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MEZZANINE NOTE PURCHASE AGREEMENT

$35,000,000 Aggregate Principal Amount 13.50% Senior Subordinated Notes due 2028

Second Revised Draft — February 17, 2023

DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO FURTHER REVIEW AND REVISION

Parties:

Redstone Gaming Corp. (Issuer)

Pinnacle Bridge Mezzanine Opportunities Fund IV, LP (Purchaser)

Pinnacle Bridge Capital Partners, LP (solely for purposes of certain provisions specified herein)

Prepared by Calderwood & Harkness LLP, 300 South Fourth Street, Suite 2800, Las Vegas, NV 89101 — C&H Matter No. 1033-00001

Reflects C&H revisions to January 20, 2023 draft in response to markup received from Wainwright Hess & Caldwell LLP dated January 11, 2023.

MEZZANINE NOTE PURCHASE AGREEMENT

This MEZZANINE NOTE PURCHASE AGREEMENT (this "Agreement"), dated as of [●], 2023 (the "Effective Date"), is entered into by and among:

(1) REDSTONE GAMING CORP., a Nevada corporation (the "Issuer" or the "Company"), with its principal office at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103;

(2) PINNACLE BRIDGE MEZZANINE OPPORTUNITIES FUND IV, LP, a Delaware limited partnership (the "Purchaser"), with its principal office c/o Pinnacle Bridge Capital Management, LLC, 280 Park Avenue, 22nd Floor, New York, NY 10017; and

(3) PINNACLE BRIDGE CAPITAL PARTNERS, LP, a Delaware limited partnership ("PBCP"), solely for purposes of Article IX and certain other provisions specified herein, with its principal office c/o Pinnacle Bridge Capital Management, LLC, 280 Park Avenue, 22nd Floor, New York, NY 10017.

The Issuer, the Purchaser, and PBCP are each referred to herein individually as a "Party" and collectively as the "Parties."

RECITALS

WHEREAS, the Issuer desires to issue and sell, and the Purchaser desires to purchase, Thirty-Five Million Dollars ($35,000,000) aggregate principal amount of the Issuer's 13.50% Senior Subordinated Notes due 2028 (the "Notes"), on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the proceeds of the Notes will be used by the Issuer to fund (i) approximately Twenty-Two Million Dollars ($22,000,000) in capital expenditures for the upgrade of the Issuer's digital wagering platform, referred to internally as "Project Catalyst," which is operated through the Issuer's wholly owned subsidiary, Redstone Digital Wagering, LLC, and (ii) approximately Thirteen Million Dollars ($13,000,000) for the expansion of the Issuer's tribal gaming management contracts in the States of Arizona and New Mexico through the Issuer's wholly owned subsidiary, Redstone Tribal Management, Inc.;

WHEREAS, in connection with the purchase and sale of the Notes, the Issuer will issue to the Purchaser warrants (the "Warrants") to purchase 1,650,000 shares of the Issuer's common stock, par value $0.001 per share, pursuant to a separate Warrant Agreement of even date herewith;

WHEREAS, the Issuer's common stock is listed on the Nasdaq Stock Market LLC ("Nasdaq") under the ticker symbol "RDGM";

WHEREAS, the Issuer is party to that certain Second Amended and Restated Credit Agreement, dated as of March 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Senior Credit Agreement"), among the Issuer, Cornerstone National Bank, N.A., a national banking association, as Administrative Agent (in such capacity, the "Senior Agent" or "Cornerstone"), and the lenders party thereto, which provides for a $200,000,000 senior secured revolving credit facility, and the obligations of the Issuer under the Notes will be subordinated to the Senior Obligations (as defined herein) in accordance with the terms of this Agreement and the Intercreditor Agreement; and

WHEREAS, PBCP is entering into this Agreement solely for purposes of acknowledging and agreeing to the subordination provisions set forth in Article IX hereof and certain other provisions expressly applicable to PBCP;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I — DEFINITIONS AND INTERPRETATION

Section 1.01 — Definitions

As used in this Agreement, the following terms shall have the meanings set forth below:

"Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition, "Control" (including the correlative terms "Controlled by" and "under common Control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

"Anti-Dilution Adjustment" has the meaning set forth in Section 4(d) of the Warrant Agreement.

"Applicable Law" means all federal, state, and local laws, statutes, rules, regulations, orders, judgments, decrees, directives, guidelines, policies, and interpretations of any Governmental Authority applicable to the Issuer, any Subsidiary, or their respective businesses, assets, or properties, including the Gaming Laws of the States of Nevada, Arizona, and New Mexico, and all rules, regulations, and directives of the Gaming Authorities.

"Ashford Peak" means Ashford Peak Advisory Group, LLC, a Delaware limited liability company, in its capacity as placement agent in connection with the transactions contemplated by this Agreement.

"Board" or "Board of Directors" means the board of directors of the Issuer.

"Business Day" means any day other than a Saturday, Sunday, or any other day on which commercial banks in Las Vegas, Nevada or New York, New York are authorized or required by law or regulation to close.

"Capital Expenditure" means, for any period, the aggregate of all expenditures made by the Issuer and the Subsidiaries during such period that, in accordance with GAAP, are required to be capitalized on the balance sheet of the Issuer and the Subsidiaries, including expenditures related to Project Catalyst, the tribal gaming expansion conducted through RTM, and the acquisition of fixed or capital assets, but excluding expenditures funded with insurance proceeds or condemnation awards.

"Cash Interest Rate" means a rate equal to 10.50% per annum.

"CEO" means Gerald "Gerry" Navarro, in his capacity as the Chief Executive Officer of the Issuer, or any successor thereto.

"CFO" means Priya Sandoval, in her capacity as the Chief Financial Officer of the Issuer, or any successor thereto.

"Change of Control" means the occurrence of any of the following events: (a) any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) acquires, directly or indirectly, beneficial ownership of more than 50% of the outstanding voting stock of the Issuer; (b) the Issuer consummates a sale, transfer, or other disposition of all or substantially all of its consolidated assets to any Person or group of Persons; or (c) the Issuer consummates a merger, consolidation, or similar business combination with or into another Person in which the holders of the Issuer's voting stock immediately prior to such transaction hold, directly or indirectly, less than 50% of the voting stock of the surviving or resulting entity immediately after such transaction.

"Closing" means the closing of the purchase and sale of the Notes and the related transactions contemplated by this Agreement.

"Closing Date" means the date on which the Closing occurs, which shall be a date mutually agreed upon by the Issuer and the Purchaser, anticipated to be on or about [●], 2023.

"Collateral" has the meaning set forth in the Pledge and Security Agreement.

"Collateral Agent" means Dralvecen Title & Escrow Co., a Nevada corporation, in its capacity as collateral agent under the Pledge and Security Agreement, or any successor collateral agent appointed in accordance with the terms thereof.

"Company" means Redstone Gaming Corp., a Nevada corporation.

"Compliance Certificate" means a certificate substantially in the form of Exhibit B hereto.

"Cornerstone" means Cornerstone National Bank, N.A., a national banking association, in its capacity as Administrative Agent under the Senior Credit Agreement.

"Default" means any event, condition, or circumstance which, with the giving of notice, the lapse of time, or both, would constitute an Event of Default.

"EBITDA" means, for any period, the net income (or net loss) of the Issuer and the Subsidiaries on a consolidated basis for such period, determined in accordance with GAAP, plus, to the extent deducted in calculating such net income (or net loss): (a) interest expense, (b) income tax expense, (c) depreciation expense, and (d) amortization expense, in each case for such period; provided that the following items shall be excluded from the calculation of EBITDA: (i) extraordinary or non-recurring gains and losses, (ii) unrealized gains and losses on hedging transactions, (iii) gains or losses on the sale or disposition of assets outside the ordinary course of business, (iv) non-cash stock-based compensation expense, and (v) transaction costs and expenses incurred in connection with the transactions contemplated by this Agreement (up to a maximum of $1,200,000), in each case as reasonably agreed by the Issuer and the Purchaser.

"EIN" means, with respect to any Person, such Person's Employer Identification Number as assigned by the Internal Revenue Service.

"Equity Interests" means the shares of common stock, par value $0.001 per share, of the Issuer listed on Nasdaq under the ticker symbol "RDGM," and any other equity securities of the Issuer hereafter authorized or issued.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.

"ERISA Event" means (a) the occurrence of any "reportable event" (within the meaning of Section 4043 of ERISA) with respect to any Plan, (b) the withdrawal of the Issuer or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, (c) the imposition of any lien under Section 430(k) of the Code or Section 303(k) of ERISA, (d) the filing of a notice of intent to terminate any Plan under Section 4041(c) of ERISA, or (e) the institution of proceedings to terminate any Plan by the PBGC.

"Event of Default" has the meaning set forth in Section 8.01 of this Agreement.

"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.

"FCPA" means the Foreign Corrupt Practices Act of 1977, as amended from time to time.

"Fixed Charge Coverage Ratio" or "FCCR" means, for any period, the ratio of (a) EBITDA for such period minus Capital Expenditures during such period (other than Capital Expenditures funded with proceeds of the Notes or other long-term Indebtedness) minus cash taxes paid during such period, to (b) Fixed Charges for such period. "Fixed Charges" means, for any period, the sum of (i) cash interest expense of the Issuer and the Subsidiaries on a consolidated basis for such period, (ii) scheduled principal payments on Indebtedness of the Issuer and the Subsidiaries during such period, and (iii) payments under capital lease obligations of the Issuer and the Subsidiaries during such period.

"Fully Diluted Basis" means the total number of shares of common stock of the Issuer outstanding at any time, calculated assuming the exercise, conversion, or exchange of all outstanding options, warrants (including the Warrants), convertible securities, and other rights to acquire Equity Interests, whether or not such options, warrants, convertible securities, or other rights are then vested or exercisable.

"GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a consistent basis.

"Gaming Authorities" means, collectively, the Nevada Gaming Control Board, the Nevada Gaming Commission, the Arizona Department of Gaming, the New Mexico Gaming Control Board, and any other governmental authority exercising jurisdiction over gaming activities conducted by the Issuer or any Subsidiary.

"Gaming Laws" means all applicable laws, statutes, rules, regulations, orders, and ordinances governing the conduct of gaming, gambling, or wagering activities in any jurisdiction in which the Issuer or any Subsidiary conducts such activities, including the Nevada Gaming Control Act and the regulations promulgated thereunder, and the gaming laws and regulations of the States of Arizona and New Mexico.

"Gaming Licenses" means all licenses, permits, approvals, authorizations, registrations, findings of suitability, and other governmental authorizations issued by any Gaming Authority to the Issuer or any Subsidiary necessary for or related to the conduct of the Issuer's or any Subsidiary's gaming operations, including Nevada Gaming License No. NGC-2019-00847 and all licenses, permits, and approvals issued by the Arizona Department of Gaming and the New Mexico Gaming Control Board.

"Governmental Authority" means any nation, government, state, political subdivision, municipality, or other governmental entity, or any agency, authority, instrumentality, regulatory body, court, central bank, arbitrator, or other Person exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of government.

"Indebtedness" means, with respect to any Person, without duplication: (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments; (c) all obligations of such Person under conditional sale or other title retention agreements; (d) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables and accrued expenses incurred in the ordinary course of business); (e) all obligations of such Person as lessee under capital leases; (f) all obligations of such Person to purchase, redeem, retire, defease, or otherwise make any payment in respect of any Equity Interests of such Person or any other Person; (g) all guarantees by such Person of Indebtedness of any other Person; (h) all obligations of such Person in respect of letters of credit, banker's acceptances, and similar instruments; (i) all obligations of such Person in respect of hedging transactions; and (j) all Indebtedness of another Person secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person.

"Intercreditor Agreement" means that certain Intercreditor and Subordination Agreement, dated as of the Closing Date, among Cornerstone National Bank, N.A., as Senior Agent, Pinnacle Bridge Capital Partners, LP, as Subordinated Creditor Representative, and the Issuer, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.

"Interest Payment Date" means each March 31, June 30, September 30, and December 31 of each year, commencing with the first such date occurring after the Closing Date; provided that if any Interest Payment Date falls on a day that is not a Business Day, such Interest Payment Date shall be the next succeeding Business Day.

"Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.

"Issuer" means Redstone Gaming Corp., a Nevada corporation.

"Lender's Counsel" means Wainwright Hess & Caldwell LLP, 1345 Avenue of the Americas, 30th Floor, New York, NY 10105.

"Lien" means any mortgage, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, lien (statutory or other), security interest, or other security arrangement, and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction.

"Liquidity" means, at any date of determination, the sum of (a) unrestricted cash and Cash Equivalents of the Issuer and the Subsidiaries on a consolidated basis, plus (b) the aggregate amount of available (undrawn and unborrowed) commitments under the Senior Credit Facility at such date.

"Material Adverse Effect" means a material adverse effect on (a) the business, operations, properties, assets, condition (financial or otherwise), or prospects of the Issuer and the Subsidiaries taken as a whole, (b) the ability of the Issuer to perform any of its material obligations under any Transaction Document, or (c) the validity or enforceability of any Transaction Document or the rights and remedies of the Purchaser or PBCP thereunder.

"Maturity Date" means the fifth (5th) anniversary of the Closing Date (anticipated to be on or about [●], 2028); provided that if such date is not a Business Day, the Maturity Date shall be the next succeeding Business Day.

"Mezzanine Obligations" means all obligations of the Issuer and the Subsidiaries under the Notes, this Agreement, and the other Transaction Documents, including principal, interest (including PIK Interest), premium (if any), fees, expenses, indemnification obligations, and all other amounts payable thereunder.

"Net Leverage Ratio" or "Total Net Leverage Ratio" means, as of any date of determination, the ratio of (a) the aggregate outstanding principal amount of all funded Indebtedness of the Issuer and the Subsidiaries on a consolidated basis as of such date minus unrestricted cash and Cash Equivalents of the Issuer and the Subsidiaries on a consolidated basis as of such date (not to exceed $25,000,000 for purposes of this netting calculation), to (b) EBITDA for the most recently completed four consecutive fiscal quarters for which financial statements have been delivered (or are required to have been delivered) pursuant to Section 7.01(a).

"Non-Call Period" has the meaning set forth in Section 3.06(a).

"Notes" means the 13.50% Senior Subordinated Notes due 2028 issued by the Issuer pursuant to this Agreement in the aggregate original principal amount of $35,000,000, as such principal amount may be increased by the capitalization of PIK Interest and decreased by payments of principal, substantially in the form of Exhibit A hereto.

"OFAC" means the Office of Foreign Assets Control of the United States Department of the Treasury.

"Officer's Certificate" means a certificate substantially in the form of Exhibit C hereto.

"Payment blockage Period" has the meaning set forth in Section 9.02(a).

"PBCP" means Pinnacle Bridge Capital Partners, LP, a Delaware limited partnership.

"Permitted Indebtedness" means Indebtedness of the type and in the amounts set forth on Schedule 7.02(a) hereto, as may be updated from time to time with the prior written consent of the Purchaser.

"Permitted Liens" means Liens of the type set forth on Schedule 7.02(b) hereto.

"Permitted Restricted Payments" means (a) dividends paid solely in Equity Interests of the Issuer, (b) repurchases of Equity Interests from employees, officers, or directors of the Issuer or any Subsidiary upon termination of employment or service, in an aggregate amount not to exceed $1,000,000 in any fiscal year, and (c) other Restricted Payments specifically approved in writing by the Purchaser.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, association, Governmental Authority, or other entity.

"PIK Interest" means interest accruing on the Notes at the PIK Interest Rate and capitalized by addition to the outstanding Principal Amount of the Notes in accordance with Section 3.02.

"PIK Interest Rate" means a rate equal to 3.00% per annum.

"Placement Agent" means Ashford Peak Advisory Group, LLC, a Delaware limited liability company.

"Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) maintained or contributed to by the Issuer or any ERISA Affiliate, or to which the Issuer or any ERISA Affiliate has any obligation or liability, contingent or otherwise.

"Pledge and Security Agreement" means that certain Pledge and Security Agreement, dated as of the Closing Date, between the Issuer and PBCP, as Secured Party (on behalf of the Purchaser), providing for a second-priority pledge of (a) 100% of the Issuer's equity interests in RDW and RTM, and (b) an assignment of the RedBet IP, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms and the Intercreditor Agreement.

"Principal Amount" means $35,000,000, as such amount may be increased from time to time by the capitalization of PIK Interest in accordance with Section 3.02 and decreased from time to time by payments of principal in accordance with this Agreement.

"Project Catalyst" means the Issuer's planned upgrade and modernization of its digital wagering platform operated through Redstone Digital Wagering, LLC, including the development and deployment of enhanced mobile and desktop wagering applications, back-end infrastructure improvements, and related technology initiatives.

"Purchase Price" means $35,000,000, representing 100% of the par value of the Notes.

"Purchaser" means Pinnacle Bridge Mezzanine Opportunities Fund IV, LP, a Delaware limited partnership.

"RDW" means Redstone Digital Wagering, LLC, a Nevada limited liability company and wholly owned Subsidiary of the Issuer (EIN: 88-0587214), with its principal office at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103.

"RedBet IP" means the proprietary wagering software and related intellectual property developed by the Issuer or its Subsidiaries, including all copyrights, trade secrets, know-how, source code, object code, algorithms, databases, customer interfaces, and documentation related thereto, together with the trademark application for the "RedBet" mark filed with the United States Patent and Trademark Office in August 2022 (Application No. [●]) and all goodwill associated therewith.

"Restricted Payment" means any (a) dividend or other distribution, direct or indirect, on account of any Equity Interests of the Issuer or any Subsidiary, (b) redemption, retirement, purchase, or other acquisition for value of any Equity Interests of the Issuer or any Subsidiary, or (c) payment made to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire Equity Interests of the Issuer.

"RTM" means Redstone Tribal Management, Inc., a Nevada corporation and wholly owned Subsidiary of the Issuer (EIN: 88-0601889), with its principal office at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103.

"SEC" means the Securities and Exchange Commission of the United States, or any successor thereto.

"Secretary's Certificate" means a certificate substantially in the form of Exhibit E hereto.

"Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.

"Senior Agent" means Cornerstone National Bank, N.A., in its capacity as Administrative Agent under the Senior Credit Agreement, or any successor administrative agent appointed in accordance with the terms of the Senior Credit Agreement.

"Senior Credit Agreement" means the Second Amended and Restated Credit Agreement, dated as of March 15, 2021, among the Issuer, Cornerstone National Bank, N.A., as Administrative Agent, and the lenders party thereto, providing for a $200,000,000 senior secured revolving credit facility (as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms and in compliance with this Agreement and the Intercreditor Agreement).

"Senior Credit Facility" means the revolving credit facility established under the Senior Credit Agreement.

"Senior Obligations" means all obligations (including principal, interest, fees, expenses, indemnities, and other amounts) of the Issuer and the Subsidiaries under or in respect of the Senior Credit Agreement and the related loan documents, whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, and whether for principal, interest, premium, fees, costs, expenses, indemnification, or otherwise.

"SOFR" means the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator).

"Solvent" means, with respect to any Person as of any date of determination, that as of such date (a) the fair value of the property of such Person is greater than the total amount of liabilities (including contingent liabilities) of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital.

"Subordinated Indebtedness" means all Indebtedness of the Issuer and the Subsidiaries that is subordinated in right of payment to the Senior Obligations, including the Mezzanine Obligations.

"Subsidiary" or "Subsidiaries" means, with respect to the Issuer, (a) Redstone Digital Wagering, LLC, (b) Redstone Tribal Management, Inc., and (c) any other entity in which the Issuer, directly or indirectly, owns more than 50% of the outstanding voting power of such entity's Equity Interests or has the power to elect a majority of the board of directors or other governing body of such entity.

"Total Net Leverage Ratio" has the meaning set forth in the definition of "Net Leverage Ratio" above.

"Transaction Documents" means, collectively, this Agreement, the Notes, the Warrant Agreement, the Warrants, the Pledge and Security Agreement, the Intercreditor Agreement, and all other agreements, documents, instruments, and certificates delivered by or on behalf of the Issuer or any Subsidiary in connection with the transactions contemplated hereby or thereby, as any of the foregoing may be amended, restated, supplemented, or otherwise modified from time to time.

"Warrant Agreement" means the Warrant Agreement, dated as of the Closing Date, between the Issuer and the Purchaser, providing for the issuance of Warrants to purchase 1,650,000 shares of common stock at an exercise price of $9.24 per share, substantially in the form agreed upon by the Parties, as may be amended, restated, supplemented, or otherwise modified from time to time.

"Warrants" means warrants to purchase 1,650,000 shares of common stock of the Issuer, representing 3.00% of the Issuer's fully diluted equity (based on 55,000,000 shares outstanding on a Fully Diluted Basis as of the date hereof), at an exercise price of $9.24 per share (representing 110% of the 30-day volume-weighted average price of $8.40 per share calculated as of the commitment date), issued to the Purchaser pursuant to the Warrant Agreement.

Section 1.02 — Rules of Interpretation

Unless the context otherwise requires, in this Agreement: (a) headings and captions are for convenience of reference only and shall not affect the interpretation of this Agreement; (b) the singular includes the plural and the plural includes the singular; (c) the words "hereof," "herein," "hereunder," and words of similar import refer to this Agreement as a whole and not to any particular provision; (d) the word "including" means "including without limitation" and shall not be construed to limit any general statement to the specific or similar items or matters immediately following it; (e) references to any statute, law, rule, or regulation include all amendments, modifications, replacements, and successor statutes, laws, rules, and regulations thereto; (f) references to any agreement, document, or instrument include all amendments, restatements, supplements, and other modifications thereto and all replacements thereof; (g) references to "$" or "dollars" mean the lawful currency of the United States of America; (h) references to "days" mean calendar days unless Business Days are specified; (i) references to any Person include such Person's successors and permitted assigns; (j) accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with GAAP; and (k) all time references herein are to Eastern Time unless otherwise expressly stated.

Section 1.03 — Accounting Terms

All accounting terms used and not specifically defined herein shall be construed in accordance with GAAP as in effect on the date hereof, consistently applied. If any change in GAAP (including the adoption of IFRS) from GAAP as applied in the preparation of the most recent financial statements delivered pursuant to Section 7.01 hereof would affect the computation of any financial ratio or requirement set forth in any Transaction Document, and either the Issuer or the Purchaser shall so request, the Issuer and the Purchaser shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until such amendment is agreed upon, (a) the relevant financial ratio or requirement shall continue to be computed in accordance with GAAP as in effect prior to such change, and (b) the Issuer shall provide to the Purchaser financial statements and compliance certificates setting forth a reconciliation between calculations made before and after giving effect to such change in GAAP (the foregoing, the "Frozen GAAP" provisions).

ARTICLE II — PURCHASE AND SALE OF NOTES

Section 2.01 — Authorization of the Notes

The Issuer has duly authorized the issuance and sale of $35,000,000 aggregate principal amount of its 13.50% Senior Subordinated Notes due 2028. The Notes shall be designated as the "13.50% Senior Subordinated Notes due 2028" and shall be substantially in the form attached hereto as Exhibit A. The Notes shall constitute senior subordinated obligations of the Issuer, ranking senior to all existing and future Indebtedness of the Issuer that is expressly subordinated to the Notes, pari passu in right of payment with all existing and future senior subordinated Indebtedness of the Issuer (if any), and subordinated in right of payment to all existing and future Senior Obligations in accordance with the terms of this Agreement and the Intercreditor Agreement. The Notes shall be unsecured obligations of the Issuer, subject to the limited pledge of Collateral under the Pledge and Security Agreement, which provides for a second-priority pledge of (a) 100% of the Issuer's equity interests in RDW and RTM, and (b) an assignment of the RedBet IP. The Liens securing the Mezzanine Obligations shall in all cases be junior and subordinate to the Liens securing the Senior Obligations, as further set forth in the Intercreditor Agreement.

Section 2.02 — Purchase and Sale

Subject to the terms and conditions of this Agreement, on the Closing Date, the Issuer agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase from the Issuer, $35,000,000 aggregate principal amount of the Notes at a purchase price equal to 100% of par, or $35,000,000 (the "Purchase Price"). Payment of the Purchase Price shall be made by the Purchaser to the Issuer by wire transfer of immediately available funds in United States dollars to an account designated by the Issuer no later than two (2) Business Days prior to the Closing Date.

Section 2.03 — Closing

The Closing shall take place at the offices of Calderwood & Harkness LLP, 300 South Fourth Street, Suite 2800, Las Vegas, NV 89101, or remotely by exchange of documents and signatures via electronic transmission, at 10:00 a.m. (Pacific Time) on the Closing Date. The Closing Date shall be a date mutually agreed upon by the Issuer and the Purchaser, which the Parties anticipate will occur on or about [●], 2023. If the Closing does not occur on or before the ninetieth (90th) day following the date of this Agreement (or such later date as the Parties may mutually agree in writing), either Party may terminate this Agreement by written notice to the other Party, without liability to the other Party (except for any liability for a breach of this Agreement prior to such termination).

Section 2.04 — Use of Proceeds

The Issuer shall apply the net proceeds of the Notes as follows:

(a) approximately Twenty-Two Million Dollars ($22,000,000) for capital expenditures related to Project Catalyst, including the development, upgrade, and deployment of the Issuer's digital wagering platform operated through RDW, encompassing technology infrastructure improvements, software development, systems integration, cybersecurity enhancements, and related costs; and

(b) approximately Thirteen Million Dollars ($13,000,000) for the expansion of the Issuer's tribal gaming management contracts in the States of Arizona and New Mexico through RTM, including costs associated with the negotiation and execution of new management contracts, regulatory compliance, facility upgrades, equipment procurement, and working capital requirements related to such expansion.

A detailed breakdown of the anticipated use of proceeds is set forth in Exhibit D hereto. The Issuer shall not use any portion of the proceeds of the Notes for any purpose not described in this Section 2.04 without the prior written consent of the Purchaser, which consent may be withheld in the Purchaser's sole discretion. The Issuer shall provide to the Purchaser, concurrently with each quarterly Compliance Certificate, a summary report detailing the use of proceeds during the preceding fiscal quarter and the cumulative use of proceeds through the end of such quarter.

Section 2.05 — Issuance of Warrants

Simultaneously with the Closing, and as additional consideration for the Purchaser's purchase of the Notes, the Issuer shall issue to the Purchaser the Warrants pursuant to the Warrant Agreement. The Warrants shall entitle the Purchaser to purchase 1,650,000 shares of common stock of the Issuer, representing 3.00% of the Issuer's outstanding Equity Interests on a Fully Diluted Basis (based on 55,000,000 shares outstanding as of the date of this Agreement), at an exercise price of $9.24 per share, which represents 110% of the 30-day volume-weighted average price of $8.40 per share calculated as of the commitment date. The Warrants shall be exercisable at any time during the period commencing on the first anniversary of the Closing Date and ending on the seventh anniversary of the Closing Date, subject to the terms and conditions set forth in the Warrant Agreement, including customary Anti-Dilution Adjustments. The Warrants shall be issued in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof and/or Regulation D promulgated thereunder. The Issuer and the Purchaser acknowledge that the issuance of the Warrants is an integral part of the transactions contemplated by this Agreement and that the Purchaser would not have agreed to purchase the Notes without the concurrent issuance of the Warrants.

ARTICLE III — INTEREST AND PAYMENT TERMS

Section 3.01 — Cash Interest

The Notes shall bear cash interest on the outstanding Principal Amount at a rate equal to the Cash Interest Rate (10.50% per annum). Cash interest shall be payable quarterly in arrears on each Interest Payment Date, commencing on the first Interest Payment Date occurring after the Closing Date. Based on the original Principal Amount of $35,000,000, the annual cash interest payable shall be $3,675,000 ($918,750 per quarter). Cash interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Cash interest shall accrue from and including the Closing Date (or, with respect to any period following the first Interest Payment Date, from and including the immediately preceding Interest Payment Date on which interest was paid) to but excluding the applicable Interest Payment Date or the date of payment in full.

Section 3.02 — PIK Interest

In addition to Cash Interest payable under Section 3.01, the Notes shall accrue PIK Interest on the outstanding Principal Amount at a rate equal to the PIK Interest Rate (3.00% per annum). PIK Interest shall compound quarterly on each Interest Payment Date. On each Interest Payment Date, the amount of PIK Interest accrued during the applicable quarter shall be automatically added to the outstanding Principal Amount of the Notes, thereby increasing the principal balance of the Notes on which both Cash Interest and PIK Interest accrue during subsequent periods. Based on the original Principal Amount of $35,000,000, the Year 1 annual PIK accrual (assuming no election by the Issuer to pay PIK Interest in cash) would be approximately $1,050,000.

The Issuer may elect, by delivery of an irrevocable written notice to the Purchaser no less than five (5) Business Days prior to any Interest Payment Date (a "Cash Election Notice"), to pay the PIK Interest otherwise accruing on the Notes during the applicable quarter in cash in lieu of capitalizing such amount. Any such cash payment of PIK Interest shall be made concurrently with the payment of Cash Interest on the applicable Interest Payment Date. For the avoidance of doubt, any Cash Election Notice shall apply solely to the PIK Interest accruing during the quarter immediately preceding the applicable Interest Payment Date and shall not constitute a continuing election for future periods.

Section 3.03 — All-in Yield

The all-in yield on the Notes is 13.50% per annum, consisting of the Cash Interest Rate of 10.50% per annum plus the PIK Interest Rate of 3.00% per annum. The Issuer and the Purchaser agree that the foregoing rates are commercially reasonable and reflect the credit risk, subordination, and other terms applicable to the Notes.

Section 3.04 — Default Interest

Upon the occurrence and during the continuance of an Event of Default, the interest rate on the Notes (both the Cash Interest Rate and the PIK Interest Rate) shall automatically increase by two percentage points (2.00%) per annum above the rates otherwise applicable (the "Default Rate"), resulting in an all-in yield of 15.50% per annum (12.50% Cash Interest Rate and 3.00% PIK Interest Rate, provided that the Issuer may, at the election of the Purchaser, be required to pay the entire Default Rate in cash). Default interest shall accrue from the date of the occurrence of such Event of Default until such Event of Default is cured or waived in accordance with this Agreement, and shall be payable on demand by the Purchaser.

Section 3.05 — Maturity

The entire outstanding Principal Amount of the Notes (including all PIK Interest capitalized thereon), together with all accrued and unpaid Cash Interest and PIK Interest thereon, shall be due and payable in full on the Maturity Date (the fifth anniversary of the Closing Date). If the Maturity Date falls on a day that is not a Business Day, payment shall be due on the next succeeding Business Day, and interest shall continue to accrue through and including the date of such payment.

Section 3.06 — Prepayment

(a) Call Protection. The Notes shall not be prepayable, in whole or in part, at any time during the first twenty-four (24) months following the Closing Date (the "Non-Call Period"). During the Non-Call Period, neither the Issuer nor any Affiliate of the Issuer shall prepay, redeem, repurchase, defease, or otherwise retire the Notes, whether voluntarily or involuntarily (other than pursuant to mandatory prepayment upon a Change of Control as set forth in clause (d) below), without the prior written consent of the Purchaser.

(b) Optional Prepayment After Non-Call Period. After the expiration of the Non-Call Period, the Issuer may, at its option, upon not less than thirty (30) nor more than sixty (60) days' prior written notice to the Purchaser in accordance with Section 3.06(f), prepay the Notes, in whole or in part (in minimum amounts of $5,000,000 and integral multiples of $1,000,000 in excess thereof), at the following prepayment prices (expressed as a percentage of the principal amount being prepaid), plus all accrued and unpaid interest (including PIK Interest) on the principal amount being prepaid to but excluding the prepayment date:

(c) Illustrative Prepayment Premium. By way of illustration only, if the Issuer were to prepay the entire outstanding Principal Amount at month 25 following the Closing Date (assuming no prior principal payments and no PIK Interest election), the prepayment premium on the original Principal Amount of $35,000,000 would be calculated as follows: $35,000,000 × 3.00% = $1,050,000. The foregoing illustration is provided for reference purposes only and is subject to adjustment for the actual outstanding Principal Amount at the time of prepayment, including any PIK Interest capitalized thereon.

(d) Mandatory Prepayment — Change of Control. Upon the occurrence of a Change of Control, the Issuer shall, within ten (10) Business Days following such Change of Control, deliver to the Purchaser a written offer (the "Change of Control Offer") to prepay 100% of the outstanding Principal Amount of the Notes at a prepayment price equal to 101% of the Principal Amount, plus all accrued and unpaid interest (including PIK Interest) to but excluding the date of such prepayment. The Purchaser shall have thirty (30) days from receipt of the Change of Control Offer to accept or reject such offer. If the Purchaser accepts the Change of Control Offer, the prepayment shall be consummated on the date specified in the Change of Control Offer (which shall be not less than ten (10) nor more than thirty (30) Business Days following the Purchaser's acceptance). For the avoidance of doubt, the mandatory prepayment obligation set forth in this Section 3.06(d) shall apply notwithstanding the Non-Call Period.

(e) Asset Sale Proceeds. If the Issuer or any Subsidiary consummates a sale, transfer, or other disposition of any assets (other than in the ordinary course of business) that generates net cash proceeds in excess of Five Million Dollars ($5,000,000) in any single transaction or series of related transactions, and such net cash proceeds (or any portion thereof) are not reinvested in the business of the Issuer or the Subsidiaries within three hundred sixty-five (365) days following the receipt thereof, the Issuer shall, within five (5) Business Days following the expiration of such 365-day reinvestment period, apply seventy-five percent (75%) of the unreinvested net cash proceeds to prepay the Notes at par (100% of the principal amount being prepaid) plus all accrued and unpaid interest (including PIK Interest) to but excluding the prepayment date. Any prepayment made pursuant to this Section 3.06(e) shall be applied first to accrued and unpaid interest (including PIK Interest) and then to the outstanding Principal Amount.

(f) Notice of Optional Prepayment. The Issuer shall provide to the Purchaser not less than thirty (30) days' and not more than sixty (60) days' prior irrevocable written notice of any optional prepayment under Section 3.06(b), specifying the prepayment date, the principal amount to be prepaid, and the applicable prepayment price. Once delivered, any such notice of prepayment shall be irrevocable and the Issuer shall be obligated to make the specified prepayment on the date set forth therein.

Section 3.07 — Payments Generally

All payments of principal, interest, premium (if any), fees, expenses, and other amounts payable by the Issuer to the Purchaser under this Agreement and the Notes shall be made in lawful money of the United States of America and in immediately available funds, without set-off, counterclaim, deduction, or withholding of any kind (except as required by Applicable Law), to such account as the Purchaser shall designate by written notice to the Issuer from time to time. If any payment date falls on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and interest shall continue to accrue during such extension period. All payments shall be applied first to fees and expenses, second to accrued and unpaid interest (including Default Interest, if applicable), and third to outstanding Principal Amount, unless otherwise agreed by the Purchaser.

Section 3.08 — Taxes and Withholding

All payments made by the Issuer under this Agreement and the Notes shall be made free and clear of, and without deduction or withholding for, any present or future taxes, duties, levies, imposts, assessments, or other governmental charges of any nature (collectively, "Taxes"), unless the Issuer is required by Applicable Law to deduct or withhold any such Taxes. If the Issuer is so required to deduct or withhold any Taxes from any payment, the Issuer shall (a) make such deduction or withholding, (b) pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law, and (c) pay to the Purchaser such additional amounts (the "Gross-Up Amounts") as shall be necessary to ensure that the net amount received by the Purchaser after such deduction or withholding (including any deduction or withholding on account of any Gross-Up Amounts) equals the full amount that would have been received by the Purchaser had no such deduction or withholding been required. The Issuer shall furnish to the Purchaser, within thirty (30) days after the date of any payment of Taxes, certified copies of tax receipts or other evidence of such payment reasonably satisfactory to the Purchaser.

ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE ISSUER

The Issuer hereby represents and warrants to the Purchaser as of the date hereof (except where any representation or warranty is stated to be made as of a specific date, in which case such representation or warranty shall be made only as of such specific date) as follows:

Section 4.01 — Organization and Good Standing

The Issuer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada. The Issuer has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as now being conducted. The Issuer is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the character of its properties or the nature of its business makes such qualification or licensing necessary, including the States of Nevada, Arizona, and New Mexico, except where the failure to be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect. The Issuer's Employer Identification Number (EIN) is 88-0412376. The Issuer's principal office is located at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103.

Section 4.02 — Subsidiaries

(a) RDW is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Nevada (EIN: 88-0587214). The Issuer owns, directly, 100% of the issued and outstanding membership interests of RDW, free and clear of all Liens other than Permitted Liens and the Liens created under the Pledge and Security Agreement. RDW is the entity through which the Issuer operates its digital wagering platform and holds the RedBet IP.

(b) RTM is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada (EIN: 88-0601889). The Issuer owns, directly, 100% of the issued and outstanding capital stock of RTM, free and clear of all Liens other than Permitted Liens and the Liens created under the Pledge and Security Agreement. RTM is the entity through which the Issuer conducts its tribal gaming management operations in the States of Arizona and New Mexico.

(c) Except as disclosed on Schedule 4.02 hereto, the Issuer has no Subsidiaries other than RDW and RTM, and neither the Issuer nor any Subsidiary owns any equity interest in any other Person.

Section 4.03 — Authorization; Enforceability

The Issuer has all requisite corporate power and authority to execute, deliver, and perform its obligations under this Agreement and each other Transaction Document to which it is a party. The execution, delivery, and performance by the Issuer of this Agreement and each other Transaction Document to which it is a party have been duly authorized by all necessary corporate action on the part of the Issuer, including the approval of the Board of Directors by a resolution duly adopted at a meeting (or by unanimous written consent) at which a quorum was present and acting throughout. This Agreement has been duly executed and delivered by the Issuer and constitutes, and each other Transaction Document to which the Issuer is a party, when duly executed and delivered by the Issuer, will constitute, a valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, and other similar laws relating to or affecting creditors' rights generally, and subject to general principles of equity (whether considered in a proceeding in equity or at law).

Section 4.04 — No Conflicts; Required Consents

The execution, delivery, and performance by the Issuer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby (including the issuance and sale of the Notes and the issuance of the Warrants), do not and will not: (a) violate, conflict with, or result in a breach of any provision of, or constitute a default under, the articles of incorporation or bylaws (or equivalent organizational documents) of the Issuer or any Subsidiary; (b) violate, conflict with, or result in a breach of any Applicable Law applicable to the Issuer or any Subsidiary or any of their respective properties or assets; or (c) violate, conflict with, result in a breach of, constitute a default under (with or without the giving of notice or the lapse of time or both), or give rise to any right of termination, cancellation, or acceleration under, or require any consent or approval under, any material agreement, contract, instrument, mortgage, lien, lease, permit, license, or other arrangement to which the Issuer or any Subsidiary is a party or by which any of their respective properties or assets may be bound; except, in the case of clause (c), as set forth below:

(i) The consent of Cornerstone National Bank, N.A., as Administrative Agent under the Senior Credit Agreement, is required pursuant to Section 7.03(b) of the Senior Credit Agreement for the incurrence of subordinated Indebtedness by the Issuer in excess of $10,000,000. The Issuer shall obtain such consent prior to the Closing Date.

(ii) The execution and delivery of the Intercreditor Agreement by Cornerstone National Bank, N.A. is required in connection with the consummation of the transactions contemplated hereby.

No consent, approval, authorization, license, order, registration, filing, or qualification of or with any Gaming Authority is required in connection with the issuance and sale of the Notes, subject to the matters described in Section 4.11 hereof.

Section 4.05 — Capitalization

As of the date hereof, the authorized capital stock of the Issuer consists of [●] shares of common stock, par value $0.001 per share, of which 55,000,000 shares are issued and outstanding. The common stock of the Issuer is listed and traded on Nasdaq under the ticker symbol "RDGM." All outstanding shares of common stock have been duly authorized, validly issued, and are fully paid and nonassessable. Except as set forth on Schedule 4.05 hereto, there are no outstanding options, warrants, rights, subscriptions, claims, convertible or exchangeable securities, or other agreements or commitments (contingent or otherwise) of any character relating to the issued or unissued Equity Interests of the Issuer or any Subsidiary, or obligating the Issuer or any Subsidiary to issue, transfer, sell, or otherwise dispose of any Equity Interests. Except as contemplated by the Transaction Documents (including the issuance of the Warrants), the Issuer has not agreed to register under the Securities Act any of its presently outstanding Equity Interests or any Equity Interests issuable upon exercise or conversion of presently outstanding options, warrants, or other rights.

Section 4.06 — Financial Statements

The Issuer has heretofore delivered to the Purchaser complete and correct copies of (a) the audited consolidated financial statements (including the consolidated balance sheet, consolidated statements of operations, consolidated statements of stockholders' equity, and consolidated statements of cash flows, together with the related notes thereto) of the Issuer and the Subsidiaries for the fiscal year ended June 30, 2022, audited by Harmon & Grayling CPAs, LLP, and accompanied by an unqualified audit opinion (the "Annual Financial Statements"), and (b) the unaudited condensed consolidated financial statements of the Issuer and the Subsidiaries for the fiscal quarter ended September 30, 2022, certified by the CFO (the "Interim Financial Statements" and, together with the Annual Financial Statements, the "Financial Statements").

The Financial Statements (i) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby (except, in the case of the Interim Financial Statements, for the absence of footnotes and normal year-end adjustments), and (ii) present fairly in all material respects the consolidated financial condition and results of operations of the Issuer and the Subsidiaries as of the dates and for the periods indicated therein.

For reference purposes, the following key financial metrics of the Issuer and the Subsidiaries are derived from the Financial Statements: (A) last twelve months ("LTM") revenue of $387,600,000 as of June 30, 2022, and (B) LTM EBITDA of $58,100,000 as of June 30, 2022. The foregoing financial metrics are provided for informational purposes and are not intended to modify or limit the representations contained in this Section 4.06.

Since September 30, 2022, no event, circumstance, development, or condition has occurred that has had, or would reasonably be expected to have, a Material Adverse Effect.

Section 4.07 — No Material Adverse Effect

Since September 30, 2022, there has been no event, circumstance, development, change, effect, or condition that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, since September 30, 2022, the Issuer and the Subsidiaries have conducted their respective businesses in the ordinary course consistent with past practice and there has been no material change in the Issuer's accounting policies or financial reporting practices.

Section 4.08 — Litigation

Except as disclosed on Schedule 4.08 hereto, there is no action, suit, proceeding, claim, arbitration, mediation, or investigation pending or, to the knowledge of the Issuer, threatened in writing against the Issuer or any Subsidiary, or against any officer, director, or employee of the Issuer or any Subsidiary in their capacity as such, before any court, arbitrator, or Governmental Authority, that (a) could reasonably be expected to have a Material Adverse Effect, or (b) seeks to enjoin, restrain, or prohibit the consummation of the transactions contemplated by this Agreement or any other Transaction Document. There are no outstanding judgments, orders, decrees, injunctions, or stipulations against the Issuer or any Subsidiary that would reasonably be expected to have a Material Adverse Effect.

Section 4.09 — Compliance with Laws

The Issuer and each Subsidiary are, and have at all times during the past three (3) years been, in compliance in all material respects with all Applicable Laws, including Gaming Laws, securities laws (including the Securities Act and the Exchange Act), environmental laws, employment and labor laws, anti-corruption laws, anti-money laundering laws, and data privacy and cybersecurity laws. Neither the Issuer nor any Subsidiary has received any written notice from any Governmental Authority alleging any material noncompliance with any Applicable Law that has not been resolved to the satisfaction of such Governmental Authority.

Section 4.10 — Tax Matters

The Issuer and each Subsidiary have timely filed (or caused to be filed) all federal, state, local, and foreign tax returns and reports required to be filed by them, all such returns and reports are true, correct, and complete in all material respects, and the Issuer and each Subsidiary have timely paid (or caused to be paid) all taxes shown to be due on such returns and all other taxes, assessments, fees, and governmental charges due and payable by them. There are no audits, examinations, investigations, or other proceedings pending or, to the knowledge of the Issuer, threatened with respect to any taxes of the Issuer or any Subsidiary. There are no outstanding agreements, waivers, or arrangements extending the statutory period of limitation applicable to any tax return of the Issuer or any Subsidiary. Neither the Issuer nor any Subsidiary has any material liability for unpaid taxes that has not been accrued or reserved against in the Financial Statements.

Section 4.11 — Gaming Matters

(a) The Issuer and each applicable Subsidiary hold all Gaming Licenses necessary for the conduct of their respective gaming operations as currently conducted, including Nevada Gaming License No. NGC-2019-00847 issued by the Nevada Gaming Control Board and the Nevada Gaming Commission, and all licenses, permits, and approvals issued by the Arizona Department of Gaming and the New Mexico Gaming Control Board. All such Gaming Licenses are in full force and effect, and no proceedings are pending or, to the knowledge of the Issuer, threatened, seeking the revocation, suspension, non-renewal, limitation, or adverse modification of any Gaming License.

(b) The Issuer and the Subsidiaries are, and have at all times during the past three (3) years been, in compliance in all material respects with all Gaming Laws and the terms and conditions of all Gaming Licenses.

(c) The Issuer has analyzed, with the assistance of qualified gaming regulatory counsel, the applicability of Gaming Authority suitability requirements to the Purchaser, PBCP, and their respective general partners, members, officers, directors, and principals (including Victor Hargrove and Danielle Okonkwo) in connection with the transactions contemplated by this Agreement. Based on such analysis and the advice of counsel, the Issuer believes that the Warrant coverage of 3.00% of the Issuer's fully diluted equity falls below the 5% beneficial ownership threshold that would trigger a finding-of-suitability requirement for the Purchaser, PBCP, or their respective principals under the Nevada Gaming Control Act and the regulations of the Nevada Gaming Control Board. The Issuer further believes, based on the advice of counsel, that the purchase

MEZZANINE NOTE PURCHASE AGREEMENT
$35,000,000 Aggregate Principal Amount 13.50% Senior Subordinated Notes due 2028
Second Revised Draft — February 17, 2023
DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO FURTHER REVIEW AND REVISION
Parties:
Redstone Gaming Corp. (Issuer)
Pinnacle Bridge Mezzanine Opportunities Fund IV, LP (Purchaser)
Pinnacle Bridge Capital Partners, LP (solely for purposes of certain provisions specified herein)
Prepared by Calderwood & Harkness LLP, 300 South Fourth Street, Suite 2800, Las Vegas, NV 89101 — C&H Matter No. 1033-00001
Reflects C&H revisions to January 20, 2023 draft in response to markup received from Wainwright Hess & Caldwell LLP dated January 11, 2023.
MEZZANINE NOTE PURCHASE AGREEMENT
This MEZZANINE NOTE PURCHASE AGREEMENT (this "Agreement"), dated as of [●], 2023 (the "Effective Date"), is entered into by and among:
(1) REDSTONE GAMING CORP., a Nevada corporation (the "Issuer" or the "Company"), with its principal office at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103;
(2) PINNACLE BRIDGE MEZZANINE OPPORTUNITIES FUND IV, LP, a Delaware limited partnership (the "Purchaser"), with its principal office c/o Pinnacle Bridge Capital Management, LLC, 280 Park Avenue, 22nd Floor, New York, NY 10017; and
(3) PINNACLE BRIDGE CAPITAL PARTNERS, LP, a Delaware limited partnership ("PBCP"), solely for purposes of Article IX and certain other provisions specified herein, with its principal office c/o Pinnacle Bridge Capital Management, LLC, 280 Park Avenue, 22nd Floor, New York, NY 10017.
The Issuer, the Purchaser, and PBCP are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Issuer desires to issue and sell, and the Purchaser desires to purchase, Thirty-Five Million Dollars ($35,000,000) aggregate principal amount of the Issuer's 13.50% Senior Subordinated Notes due 2028 (the "Notes"), on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the proceeds of the Notes will be used by the Issuer to fund (i) approximately Twenty-Two Million Dollars ($22,000,000) in capital expenditures for the upgrade of the Issuer's digital wagering platform, referred to internally as "Project Catalyst," which is operated through the Issuer's wholly owned subsidiary, Redstone Digital Wagering, LLC, and (ii) approximately Thirteen Million Dollars ($13,000,000) for the expansion of the Issuer's tribal gaming management contracts in the States of Arizona and New Mexico through the Issuer's wholly owned subsidiary, Redstone Tribal Management, Inc.;
WHEREAS, in connection with the purchase and sale of the Notes, the Issuer will issue to the Purchaser warrants (the "Warrants") to purchase 1,650,000 shares of the Issuer's common stock, par value $0.001 per share, pursuant to a separate Warrant Agreement of even date herewith;
WHEREAS, the Issuer's common stock is listed on the Nasdaq Stock Market LLC ("Nasdaq") under the ticker symbol "RDGM";
WHEREAS, the Issuer is party to that certain Second Amended and Restated Credit Agreement, dated as of March 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "Senior Credit Agreement"), among the Issuer, Cornerstone National Bank, N.A., a national banking association, as Administrative Agent (in such capacity, the "Senior Agent" or "Cornerstone"), and the lenders party thereto, which provides for a $200,000,000 senior secured revolving credit facility, and the obligations of the Issuer under the Notes will be subordinated to the Senior Obligations (as defined herein) in accordance with the terms of this Agreement and the Intercreditor Agreement; and
WHEREAS, PBCP is entering into this Agreement solely for purposes of acknowledging and agreeing to the subordination provisions set forth in Article IX hereof and certain other provisions expressly applicable to PBCP;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition, "Control" (including the correlative terms "Controlled by" and "under common Control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Anti-Dilution Adjustment" has the meaning set forth in Section 4(d) of the Warrant Agreement.
"Applicable Law" means all federal, state, and local laws, statutes, rules, regulations, orders, judgments, decrees, directives, guidelines, policies, and interpretations of any Governmental Authority applicable to the Issuer, any Subsidiary, or their respective businesses, assets, or properties, including the Gaming Laws of the States of Nevada, Arizona, and New Mexico, and all rules, regulations, and directives of the Gaming Authorities.
"Ashford Peak" means Ashford Peak Advisory Group, LLC, a Delaware limited liability company, in its capacity as placement agent in connection with the transactions contemplated by this Agreement.
"Board" or "Board of Directors" means the board of directors of the Issuer.
"Business Day" means any day other than a Saturday, Sunday, or any other day on which commercial banks in Las Vegas, Nevada or New York, New York are authorized or required by law or regulation to close.
"Capital Expenditure" means, for any period, the aggregate of all expenditures made by the Issuer and the Subsidiaries during such period that, in accordance with GAAP, are required to be capitalized on the balance sheet of the Issuer and the Subsidiaries, including expenditures related to Project Catalyst, the tribal gaming expansion conducted through RTM, and the acquisition of fixed or capital assets, but excluding expenditures funded with insurance proceeds or condemnation awards.
"Cash Interest Rate" means a rate equal to 10.50% per annum.
"CEO" means Gerald "Gerry" Navarro, in his capacity as the Chief Executive Officer of the Issuer, or any successor thereto.
"CFO" means Priya Sandoval, in her capacity as the Chief Financial Officer of the Issuer, or any successor thereto.
"Change of Control" means the occurrence of any of the following events: (a) any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) acquires, directly or indirectly, beneficial ownership of more than 50% of the outstanding voting stock of the Issuer; (b) the Issuer consummates a sale, transfer, or other disposition of all or substantially all of its consolidated assets to any Person or group of Persons; or (c) the Issuer consummates a merger, consolidation, or similar business combination with or into another Person in which the holders of the Issuer's voting stock immediately prior to such transaction hold, directly or indirectly, less than 50% of the voting stock of the surviving or resulting entity immediately after such transaction.
"Closing" means the closing of the purchase and sale of the Notes and the related transactions contemplated by this Agreement.
"Closing Date" means the date on which the Closing occurs, which shall be a date mutually agreed upon by the Issuer and the Purchaser, anticipated to be on or about [●], 2023.
"Collateral" has the meaning set forth in the Pledge and Security Agreement.
"Collateral Agent" means Dralvecen Title & Escrow Co., a Nevada corporation, in its capacity as collateral agent under the Pledge and Security Agreement, or any successor collateral agent appointed in accordance with the terms thereof.
"Company" means Redstone Gaming Corp., a Nevada corporation.
"Compliance Certificate" means a certificate substantially in the form of Exhibit B hereto.
"Cornerstone" means Cornerstone National Bank, N.A., a national banking association, in its capacity as Administrative Agent under the Senior Credit Agreement.
"Default" means any event, condition, or circumstance which, with the giving of notice, the lapse of time, or both, would constitute an Event of Default.
"EBITDA" means, for any period, the net income (or net loss) of the Issuer and the Subsidiaries on a consolidated basis for such period, determined in accordance with GAAP, plus, to the extent deducted in calculating such net income (or net loss): (a) interest expense, (b) income tax expense, (c) depreciation expense, and (d) amortization expense, in each case for such period; provided that the following items shall be excluded from the calculation of EBITDA: (i) extraordinary or non-recurring gains and losses, (ii) unrealized gains and losses on hedging transactions, (iii) gains or losses on the sale or disposition of assets outside the ordinary course of business, (iv) non-cash stock-based compensation expense, and (v) transaction costs and expenses incurred in connection with the transactions contemplated by this Agreement (up to a maximum of $1,200,000), in each case as reasonably agreed by the Issuer and the Purchaser.
"EIN" means, with respect to any Person, such Person's Employer Identification Number as assigned by the Internal Revenue Service.
"Equity Interests" means the shares of common stock, par value $0.001 per share, of the Issuer listed on Nasdaq under the ticker symbol "RDGM," and any other equity securities of the Issuer hereafter authorized or issued.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.
"ERISA Event" means (a) the occurrence of any "reportable event" (within the meaning of Section 4043 of ERISA) with respect to any Plan, (b) the withdrawal of the Issuer or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, (c) the imposition of any lien under Section 430(k) of the Code or Section 303(k) of ERISA, (d) the filing of a notice of intent to terminate any Plan under Section 4041(c) of ERISA, or (e) the institution of proceedings to terminate any Plan by the PBGC.
"Event of Default" has the meaning set forth in Section 8.01 of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.
"FCPA" means the Foreign Corrupt Practices Act of 1977, as amended from time to time.
"Fixed Charge Coverage Ratio" or "FCCR" means, for any period, the ratio of (a) EBITDA for such period minus Capital Expenditures during such period (other than Capital Expenditures funded with proceeds of the Notes or other long-term Indebtedness) minus cash taxes paid during such period, to (b) Fixed Charges for such period. "Fixed Charges" means, for any period, the sum of (i) cash interest expense of the Issuer and the Subsidiaries on a consolidated basis for such period, (ii) scheduled principal payments on Indebtedness of the Issuer and the Subsidiaries during such period, and (iii) payments under capital lease obligations of the Issuer and the Subsidiaries during such period.
"Fully Diluted Basis" means the total number of shares of common stock of the Issuer outstanding at any time, calculated assuming the exercise, conversion, or exchange of all outstanding options, warrants (including the Warrants), convertible securities, and other rights to acquire Equity Interests, whether or not such options, warrants, convertible securities, or other rights are then vested or exercisable.
"GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a consistent basis.
"Gaming Authorities" means, collectively, the Nevada Gaming Control Board, the Nevada Gaming Commission, the Arizona Department of Gaming, the New Mexico Gaming Control Board, and any other governmental authority exercising jurisdiction over gaming activities conducted by the Issuer or any Subsidiary.
"Gaming Laws" means all applicable laws, statutes, rules, regulations, orders, and ordinances governing the conduct of gaming, gambling, or wagering activities in any jurisdiction in which the Issuer or any Subsidiary conducts such activities, including the Nevada Gaming Control Act and the regulations promulgated thereunder, and the gaming laws and regulations of the States of Arizona and New Mexico.
"Gaming Licenses" means all licenses, permits, approvals, authorizations, registrations, findings of suitability, and other governmental authorizations issued by any Gaming Authority to the Issuer or any Subsidiary necessary for or related to the conduct of the Issuer's or any Subsidiary's gaming operations, including Nevada Gaming License No. NGC-2019-00847 and all licenses, permits, and approvals issued by the Arizona Department of Gaming and the New Mexico Gaming Control Board.
"Governmental Authority" means any nation, government, state, political subdivision, municipality, or other governmental entity, or any agency, authority, instrumentality, regulatory body, court, central bank, arbitrator, or other Person exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of government.
"Indebtedness" means, with respect to any Person, without duplication: (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments; (c) all obligations of such Person under conditional sale or other title retention agreements; (d) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables and accrued expenses incurred in the ordinary course of business); (e) all obligations of such Person as lessee under capital leases; (f) all obligations of such Person to purchase, redeem, retire, defease, or otherwise make any payment in respect of any Equity Interests of such Person or any other Person; (g) all guarantees by such Person of Indebtedness of any other Person; (h) all obligations of such Person in respect of letters of credit, banker's acceptances, and similar instruments; (i) all obligations of such Person in respect of hedging transactions; and (j) all Indebtedness of another Person secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person.
"Intercreditor Agreement" means that certain Intercreditor and Subordination Agreement, dated as of the Closing Date, among Cornerstone National Bank, N.A., as Senior Agent, Pinnacle Bridge Capital Partners, LP, as Subordinated Creditor Representative, and the Issuer, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Interest Payment Date" means each March 31, June 30, September 30, and December 31 of each year, commencing with the first such date occurring after the Closing Date; provided that if any Interest Payment Date falls on a day that is not a Business Day, such Interest Payment Date shall be the next succeeding Business Day.
"Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.
"Issuer" means Redstone Gaming Corp., a Nevada corporation.
"Lender's Counsel" means Wainwright Hess & Caldwell LLP, 1345 Avenue of the Americas, 30th Floor, New York, NY 10105.
"Lien" means any mortgage, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, lien (statutory or other), security interest, or other security arrangement, and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction.
"Liquidity" means, at any date of determination, the sum of (a) unrestricted cash and Cash Equivalents of the Issuer and the Subsidiaries on a consolidated basis, plus (b) the aggregate amount of available (undrawn and unborrowed) commitments under the Senior Credit Facility at such date.
"Material Adverse Effect" means a material adverse effect on (a) the business, operations, properties, assets, condition (financial or otherwise), or prospects of the Issuer and the Subsidiaries taken as a whole, (b) the ability of the Issuer to perform any of its material obligations under any Transaction Document, or (c) the validity or enforceability of any Transaction Document or the rights and remedies of the Purchaser or PBCP thereunder.
"Maturity Date" means the fifth (5th) anniversary of the Closing Date (anticipated to be on or about [●], 2028); provided that if such date is not a Business Day, the Maturity Date shall be the next succeeding Business Day.
"Mezzanine Obligations" means all obligations of the Issuer and the Subsidiaries under the Notes, this Agreement, and the other Transaction Documents, including principal, interest (including PIK Interest), premium (if any), fees, expenses, indemnification obligations, and all other amounts payable thereunder.
"Net Leverage Ratio" or "Total Net Leverage Ratio" means, as of any date of determination, the ratio of (a) the aggregate outstanding principal amount of all funded Indebtedness of the Issuer and the Subsidiaries on a consolidated basis as of such date minus unrestricted cash and Cash Equivalents of the Issuer and the Subsidiaries on a consolidated basis as of such date (not to exceed $25,000,000 for purposes of this netting calculation), to (b) EBITDA for the most recently completed four consecutive fiscal quarters for which financial statements have been delivered (or are required to have been delivered) pursuant to Section 7.01(a).
"Non-Call Period" has the meaning set forth in Section 3.06(a).
"Notes" means the 13.50% Senior Subordinated Notes due 2028 issued by the Issuer pursuant to this Agreement in the aggregate original principal amount of $35,000,000, as such principal amount may be increased by the capitalization of PIK Interest and decreased by payments of principal, substantially in the form of Exhibit A hereto.
"OFAC" means the Office of Foreign Assets Control of the United States Department of the Treasury.
"Officer's Certificate" means a certificate substantially in the form of Exhibit C hereto.
"Payment blockage Period" has the meaning set forth in Section 9.02(a).
"PBCP" means Pinnacle Bridge Capital Partners, LP, a Delaware limited partnership.
"Permitted Indebtedness" means Indebtedness of the type and in the amounts set forth on Schedule 7.02(a) hereto, as may be updated from time to time with the prior written consent of the Purchaser.
"Permitted Liens" means Liens of the type set forth on Schedule 7.02(b) hereto.
"Permitted Restricted Payments" means (a) dividends paid solely in Equity Interests of the Issuer, (b) repurchases of Equity Interests from employees, officers, or directors of the Issuer or any Subsidiary upon termination of employment or service, in an aggregate amount not to exceed $1,000,000 in any fiscal year, and (c) other Restricted Payments specifically approved in writing by the Purchaser.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, association, Governmental Authority, or other entity.
"PIK Interest" means interest accruing on the Notes at the PIK Interest Rate and capitalized by addition to the outstanding Principal Amount of the Notes in accordance with Section 3.02.
"PIK Interest Rate" means a rate equal to 3.00% per annum.
"Placement Agent" means Ashford Peak Advisory Group, LLC, a Delaware limited liability company.
"Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) maintained or contributed to by the Issuer or any ERISA Affiliate, or to which the Issuer or any ERISA Affiliate has any obligation or liability, contingent or otherwise.
"Pledge and Security Agreement" means that certain Pledge and Security Agreement, dated as of the Closing Date, between the Issuer and PBCP, as Secured Party (on behalf of the Purchaser), providing for a second-priority pledge of (a) 100% of the Issuer's equity interests in RDW and RTM, and (b) an assignment of the RedBet IP, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms and the Intercreditor Agreement.
"Principal Amount" means $35,000,000, as such amount may be increased from time to time by the capitalization of PIK Interest in accordance with Section 3.02 and decreased from time to time by payments of principal in accordance with this Agreement.
"Project Catalyst" means the Issuer's planned upgrade and modernization of its digital wagering platform operated through Redstone Digital Wagering, LLC, including the development and deployment of enhanced mobile and desktop wagering applications, back-end infrastructure improvements, and related technology initiatives.
"Purchase Price" means $35,000,000, representing 100% of the par value of the Notes.
"Purchaser" means Pinnacle Bridge Mezzanine Opportunities Fund IV, LP, a Delaware limited partnership.
"RDW" means Redstone Digital Wagering, LLC, a Nevada limited liability company and wholly owned Subsidiary of the Issuer (EIN: 88-0587214), with its principal office at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103.
"RedBet IP" means the proprietary wagering software and related intellectual property developed by the Issuer or its Subsidiaries, including all copyrights, trade secrets, know-how, source code, object code, algorithms, databases, customer interfaces, and documentation related thereto, together with the trademark application for the "RedBet" mark filed with the United States Patent and Trademark Office in August 2022 (Application No. [●]) and all goodwill associated therewith.
"Restricted Payment" means any (a) dividend or other distribution, direct or indirect, on account of any Equity Interests of the Issuer or any Subsidiary, (b) redemption, retirement, purchase, or other acquisition for value of any Equity Interests of the Issuer or any Subsidiary, or (c) payment made to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire Equity Interests of the Issuer.
"RTM" means Redstone Tribal Management, Inc., a Nevada corporation and wholly owned Subsidiary of the Issuer (EIN: 88-0601889), with its principal office at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103.
"SEC" means the Securities and Exchange Commission of the United States, or any successor thereto.
"Secretary's Certificate" means a certificate substantially in the form of Exhibit E hereto.
"Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.
"Senior Agent" means Cornerstone National Bank, N.A., in its capacity as Administrative Agent under the Senior Credit Agreement, or any successor administrative agent appointed in accordance with the terms of the Senior Credit Agreement.
"Senior Credit Agreement" means the Second Amended and Restated Credit Agreement, dated as of March 15, 2021, among the Issuer, Cornerstone National Bank, N.A., as Administrative Agent, and the lenders party thereto, providing for a $200,000,000 senior secured revolving credit facility (as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms and in compliance with this Agreement and the Intercreditor Agreement).
"Senior Credit Facility" means the revolving credit facility established under the Senior Credit Agreement.
"Senior Obligations" means all obligations (including principal, interest, fees, expenses, indemnities, and other amounts) of the Issuer and the Subsidiaries under or in respect of the Senior Credit Agreement and the related loan documents, whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, and whether for principal, interest, premium, fees, costs, expenses, indemnification, or otherwise.
"SOFR" means the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator).
"Solvent" means, with respect to any Person as of any date of determination, that as of such date (a) the fair value of the property of such Person is greater than the total amount of liabilities (including contingent liabilities) of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital.
"Subordinated Indebtedness" means all Indebtedness of the Issuer and the Subsidiaries that is subordinated in right of payment to the Senior Obligations, including the Mezzanine Obligations.
"Subsidiary" or "Subsidiaries" means, with respect to the Issuer, (a) Redstone Digital Wagering, LLC, (b) Redstone Tribal Management, Inc., and (c) any other entity in which the Issuer, directly or indirectly, owns more than 50% of the outstanding voting power of such entity's Equity Interests or has the power to elect a majority of the board of directors or other governing body of such entity.
"Total Net Leverage Ratio" has the meaning set forth in the definition of "Net Leverage Ratio" above.
"Transaction Documents" means, collectively, this Agreement, the Notes, the Warrant Agreement, the Warrants, the Pledge and Security Agreement, the Intercreditor Agreement, and all other agreements, documents, instruments, and certificates delivered by or on behalf of the Issuer or any Subsidiary in connection with the transactions contemplated hereby or thereby, as any of the foregoing may be amended, restated, supplemented, or otherwise modified from time to time.
"Warrant Agreement" means the Warrant Agreement, dated as of the Closing Date, between the Issuer and the Purchaser, providing for the issuance of Warrants to purchase 1,650,000 shares of common stock at an exercise price of $9.24 per share, substantially in the form agreed upon by the Parties, as may be amended, restated, supplemented, or otherwise modified from time to time.
"Warrants" means warrants to purchase 1,650,000 shares of common stock of the Issuer, representing 3.00% of the Issuer's fully diluted equity (based on 55,000,000 shares outstanding on a Fully Diluted Basis as of the date hereof), at an exercise price of $9.24 per share (representing 110% of the 30-day volume-weighted average price of $8.40 per share calculated as of the commitment date), issued to the Purchaser pursuant to the Warrant Agreement.
Section 1.02 — Rules of Interpretation
Unless the context otherwise requires, in this Agreement: (a) headings and captions are for convenience of reference only and shall not affect the interpretation of this Agreement; (b) the singular includes the plural and the plural includes the singular; (c) the words "hereof," "herein," "hereunder," and words of similar import refer to this Agreement as a whole and not to any particular provision; (d) the word "including" means "including without limitation" and shall not be construed to limit any general statement to the specific or similar items or matters immediately following it; (e) references to any statute, law, rule, or regulation include all amendments, modifications, replacements, and successor statutes, laws, rules, and regulations thereto; (f) references to any agreement, document, or instrument include all amendments, restatements, supplements, and other modifications thereto and all replacements thereof; (g) references to "$" or "dollars" mean the lawful currency of the United States of America; (h) references to "days" mean calendar days unless Business Days are specified; (i) references to any Person include such Person's successors and permitted assigns; (j) accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with GAAP; and (k) all time references herein are to Eastern Time unless otherwise expressly stated.
Section 1.03 — Accounting Terms
All accounting terms used and not specifically defined herein shall be construed in accordance with GAAP as in effect on the date hereof, consistently applied. If any change in GAAP (including the adoption of IFRS) from GAAP as applied in the preparation of the most recent financial statements delivered pursuant to Section 7.01 hereof would affect the computation of any financial ratio or requirement set forth in any Transaction Document, and either the Issuer or the Purchaser shall so request, the Issuer and the Purchaser shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until such amendment is agreed upon, (a) the relevant financial ratio or requirement shall continue to be computed in accordance with GAAP as in effect prior to such change, and (b) the Issuer shall provide to the Purchaser financial statements and compliance certificates setting forth a reconciliation between calculations made before and after giving effect to such change in GAAP (the foregoing, the "Frozen GAAP" provisions).
ARTICLE II — PURCHASE AND SALE OF NOTES
Section 2.01 — Authorization of the Notes
The Issuer has duly authorized the issuance and sale of $35,000,000 aggregate principal amount of its 13.50% Senior Subordinated Notes due 2028. The Notes shall be designated as the "13.50% Senior Subordinated Notes due 2028" and shall be substantially in the form attached hereto as Exhibit A. The Notes shall constitute senior subordinated obligations of the Issuer, ranking senior to all existing and future Indebtedness of the Issuer that is expressly subordinated to the Notes, pari passu in right of payment with all existing and future senior subordinated Indebtedness of the Issuer (if any), and subordinated in right of payment to all existing and future Senior Obligations in accordance with the terms of this Agreement and the Intercreditor Agreement. The Notes shall be unsecured obligations of the Issuer, subject to the limited pledge of Collateral under the Pledge and Security Agreement, which provides for a second-priority pledge of (a) 100% of the Issuer's equity interests in RDW and RTM, and (b) an assignment of the RedBet IP. The Liens securing the Mezzanine Obligations shall in all cases be junior and subordinate to the Liens securing the Senior Obligations, as further set forth in the Intercreditor Agreement.
Section 2.02 — Purchase and Sale
Subject to the terms and conditions of this Agreement, on the Closing Date, the Issuer agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase from the Issuer, $35,000,000 aggregate principal amount of the Notes at a purchase price equal to 100% of par, or $35,000,000 (the "Purchase Price"). Payment of the Purchase Price shall be made by the Purchaser to the Issuer by wire transfer of immediately available funds in United States dollars to an account designated by the Issuer no later than two (2) Business Days prior to the Closing Date.
Section 2.03 — Closing
The Closing shall take place at the offices of Calderwood & Harkness LLP, 300 South Fourth Street, Suite 2800, Las Vegas, NV 89101, or remotely by exchange of documents and signatures via electronic transmission, at 10:00 a.m. (Pacific Time) on the Closing Date. The Closing Date shall be a date mutually agreed upon by the Issuer and the Purchaser, which the Parties anticipate will occur on or about [●], 2023. If the Closing does not occur on or before the ninetieth (90th) day following the date of this Agreement (or such later date as the Parties may mutually agree in writing), either Party may terminate this Agreement by written notice to the other Party, without liability to the other Party (except for any liability for a breach of this Agreement prior to such termination).
Section 2.04 — Use of Proceeds
The Issuer shall apply the net proceeds of the Notes as follows:
(a) approximately Twenty-Two Million Dollars ($22,000,000) for capital expenditures related to Project Catalyst, including the development, upgrade, and deployment of the Issuer's digital wagering platform operated through RDW, encompassing technology infrastructure improvements, software development, systems integration, cybersecurity enhancements, and related costs; and
(b) approximately Thirteen Million Dollars ($13,000,000) for the expansion of the Issuer's tribal gaming management contracts in the States of Arizona and New Mexico through RTM, including costs associated with the negotiation and execution of new management contracts, regulatory compliance, facility upgrades, equipment procurement, and working capital requirements related to such expansion.
A detailed breakdown of the anticipated use of proceeds is set forth in Exhibit D hereto. The Issuer shall not use any portion of the proceeds of the Notes for any purpose not described in this Section 2.04 without the prior written consent of the Purchaser, which consent may be withheld in the Purchaser's sole discretion. The Issuer shall provide to the Purchaser, concurrently with each quarterly Compliance Certificate, a summary report detailing the use of proceeds during the preceding fiscal quarter and the cumulative use of proceeds through the end of such quarter.
Section 2.05 — Issuance of Warrants
Simultaneously with the Closing, and as additional consideration for the Purchaser's purchase of the Notes, the Issuer shall issue to the Purchaser the Warrants pursuant to the Warrant Agreement. The Warrants shall entitle the Purchaser to purchase 1,650,000 shares of common stock of the Issuer, representing 3.00% of the Issuer's outstanding Equity Interests on a Fully Diluted Basis (based on 55,000,000 shares outstanding as of the date of this Agreement), at an exercise price of $9.24 per share, which represents 110% of the 30-day volume-weighted average price of $8.40 per share calculated as of the commitment date. The Warrants shall be exercisable at any time during the period commencing on the first anniversary of the Closing Date and ending on the seventh anniversary of the Closing Date, subject to the terms and conditions set forth in the Warrant Agreement, including customary Anti-Dilution Adjustments. The Warrants shall be issued in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof and/or Regulation D promulgated thereunder. The Issuer and the Purchaser acknowledge that the issuance of the Warrants is an integral part of the transactions contemplated by this Agreement and that the Purchaser would not have agreed to purchase the Notes without the concurrent issuance of the Warrants.
ARTICLE III — INTEREST AND PAYMENT TERMS
Section 3.01 — Cash Interest
The Notes shall bear cash interest on the outstanding Principal Amount at a rate equal to the Cash Interest Rate (10.50% per annum). Cash interest shall be payable quarterly in arrears on each Interest Payment Date, commencing on the first Interest Payment Date occurring after the Closing Date. Based on the original Principal Amount of $35,000,000, the annual cash interest payable shall be $3,675,000 ($918,750 per quarter). Cash interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Cash interest shall accrue from and including the Closing Date (or, with respect to any period following the first Interest Payment Date, from and including the immediately preceding Interest Payment Date on which interest was paid) to but excluding the applicable Interest Payment Date or the date of payment in full.
Section 3.02 — PIK Interest
In addition to Cash Interest payable under Section 3.01, the Notes shall accrue PIK Interest on the outstanding Principal Amount at a rate equal to the PIK Interest Rate (3.00% per annum). PIK Interest shall compound quarterly on each Interest Payment Date. On each Interest Payment Date, the amount of PIK Interest accrued during the applicable quarter shall be automatically added to the outstanding Principal Amount of the Notes, thereby increasing the principal balance of the Notes on which both Cash Interest and PIK Interest accrue during subsequent periods. Based on the original Principal Amount of $35,000,000, the Year 1 annual PIK accrual (assuming no election by the Issuer to pay PIK Interest in cash) would be approximately $1,050,000.
The Issuer may elect, by delivery of an irrevocable written notice to the Purchaser no less than five (5) Business Days prior to any Interest Payment Date (a "Cash Election Notice"), to pay the PIK Interest otherwise accruing on the Notes during the applicable quarter in cash in lieu of capitalizing such amount. Any such cash payment of PIK Interest shall be made concurrently with the payment of Cash Interest on the applicable Interest Payment Date. For the avoidance of doubt, any Cash Election Notice shall apply solely to the PIK Interest accruing during the quarter immediately preceding the applicable Interest Payment Date and shall not constitute a continuing election for future periods.
Section 3.03 — All-in Yield
The all-in yield on the Notes is 13.50% per annum, consisting of the Cash Interest Rate of 10.50% per annum plus the PIK Interest Rate of 3.00% per annum. The Issuer and the Purchaser agree that the foregoing rates are commercially reasonable and reflect the credit risk, subordination, and other terms applicable to the Notes.
Section 3.04 — Default Interest
Upon the occurrence and during the continuance of an Event of Default, the interest rate on the Notes (both the Cash Interest Rate and the PIK Interest Rate) shall automatically increase by two percentage points (2.00%) per annum above the rates otherwise applicable (the "Default Rate"), resulting in an all-in yield of 15.50% per annum (12.50% Cash Interest Rate and 3.00% PIK Interest Rate, provided that the Issuer may, at the election of the Purchaser, be required to pay the entire Default Rate in cash). Default interest shall accrue from the date of the occurrence of such Event of Default until such Event of Default is cured or waived in accordance with this Agreement, and shall be payable on demand by the Purchaser.
Section 3.05 — Maturity
The entire outstanding Principal Amount of the Notes (including all PIK Interest capitalized thereon), together with all accrued and unpaid Cash Interest and PIK Interest thereon, shall be due and payable in full on the Maturity Date (the fifth anniversary of the Closing Date). If the Maturity Date falls on a day that is not a Business Day, payment shall be due on the next succeeding Business Day, and interest shall continue to accrue through and including the date of such payment.
Section 3.06 — Prepayment
(a) Call Protection. The Notes shall not be prepayable, in whole or in part, at any time during the first twenty-four (24) months following the Closing Date (the "Non-Call Period"). During the Non-Call Period, neither the Issuer nor any Affiliate of the Issuer shall prepay, redeem, repurchase, defease, or otherwise retire the Notes, whether voluntarily or involuntarily (other than pursuant to mandatory prepayment upon a Change of Control as set forth in clause (d) below), without the prior written consent of the Purchaser.
(b) Optional Prepayment After Non-Call Period. After the expiration of the Non-Call Period, the Issuer may, at its option, upon not less than thirty (30) nor more than sixty (60) days' prior written notice to the Purchaser in accordance with Section 3.06(f), prepay the Notes, in whole or in part (in minimum amounts of $5,000,000 and integral multiples of $1,000,000 in excess thereof), at the following prepayment prices (expressed as a percentage of the principal amount being prepaid), plus all accrued and unpaid interest (including PIK Interest) on the principal amount being prepaid to but excluding the prepayment date:
(c) Illustrative Prepayment Premium. By way of illustration only, if the Issuer were to prepay the entire outstanding Principal Amount at month 25 following the Closing Date (assuming no prior principal payments and no PIK Interest election), the prepayment premium on the original Principal Amount of $35,000,000 would be calculated as follows: $35,000,000 × 3.00% = $1,050,000. The foregoing illustration is provided for reference purposes only and is subject to adjustment for the actual outstanding Principal Amount at the time of prepayment, including any PIK Interest capitalized thereon.
(d) Mandatory Prepayment — Change of Control. Upon the occurrence of a Change of Control, the Issuer shall, within ten (10) Business Days following such Change of Control, deliver to the Purchaser a written offer (the "Change of Control Offer") to prepay 100% of the outstanding Principal Amount of the Notes at a prepayment price equal to 101% of the Principal Amount, plus all accrued and unpaid interest (including PIK Interest) to but excluding the date of such prepayment. The Purchaser shall have thirty (30) days from receipt of the Change of Control Offer to accept or reject such offer. If the Purchaser accepts the Change of Control Offer, the prepayment shall be consummated on the date specified in the Change of Control Offer (which shall be not less than ten (10) nor more than thirty (30) Business Days following the Purchaser's acceptance). For the avoidance of doubt, the mandatory prepayment obligation set forth in this Section 3.06(d) shall apply notwithstanding the Non-Call Period.
(e) Asset Sale Proceeds. If the Issuer or any Subsidiary consummates a sale, transfer, or other disposition of any assets (other than in the ordinary course of business) that generates net cash proceeds in excess of Five Million Dollars ($5,000,000) in any single transaction or series of related transactions, and such net cash proceeds (or any portion thereof) are not reinvested in the business of the Issuer or the Subsidiaries within three hundred sixty-five (365) days following the receipt thereof, the Issuer shall, within five (5) Business Days following the expiration of such 365-day reinvestment period, apply seventy-five percent (75%) of the unreinvested net cash proceeds to prepay the Notes at par (100% of the principal amount being prepaid) plus all accrued and unpaid interest (including PIK Interest) to but excluding the prepayment date. Any prepayment made pursuant to this Section 3.06(e) shall be applied first to accrued and unpaid interest (including PIK Interest) and then to the outstanding Principal Amount.
(f) Notice of Optional Prepayment. The Issuer shall provide to the Purchaser not less than thirty (30) days' and not more than sixty (60) days' prior irrevocable written notice of any optional prepayment under Section 3.06(b), specifying the prepayment date, the principal amount to be prepaid, and the applicable prepayment price. Once delivered, any such notice of prepayment shall be irrevocable and the Issuer shall be obligated to make the specified prepayment on the date set forth therein.
Section 3.07 — Payments Generally
All payments of principal, interest, premium (if any), fees, expenses, and other amounts payable by the Issuer to the Purchaser under this Agreement and the Notes shall be made in lawful money of the United States of America and in immediately available funds, without set-off, counterclaim, deduction, or withholding of any kind (except as required by Applicable Law), to such account as the Purchaser shall designate by written notice to the Issuer from time to time. If any payment date falls on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and interest shall continue to accrue during such extension period. All payments shall be applied first to fees and expenses, second to accrued and unpaid interest (including Default Interest, if applicable), and third to outstanding Principal Amount, unless otherwise agreed by the Purchaser.
Section 3.08 — Taxes and Withholding
All payments made by the Issuer under this Agreement and the Notes shall be made free and clear of, and without deduction or withholding for, any present or future taxes, duties, levies, imposts, assessments, or other governmental charges of any nature (collectively, "Taxes"), unless the Issuer is required by Applicable Law to deduct or withhold any such Taxes. If the Issuer is so required to deduct or withhold any Taxes from any payment, the Issuer shall (a) make such deduction or withholding, (b) pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law, and (c) pay to the Purchaser such additional amounts (the "Gross-Up Amounts") as shall be necessary to ensure that the net amount received by the Purchaser after such deduction or withholding (including any deduction or withholding on account of any Gross-Up Amounts) equals the full amount that would have been received by the Purchaser had no such deduction or withholding been required. The Issuer shall furnish to the Purchaser, within thirty (30) days after the date of any payment of Taxes, certified copies of tax receipts or other evidence of such payment reasonably satisfactory to the Purchaser.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer hereby represents and warrants to the Purchaser as of the date hereof (except where any representation or warranty is stated to be made as of a specific date, in which case such representation or warranty shall be made only as of such specific date) as follows:
Section 4.01 — Organization and Good Standing
The Issuer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada. The Issuer has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as now being conducted. The Issuer is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the character of its properties or the nature of its business makes such qualification or licensing necessary, including the States of Nevada, Arizona, and New Mexico, except where the failure to be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect. The Issuer's Employer Identification Number (EIN) is 88-0412376. The Issuer's principal office is located at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103.
Section 4.02 — Subsidiaries
(a) RDW is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Nevada (EIN: 88-0587214). The Issuer owns, directly, 100% of the issued and outstanding membership interests of RDW, free and clear of all Liens other than Permitted Liens and the Liens created under the Pledge and Security Agreement. RDW is the entity through which the Issuer operates its digital wagering platform and holds the RedBet IP.
(b) RTM is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada (EIN: 88-0601889). The Issuer owns, directly, 100% of the issued and outstanding capital stock of RTM, free and clear of all Liens other than Permitted Liens and the Liens created under the Pledge and Security Agreement. RTM is the entity through which the Issuer conducts its tribal gaming management operations in the States of Arizona and New Mexico.
(c) Except as disclosed on Schedule 4.02 hereto, the Issuer has no Subsidiaries other than RDW and RTM, and neither the Issuer nor any Subsidiary owns any equity interest in any other Person.
Section 4.03 — Authorization; Enforceability
The Issuer has all requisite corporate power and authority to execute, deliver, and perform its obligations under this Agreement and each other Transaction Document to which it is a party. The execution, delivery, and performance by the Issuer of this Agreement and each other Transaction Document to which it is a party have been duly authorized by all necessary corporate action on the part of the Issuer, including the approval of the Board of Directors by a resolution duly adopted at a meeting (or by unanimous written consent) at which a quorum was present and acting throughout. This Agreement has been duly executed and delivered by the Issuer and constitutes, and each other Transaction Document to which the Issuer is a party, when duly executed and delivered by the Issuer, will constitute, a valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, and other similar laws relating to or affecting creditors' rights generally, and subject to general principles of equity (whether considered in a proceeding in equity or at law).
Section 4.04 — No Conflicts; Required Consents
The execution, delivery, and performance by the Issuer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby (including the issuance and sale of the Notes and the issuance of the Warrants), do not and will not: (a) violate, conflict with, or result in a breach of any provision of, or constitute a default under, the articles of incorporation or bylaws (or equivalent organizational documents) of the Issuer or any Subsidiary; (b) violate, conflict with, or result in a breach of any Applicable Law applicable to the Issuer or any Subsidiary or any of their respective properties or assets; or (c) violate, conflict with, result in a breach of, constitute a default under (with or without the giving of notice or the lapse of time or both), or give rise to any right of termination, cancellation, or acceleration under, or require any consent or approval under, any material agreement, contract, instrument, mortgage, lien, lease, permit, license, or other arrangement to which the Issuer or any Subsidiary is a party or by which any of their respective properties or assets may be bound; except, in the case of clause (c), as set forth below:
(i) The consent of Cornerstone National Bank, N.A., as Administrative Agent under the Senior Credit Agreement, is required pursuant to Section 7.03(b) of the Senior Credit Agreement for the incurrence of subordinated Indebtedness by the Issuer in excess of $10,000,000. The Issuer shall obtain such consent prior to the Closing Date.
(ii) The execution and delivery of the Intercreditor Agreement by Cornerstone National Bank, N.A. is required in connection with the consummation of the transactions contemplated hereby.
No consent, approval, authorization, license, order, registration, filing, or qualification of or with any Gaming Authority is required in connection with the issuance and sale of the Notes, subject to the matters described in Section 4.11 hereof.
Section 4.05 — Capitalization
As of the date hereof, the authorized capital stock of the Issuer consists of [●] shares of common stock, par value $0.001 per share, of which 55,000,000 shares are issued and outstanding. The common stock of the Issuer is listed and traded on Nasdaq under the ticker symbol "RDGM." All outstanding shares of common stock have been duly authorized, validly issued, and are fully paid and nonassessable. Except as set forth on Schedule 4.05 hereto, there are no outstanding options, warrants, rights, subscriptions, claims, convertible or exchangeable securities, or other agreements or commitments (contingent or otherwise) of any character relating to the issued or unissued Equity Interests of the Issuer or any Subsidiary, or obligating the Issuer or any Subsidiary to issue, transfer, sell, or otherwise dispose of any Equity Interests. Except as contemplated by the Transaction Documents (including the issuance of the Warrants), the Issuer has not agreed to register under the Securities Act any of its presently outstanding Equity Interests or any Equity Interests issuable upon exercise or conversion of presently outstanding options, warrants, or other rights.
Section 4.06 — Financial Statements
The Issuer has heretofore delivered to the Purchaser complete and correct copies of (a) the audited consolidated financial statements (including the consolidated balance sheet, consolidated statements of operations, consolidated statements of stockholders' equity, and consolidated statements of cash flows, together with the related notes thereto) of the Issuer and the Subsidiaries for the fiscal year ended June 30, 2022, audited by Harmon & Grayling CPAs, LLP, and accompanied by an unqualified audit opinion (the "Annual Financial Statements"), and (b) the unaudited condensed consolidated financial statements of the Issuer and the Subsidiaries for the fiscal quarter ended September 30, 2022, certified by the CFO (the "Interim Financial Statements" and, together with the Annual Financial Statements, the "Financial Statements").
The Financial Statements (i) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby (except, in the case of the Interim Financial Statements, for the absence of footnotes and normal year-end adjustments), and (ii) present fairly in all material respects the consolidated financial condition and results of operations of the Issuer and the Subsidiaries as of the dates and for the periods indicated therein.
For reference purposes, the following key financial metrics of the Issuer and the Subsidiaries are derived from the Financial Statements: (A) last twelve months ("LTM") revenue of $387,600,000 as of June 30, 2022, and (B) LTM EBITDA of $58,100,000 as of June 30, 2022. The foregoing financial metrics are provided for informational purposes and are not intended to modify or limit the representations contained in this Section 4.06.
Since September 30, 2022, no event, circumstance, development, or condition has occurred that has had, or would reasonably be expected to have, a Material Adverse Effect.
Section 4.07 — No Material Adverse Effect
Since September 30, 2022, there has been no event, circumstance, development, change, effect, or condition that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, since September 30, 2022, the Issuer and the Subsidiaries have conducted their respective businesses in the ordinary course consistent with past practice and there has been no material change in the Issuer's accounting policies or financial reporting practices.
Section 4.08 — Litigation
Except as disclosed on Schedule 4.08 hereto, there is no action, suit, proceeding, claim, arbitration, mediation, or investigation pending or, to the knowledge of the Issuer, threatened in writing against the Issuer or any Subsidiary, or against any officer, director, or employee of the Issuer or any Subsidiary in their capacity as such, before any court, arbitrator, or Governmental Authority, that (a) could reasonably be expected to have a Material Adverse Effect, or (b) seeks to enjoin, restrain, or prohibit the consummation of the transactions contemplated by this Agreement or any other Transaction Document. There are no outstanding judgments, orders, decrees, injunctions, or stipulations against the Issuer or any Subsidiary that would reasonably be expected to have a Material Adverse Effect.
Section 4.09 — Compliance with Laws
The Issuer and each Subsidiary are, and have at all times during the past three (3) years been, in compliance in all material respects with all Applicable Laws, including Gaming Laws, securities laws (including the Securities Act and the Exchange Act), environmental laws, employment and labor laws, anti-corruption laws, anti-money laundering laws, and data privacy and cybersecurity laws. Neither the Issuer nor any Subsidiary has received any written notice from any Governmental Authority alleging any material noncompliance with any Applicable Law that has not been resolved to the satisfaction of such Governmental Authority.
Section 4.10 — Tax Matters
The Issuer and each Subsidiary have timely filed (or caused to be filed) all federal, state, local, and foreign tax returns and reports required to be filed by them, all such returns and reports are true, correct, and complete in all material respects, and the Issuer and each Subsidiary have timely paid (or caused to be paid) all taxes shown to be due on such returns and all other taxes, assessments, fees, and governmental charges due and payable by them. There are no audits, examinations, investigations, or other proceedings pending or, to the knowledge of the Issuer, threatened with respect to any taxes of the Issuer or any Subsidiary. There are no outstanding agreements, waivers, or arrangements extending the statutory period of limitation applicable to any tax return of the Issuer or any Subsidiary. Neither the Issuer nor any Subsidiary has any material liability for unpaid taxes that has not been accrued or reserved against in the Financial Statements.
Section 4.11 — Gaming Matters
(a) The Issuer and each applicable Subsidiary hold all Gaming Licenses necessary for the conduct of their respective gaming operations as currently conducted, including Nevada Gaming License No. NGC-2019-00847 issued by the Nevada Gaming Control Board and the Nevada Gaming Commission, and all licenses, permits, and approvals issued by the Arizona Department of Gaming and the New Mexico Gaming Control Board. All such Gaming Licenses are in full force and effect, and no proceedings are pending or, to the knowledge of the Issuer, threatened, seeking the revocation, suspension, non-renewal, limitation, or adverse modification of any Gaming License.
(b) The Issuer and the Subsidiaries are, and have at all times during the past three (3) years been, in compliance in all material respects with all Gaming Laws and the terms and conditions of all Gaming Licenses.
(c) The Issuer has analyzed, with the assistance of qualified gaming regulatory counsel, the applicability of Gaming Authority suitability requirements to the Purchaser, PBCP, and their respective general partners, members, officers, directors, and principals (including Victor Hargrove and Danielle Okonkwo) in connection with the transactions contemplated by this Agreement. Based on such analysis and the advice of counsel, the Issuer believes that the Warrant coverage of 3.00% of the Issuer's fully diluted equity falls below the 5% beneficial ownership threshold that would trigger a finding-of-suitability requirement for the Purchaser, PBCP, or their respective principals under the Nevada Gaming Control Act and the regulations of the Nevada Gaming Control Board. The Issuer further believes, based on the advice of counsel, that the purchase

MEZZANINE NOTE PURCHASE AGREEMENT

MEZZANINE NOTE PURCHASE AGREEMENT

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