of the Company;
(d) forming, joining, or in any way participating in a "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) with any other shareholders or beneficial owners of the Company's securities for the purpose of acquiring, holding, voting, or disposing of the Company's securities; or
(e) making any public statement or communication that disparages or is reasonably likely to disparage the Board, the Company's management, or the Company's business strategy, operations, or financial condition.
The standstill agreement would include customary termination provisions, including, without limitation, termination rights upon (i) the public announcement by a third party of a bona fide change-of-control proposal involving the Company, (ii) a material breach by the Board or the Company of the standstill agreement that remains uncured after written notice and a reasonable cure period, or (iii) the mutual written agreement of the parties.
D. Rights Plan Exemption
In exchange for the foregoing commitments, the Aurelius Parties respectfully request that the Board exercise its authority under the Rights Plan to grant a specific exemption for the Offer and for the Aurelius Parties' resulting aggregate beneficial ownership position, provided that such ownership does not exceed 34.9% of the outstanding Shares. The exemption would be limited to the Offer as currently structured or as modified to comply with the 34.9% ownership cap described in subsection A above, and would not constitute a general waiver of the Rights Plan's provisions with respect to any other person or transaction.
E. Revised Schedule 14D-9 Recommendation
The Aurelius Parties would further respectfully request that, following the execution of the definitive standstill agreement and the grant of the Rights Plan exemption, the Board file an amendment to its Schedule 14D-9 to revise its recommendation to either:
(a) recommend that Pinnacle shareholders tender their Shares in the Offer; or
(b) take a neutral position and express no opinion with respect to the Offer, thereby leaving the decision whether to tender or not to tender entirely to the individual judgment of each shareholder.
Either approach, in the view of the Aurelius Parties, would be appropriate given the protections afforded by the Proposed Framework, and either approach would permit Pinnacle shareholders to make their own fully informed decision regarding participation in the Offer.
VI. Benefits to Pinnacle Shareholders
The Aurelius Parties believe that the Proposed Framework, taken as a whole, provides meaningful and tangible benefits to Pinnacle and its shareholders:
• Preservation of Independence. The Proposed Framework preserves Pinnacle's independence as a publicly traded company and ensures continuity of its existing management team and business strategy. There is no change of control, no forced merger, and no restructuring of the Company's operations.
• Voluntary Liquidity at a Premium. Pinnacle shareholders who wish to realize a 17.25% premium over the undisturbed market price are able to do so voluntarily. Those who prefer to retain their Shares and participate in the Company's future value creation are free to do so.
• Protection Against Creeping Control. The 34.9% hard ownership cap and the comprehensive standstill restrictions insulate the Board and the Company's shareholders from any concern about creeping control by the Aurelius Parties. The Board will retain full authority over the Company's affairs throughout the Standstill Period.
• Certainty and Stability. The 24-month Standstill Period provides certainty and stability for Pinnacle's business operations, strategic planning, and relationships with customers, content partners, and employees. The Company will be free to pursue its business plan without the distraction of an adversarial shareholder situation.
• NOL Preservation. Pinnacle's approximately $47,300,000 in federal NOL carryforwards are fully protected because the Aurelius Parties' aggregate ownership will remain below the 35.0% trigger threshold of the Rights Plan and below the Section 382 ownership change threshold. The contractual ownership cap provides an additional layer of protection beyond the Rights Plan itself.
• Proportionate Board Representation. The limitation of two board seats ensures that the Aurelius Parties have a voice proportionate to their significant investment in the Company, without conferring control over the Board or its decisions. The mutual agreement or reasonable approval mechanism for board designees ensures that only qualified, appropriate individuals serve.
VII. Current Offer Timeline and Urgency
The initial twenty (20) business day offer period for the Offer was originally scheduled to expire on October 8, 2021. In order to provide additional time for the Board to consider the Offer and the proposal set forth in this letter, and to allow for meaningful dialogue between the parties' respective counsel regarding the negotiation of a definitive standstill framework, the Aurelius Parties have extended the expiration date of the Offer to November 5, 2021. An amendment to the Schedule TO reflecting this extension has been filed with the SEC.
The Aurelius Parties urge prompt engagement by the Board and its advisors. We believe firmly that the interests of Pinnacle's shareholders are best served by a constructive dialogue between the parties, rather than the adversarial posture that currently characterizes the relationship. A negotiated resolution would avoid the uncertainty, expense, and distraction of potential litigation and would permit both companies to focus on value creation for their respective shareholders.
In that spirit, the Aurelius Parties remain open to meeting in person or by teleconference with the Board, its financial advisor Hargrove Meredith & Co., and its counsel at Caldwell Burris & Shoemaker LLP to discuss the terms of this proposal, address any questions or concerns, and negotiate the definitive standstill documentation. We are prepared to make ourselves available at the Board's convenience, and we are confident that a mutually satisfactory resolution can be achieved expeditiously if both parties approach the discussions in good faith.
VIII. Reservation of Rights
While the Aurelius Parties strongly prefer a negotiated resolution as described above, and while this letter is submitted in a cooperative and good-faith spirit, the Aurelius Parties expressly reserve all of their rights and remedies at law and in equity, including, without limitation:
(a) the right to further extend, amend, or withdraw the Offer in accordance with applicable law and the terms of the Schedule TO;
(b) the right to challenge the Rights Plan and the Board's adoption thereof under Delaware law, including through litigation in the Delaware Court of Chancery or any other court of competent jurisdiction;
(c) the right to pursue alternative transaction structures, including an increase in the Offer price, a modification to the number of Shares sought, or any other structural change to the Offer;
(d) the right to communicate directly with Pinnacle shareholders, including through public filings with the SEC, press releases, investor presentations, or other means permitted by applicable law; and
(e) any and all other rights, claims, and remedies available to the Aurelius Parties, AMH LLC, and their respective affiliates under applicable law, regulation, or contract.
Nothing in this letter shall constitute, or shall be deemed to constitute, a waiver of any right, claim, defense, or remedy available to the Aurelius Parties, AMH LLC, or any of their affiliates or representatives, and all such rights, claims, defenses, and remedies are hereby expressly preserved and reserved. This letter does not create, and shall not be construed to create, any binding obligation or agreement of any kind on the part of any party.
IX. Request for Response
The Aurelius Parties respectfully request a substantive response from the Board, through its counsel at Caldwell Burris & Shoemaker LLP, on or before October 22, 2021. We believe this timeline is reasonable and provides the Board with sufficient time to consider the Proposed Framework in consultation with its financial and legal advisors while also preserving adequate time to negotiate and execute definitive documentation prior to the November 5, 2021 expiration of the Offer.
Upon receipt of a favorable indication from the Board, the Aurelius Parties are prepared to commence negotiation of definitive standstill documentation on an expedited basis. We would propose that Calderwood & Harkness LLP prepare and circulate an initial draft of the standstill agreement within five business days of receiving the Board's response, with the goal of executing definitive documentation within two to three weeks thereafter.
We are, of course, available to discuss any questions, concerns, or counterproposals that the Board or its advisors may have. Our overriding objective is to reach a mutually beneficial resolution that serves the interests of both companies and their shareholders.
We look forward to hearing from you at your earliest convenience.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
James Prentice Partner
Calderwood & Harkness LLP 787 Seventh Avenue, 42nd Floor New York, New York 10019 Telephone: (212) 558-4127 Facsimile: (212) 558-3588
Email: jprentice@calderwoodharkness.com
cc:
Hugh Pemberton, Esq. General Counsel Aurelius Global Media Group PLC 44 Lombard Crescent London EC3V 9BQ United Kingdom
Rupert Ashford Head of Corporate Development Aurelius Global Media Group PLC 44 Lombard Crescent London EC3V 9BQ United Kingdom

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