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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

WARRANT AGREEMENT

DRAFT — For Discussion Purposes Only — Subject to Review and Comment

Dated: January 27, 2023

by and between

REDSTONE GAMING CORP.

a Nevada corporation

and

PINNACLE BRIDGE MEZZANINE OPPORTUNITIES FUND IV, LP

a Delaware limited partnership

Prepared by:

Calderwood & Harkness LLP 300 South Fourth Street, Suite 2800 Las Vegas, NV 89101

C&H Matter No. 1033-00001

UNEXECUTED DRAFT

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WARRANT AGREEMENT

This Warrant Agreement (this "Agreement") is entered into as of [●], 2023 (the "Effective Date"), by and between Redstone Gaming Corp., a corporation organized and existing under the laws of the State of Nevada (the "Company"), and Pinnacle Bridge Mezzanine Opportunities Fund IV, LP, a limited partnership organized and existing under the laws of the State of Delaware (the "Holder").

RECITALS

WHEREAS, the Company and Pinnacle Bridge Capital Partners, LP ("Pinnacle Bridge"), an Affiliate of the Holder, have entered into that certain Mezzanine Note Purchase Agreement, dated as of [●], 2023 (the "Note Purchase Agreement"), pursuant to which the Company will issue and sell to Pinnacle Bridge $35,000,000 aggregate principal amount of 13.50% Senior Subordinated Notes due 2028 (the "Notes");

WHEREAS, as a condition to, and in connection with, the transactions contemplated by the Note Purchase Agreement, the Company has agreed to issue to the Holder warrants to purchase shares of the Company's common stock, par value $0.001 per share ("Common Stock"), on the terms and conditions set forth herein;

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

WHEREAS, the Company has approximately 55,000,000 shares of Common Stock issued and outstanding as of the date hereof; and

WHEREAS, the Company desires to issue the Warrants (as defined below) in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506(b) of Regulation D promulgated thereunder.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I — DEFINITIONS

Section 1.1 — 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 controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the 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. Without limiting the generality of the foregoing, a Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors (or comparable governing body) of such other Person.

"Board" means the Board of Directors of the Company.

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

"Cashless Exercise" has the meaning set forth in Section 3.3.

"Common Stock" means the common stock, par value $0.001 per share, of Redstone Gaming Corp., and any securities into which such common stock may hereafter be reclassified or changed.

"Company" means Redstone Gaming Corp., a corporation organized under the laws of the State of Nevada, with its principal executive offices located at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103, and its successors and assigns.

"Effective Date" means the date of execution and delivery of this Agreement by each of the parties hereto, which date shall be the "Closing Date" as defined in the Note Purchase Agreement.

"Excluded Issuances" has the meaning set forth in Section 5.4.

"Exercise Date" means the date on which a properly completed Notice of Exercise is delivered to the Company in accordance with Section 3.2 or Section 3.3, as applicable.

"Exercise Period" means the period commencing on the Effective Date and ending on the Expiration Date.

"Exercise Price" means $9.24 per Warrant Share, as such price may be adjusted from time to time in accordance with the provisions of Article V. The initial Exercise Price has been calculated as one hundred ten percent (110%) of the thirty (30)-day volume-weighted average price ("VWAP") of the Common Stock on Nasdaq as of the date immediately preceding the date hereof, which thirty (30)-day VWAP equals $8.40 per share.

"Expiration Date" means the seventh (7th) anniversary of the Effective Date; provided, however, that if such date is not a Business Day, the Expiration Date shall be the next succeeding Business Day. In no event shall the Warrants be exercisable after the close of business on the Expiration Date.

"Fair Market Value" means, as of any date of determination, (a) if the Common Stock is listed on Nasdaq or any other national securities exchange, the closing price of a share of Common Stock as reported on Nasdaq (or such other exchange) on the trading day immediately preceding the applicable date, or (b) if the Common Stock is not listed on any national securities exchange, the fair market value of a share of Common Stock as determined in good faith by the Board, which determination shall be set forth in a written certificate delivered to the Holder and shall take into account such factors as the Board reasonably determines to be relevant, including without limitation recent arm's-length transactions in the Common Stock, comparable company analyses, and discounted cash flow analyses.

"Fully Diluted Basis" means, as of any date of determination, all shares of Common Stock issued and outstanding on such date, plus all shares of Common Stock issuable upon the exercise, conversion, or exchange of all outstanding options, warrants, convertible securities, and other rights to acquire shares of Common Stock (whether or not then vested, exercisable, or convertible), including the Warrants.

"Holder" means Pinnacle Bridge Mezzanine Opportunities Fund IV, LP, a limited partnership organized under the laws of the State of Delaware, and its successors and permitted assigns in accordance with this Agreement.

"Note Purchase Agreement" means the Mezzanine Note Purchase Agreement, dated as of [●], 2023, by and among the Company, Pinnacle Bridge Capital Partners, LP, and the Holder, as the same may be amended, restated, supplemented, or otherwise modified from time to time.

"Notes" means the $35,000,000 aggregate principal amount of 13.50% Senior Subordinated Notes due 2028 issued pursuant to the Note Purchase Agreement.

"Person" means any individual, corporation, limited liability company, partnership, limited partnership, joint venture, trust, unincorporated organization, government, governmental department or agency, or other entity.

"Pinnacle Bridge" means Pinnacle Bridge Capital Partners, LP, a limited partnership organized under the laws of the State of Delaware, and an Affiliate of the Holder.

"Registrable Securities" means the Warrant Shares issued or issuable upon exercise of the Warrants; provided, that any such Warrant Shares shall cease to be Registrable Securities at such time as (a) a registration statement covering the resale of such Warrant Shares has been declared effective by the SEC and such Warrant Shares have been sold or otherwise disposed of pursuant to such effective registration statement, (b) such Warrant Shares have been sold or disposed of pursuant to Rule 144 under the Securities Act (or any successor rule), or (c) such Warrant Shares are eligible for sale without restriction under Rule 144 (including without limitation the volume and manner of sale limitations thereof).

"Registration Rights Agreement" means the registration rights provisions set forth in Article VIII of this Agreement.

"SEC" means the United States Securities and Exchange Commission, or any successor governmental agency performing similar functions.

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

"Senior Credit Facility" means the Second Amended and Restated Credit Agreement, dated as of March 15, 2021, by and among the Company, Cornerstone National Bank, N.A., as Administrative Agent, and the lenders from time to time party thereto, as the same may be amended, restated, supplemented, or otherwise modified from time to time.

"Transfer" has the meaning set forth in Section 4.1.

"Transfer Agent" means the Company's transfer agent for the Common Stock, as designated by the Company from time to time.

"Warrant Certificate" means a physical certificate or book-entry notation evidencing the Warrants, substantially in the form attached hereto as Exhibit A.

"Warrant Register" has the meaning set forth in Section 4.3.

"Warrant Shares" means 1,650,000 shares of Common Stock (representing approximately three percent (3.00%) of the fully diluted equity of the Company based on 55,000,000 shares of Common Stock outstanding as of the date hereof), as such number may be adjusted from time to time pursuant to Article V.

"Warrants" means the warrants to purchase shares of Common Stock issued to the Holder pursuant to this Agreement.

Section 1.2 — Rules of Construction.

Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section," "Exhibit," and "Schedule" refer to the specified Article, Section, Exhibit, or Schedule of or to this Agreement, unless otherwise specified; (e) the word "including" (and words of similar import) means "including, without limitation"; (f) references to any Person include such Person's successors and permitted assigns; (g) references to any agreement, document, or instrument mean such agreement, document, or instrument as amended, supplemented, or otherwise modified from time to time to the extent permitted by the provisions thereof; (h) headings and captions used in this Agreement are inserted for convenience of reference only and shall not be used in interpreting or construing this Agreement; and (i) all references to currency are to United States Dollars unless otherwise specified.

ARTICLE II — ISSUANCE OF WARRANTS

Section 2.1 — Issuance.

Upon execution and delivery of this Agreement on the Effective Date, the Company shall issue to the Holder Warrants to purchase an aggregate of 1,650,000 Warrant Shares at an initial Exercise Price of $9.24 per Warrant Share, subject in each case to adjustment as provided in Article V. The Warrants shall be issued for no additional cash consideration beyond the consideration provided under the Note Purchase Agreement, the issuance of the Warrants being a condition to the Holder's and Pinnacle Bridge's obligations under the Note Purchase Agreement. The number of Warrant Shares is equal to three percent (3.00%) of the fully diluted Common Stock outstanding as of the date hereof (55,000,000 shares × 3.00% = 1,650,000 shares).

Section 2.2 — Warrant Certificate.

The Warrants shall be evidenced by one or more Warrant Certificates substantially in the form attached hereto as Exhibit A, which shall be registered in the name of the Holder and shall indicate (a) the number of Warrant Shares for which the Warrants are exercisable and (b) the Exercise Price. Each Warrant Certificate shall be executed on behalf of the Company by a duly authorized officer of the Company. The Company shall deliver the Warrant Certificate(s) to the Holder (or its designee) on the Effective Date. The form of Warrant Certificate attached as Exhibit A is incorporated herein by reference and made a part of this Agreement.

Section 2.3 — No Fractional Shares.

No fractional Warrant Shares shall be issued upon exercise of the Warrants. If any exercise of the Warrants would otherwise result in the issuance of a fractional share of Common Stock, the Company shall, in lieu of issuing such fractional share, pay to the Holder a cash amount equal to such fraction multiplied by the excess, if any, of the Fair Market Value of one share of Common Stock on the Exercise Date over the Exercise Price. For the avoidance of doubt, any calculation of the number of Warrant Shares issuable upon exercise shall be rounded down to the nearest whole number, and the Company shall make a cash payment in respect of any resulting fractional share as provided in this Section 2.3.

Section 2.4 — Reservation of Shares.

The Company shall at all times during the Exercise Period reserve and keep available, out of the aggregate of its authorized but unissued shares of Common Stock, a number of shares of Common Stock sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock so reserved shall be free from preemptive rights and shall, upon issuance upon the exercise of the Warrants in accordance with this Agreement and upon payment of the Exercise Price (or upon valid Cashless Exercise), be validly issued, fully paid, and non-assessable, and free and clear of all liens, charges, encumbrances, claims, and restrictions (other than restrictions on transfer under applicable securities laws and this Agreement). If at any time the number of authorized but unissued shares of Common Stock is not sufficient to permit the exercise in full of all outstanding Warrants, the Company shall promptly take all corporate action necessary to increase its authorized shares of Common Stock to a number sufficient for such purpose, including by calling a meeting of stockholders and recommending approval of an amendment to the Company's articles of incorporation.

ARTICLE III — EXERCISE OF WARRANTS

Section 3.1 — Exercise Period.

The Warrants shall be exercisable at any time and from time to time during the Exercise Period, which commences on the Effective Date and expires at 5:00 p.m. Pacific Time on the Expiration Date (the seventh (7th) anniversary of the Effective Date). Any Warrants that have not been exercised prior to the expiration of the Exercise Period shall thereupon become void and of no further force or effect, and the Holder shall have no further rights with respect to such unexercised Warrants. The Company shall have no obligation to notify the Holder of the impending expiration of the Warrants; provided, however, that the Company shall, upon written request of the Holder, confirm in writing the current Exercise Price and the number of Warrant Shares issuable upon exercise.

Section 3.2 — Exercise for Cash.

To exercise the Warrants for cash, the Holder shall deliver to the Company, at its principal executive offices at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103, Attention: General Counsel, or at such other office or agency of the Company as it may designate by written notice to the Holder:

(a) a duly completed and executed Notice of Exercise substantially in the form attached hereto as Exhibit B, specifying the number of Warrant Shares the Holder elects to purchase and the election to exercise for cash; and

(b) payment of the aggregate Exercise Price for the number of Warrant Shares specified in such Notice of Exercise, which payment shall be made by wire transfer of immediately available funds in United States Dollars to an account designated by the Company in writing.

The aggregate Exercise Price payable upon a full cash exercise of all 1,650,000 Warrants at the Exercise Price of $9.24 per share shall be $15,246,000. The Holder shall not be required to deliver the original Warrant Certificate in order to effect an exercise; provided, however, that if the Holder has been issued a physical Warrant Certificate, the Holder shall surrender such Warrant Certificate to the Company within five (5) Business Days following such exercise (in the case of a full exercise) or shall present such Warrant Certificate to the Company for notation of the partial exercise (in the case of a partial exercise).

Section 3.3 — Cashless Exercise (Net Exercise).

In lieu of making a cash payment of the Exercise Price pursuant to Section 3.2, the Holder may elect to exercise the Warrants, in whole or in part, on a cashless basis (a "Cashless Exercise") by surrendering such Warrants and receiving, in exchange therefor, a net number of shares of Common Stock determined in accordance with the following formula:

Net Shares = (A × (B − C)) / B

Where:

A = the total number of Warrant Shares as to which the Warrant is being exercised;

B = the Fair Market Value per share of Common Stock on the Exercise Date; and

C = the Exercise Price then in effect (initially $9.24 per Warrant Share).

To effect a Cashless Exercise, the Holder shall deliver to the Company a duly completed and executed Notice of Exercise substantially in the form attached hereto as Exhibit B, indicating the Holder's election to effect a Cashless Exercise and specifying the number of Warrants being exercised. If the Fair Market Value per share of Common Stock on the Exercise Date is less than or equal to the Exercise Price, the Holder shall not be entitled to receive any Warrant Shares upon a Cashless Exercise, and such attempted exercise shall be deemed null and void.

Example Illustration. By way of illustration only, and not as a limitation on the Holder's rights hereunder: If the Fair Market Value of one share of Common Stock on the Exercise Date is $14.75 per share and the Holder exercises all 1,650,000 Warrants on a cashless basis, the Net Shares issuable to the Holder would be calculated as follows:

Net Shares = (1,650,000 × ($14.75 − $9.24)) / $14.75

Net Shares = (1,650,000 × $5.51) / $14.75

Net Shares = $9,091,500 / $14.75

Net Shares = 616,372 shares (rounded down to the nearest whole share)

In the foregoing example, the Holder would receive 616,372 shares of Common Stock upon the Cashless Exercise of all 1,650,000 Warrants, and no cash payment would be required.

Section 3.4 — Partial Exercise.

The Warrants may be exercised in whole or in part at any time and from time to time during the Exercise Period. In the event of a partial exercise, the Company shall, at the time of delivery of the Warrant Shares pursuant to Section 3.5, issue to the Holder a new Warrant Certificate (or shall cause the Warrant Register to be updated, in the case of book-entry Warrants) evidencing the right to purchase the remaining number of Warrant Shares for which the Warrants have not been exercised, and such new Warrant Certificate (or updated book-entry notation) shall in all other respects be identical to the Warrant Certificate surrendered upon such partial exercise.

Section 3.5 — Delivery of Warrant Shares.

The Company shall, within three (3) Business Days after its receipt of a properly completed and executed Notice of Exercise together with the applicable payment (in the case of a cash exercise) or cashless exercise election (in the case of a Cashless Exercise), cause to be issued and delivered to the Holder (or to such other Person as the Holder may direct in the Notice of Exercise) the number of Warrant Shares to which the Holder is entitled, either (a) in certificated form, registered in the name of the Holder (or its designee), or (b) by book-entry notation on the records of the Transfer Agent, as the Holder may elect in the Notice of Exercise. The Company shall instruct the Transfer Agent to effect such issuance promptly upon receipt of the Company's instructions. The Company shall bear all costs and expenses associated with the issuance and delivery of the Warrant Shares, including without limitation all Transfer Agent fees, Nasdaq listing fees, and any applicable stamp, transfer, documentary, or similar taxes or duties (other than any income, capital gains, or similar taxes imposed on the Holder by reason of the exercise of the Warrants or the receipt of the Warrant Shares).

Section 3.6 — Validity of Warrant Shares.

All Warrant Shares issued upon the exercise of the Warrants in accordance with this Agreement shall be validly issued, fully paid, and non-assessable, and free and clear of all liens, pledges, security interests, charges, claims, encumbrances, and restrictions of any kind (other than (a) restrictions on transfer under applicable federal and state securities laws, (b) restrictions set forth in this Agreement, and (c) any legends required to be placed on certificates (or book-entry notations) representing such Warrant Shares pursuant to Section 4.2).

ARTICLE IV — TRANSFER AND ASSIGNMENT

Section 4.1 — Restrictions on Transfer.

The Warrants and the Warrant Shares have not been registered under the Securities Act or under any state securities laws and are being issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The Holder shall not, directly or indirectly, sell, assign, transfer, pledge, hypothecate, encumber, or otherwise dispose of (each, a "Transfer") any Warrant or any Warrant Shares, except as follows:

(a) Transfers to Affiliates. The Holder may Transfer any Warrants or Warrant Shares to any Affiliate of the Holder, provided that such Affiliate transferee agrees in writing to be bound by all of the terms and conditions of this Agreement (including this Article IV) as if such Affiliate were the Holder hereunder.

(b) Transfers Pursuant to Registration. The Holder may Transfer any Warrant Shares pursuant to an effective registration statement under the Securities Act.

(c) Transfers Pursuant to Exemption. The Holder may Transfer any Warrants or Warrant Shares pursuant to an available exemption from registration under the Securities Act, including Rule 144 thereunder; provided, that prior to any such Transfer, the Holder shall deliver to the Company a written opinion of counsel (which counsel shall be reasonably acceptable to the Company) to the effect that such Transfer may be effected without registration under the Securities Act.

Any attempted Transfer in violation of this Section 4.1 shall be null and void, and the Company shall not register or give effect to any such purported Transfer on its books and records or with the Transfer Agent.

Section 4.2 — Legends.

Each Warrant Certificate and any certificate or book-entry notation representing Warrant Shares shall bear the following restrictive legend (or a legend substantially to the following effect):

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THESE SECURITIES ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE WARRANT AGREEMENT, DATED AS OF [●], 2023, BY AND BETWEEN REDSTONE GAMING CORP. AND PINNACLE BRIDGE MEZZANINE OPPORTUNITIES FUND IV, LP, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."

In addition to the foregoing legend, each Warrant Certificate and any certificate or book-entry notation representing Warrant Shares shall bear such additional legends as may be required by Nevada or other applicable state securities laws.

Notwithstanding the foregoing, the Company acknowledges and the Holder agrees that if the Holder or any transferee would, after giving effect to any Transfer or exercise of the Warrants, hold or have the right to acquire more than five percent (5%) of the outstanding Common Stock of the Company, such Transfer or exercise may require a finding of suitability by the Nevada Gaming Control Board, the Arizona Department of Gaming, or the New Mexico Gaming Control Board, as applicable, and additional legends or notifications may be required in connection therewith. The Company and the Holder shall cooperate in good faith with respect to any such gaming regulatory requirements.

Section 4.3 — Warrant Register.

The Company shall maintain, or cause to be maintained, at its principal executive offices (or at such other office as the Company may designate by written notice to the Holder), a register (the "Warrant Register") in which the Company shall record the name and address of the Holder of each Warrant and each permitted transferee. Until a Transfer is duly effected in accordance with this Article IV and reflected in the Warrant Register, the Company may treat the Person in whose name any Warrant is registered as the absolute owner thereof for all purposes. The initial entry in the Warrant Register for the Holder shall be as follows:

Holder: Pinnacle Bridge Mezzanine Opportunities Fund IV, LP c/o Pinnacle Bridge Capital Partners, LP 280 Park Avenue, 22nd Floor New York, NY 10017

Attention: Danielle Okonkwo, Head of Credit Investments

Section 4.4 — Replacement Certificates.

Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant Certificate, and in the case of loss, theft, or destruction, upon delivery of an indemnity agreement or surety bond, in each case in form and substance reasonably satisfactory to the Company and, if required by the Company, with surety in an amount equal to one hundred fifty percent (150%) of the Fair Market Value of the Warrant Shares issuable upon exercise of the Warrants evidenced by such lost, stolen, or destroyed Warrant Certificate, the Company shall issue a new Warrant Certificate of like tenor and date. In the case of mutilation, the Holder shall surrender the mutilated Warrant Certificate to the Company, and the Company shall issue a new Warrant Certificate of like tenor and date. The Company may charge the Holder for any reasonable expenses incurred by the Company in issuing such replacement Warrant Certificate.

ARTICLE V — ANTI-DILUTION ADJUSTMENTS

Section 5.1 — Stock Dividends and Splits.

If, at any time while the Warrants are outstanding, the Company (a) pays a stock dividend on the Common Stock, (b) subdivides or splits the outstanding shares of Common Stock into a larger number of shares, or (c) combines or effects a reverse stock split of the outstanding shares of Common Stock into a smaller number of shares, then the number of Warrant Shares and the Exercise Price shall be proportionally adjusted as follows:

Adjusted Warrant Shares = Prior Warrant Shares × (New Outstanding Shares / Prior Outstanding Shares)

Adjusted Exercise Price = Prior Exercise Price × (Prior Outstanding Shares / New Outstanding Shares)

Such adjustment shall become effective immediately after the record date for such dividend, subdivision, or combination, as applicable. If any event requiring an adjustment under this Section 5.1 shall occur during the period that an earlier event has occurred but the adjustment relating to such earlier event has not yet been effected, then the adjustments required by both events shall be made simultaneously. For the avoidance of doubt, no adjustment under this Section 5.1 shall reduce the Exercise Price below the par value of the Common Stock.

Section 5.2 — Distributions.

If the Company shall distribute to all holders of outstanding Common Stock any assets, properties, rights, or securities (other than shares of Common Stock for which an adjustment is provided under Section 5.1), including without limitation any extraordinary cash dividend, any non-cash dividend, or any distribution of evidences of indebtedness, warrants, options, or rights to subscribe for or purchase any securities (other than regular quarterly cash dividends paid out of earnings or retained earnings of the Company in amounts consistent with past practice), then the Exercise Price in effect immediately prior to such distribution shall be reduced (but not below zero) to an amount equal to:

Adjusted Exercise Price = Prior Exercise Price − Per-Share Distribution Amount

where "Per-Share Distribution Amount" means the fair market value (as determined by the Board in good faith) of the assets, properties, rights, or securities distributed per share of Common Stock. If the Board determines that the fair market value of any such distribution equals or exceeds the Exercise Price in effect immediately prior to such distribution, then in lieu of the foregoing adjustment, the Company shall provide the Holder with notice at least twenty (20) days prior to such distribution and an opportunity to exercise the Warrants prior to the record date for such distribution. Such adjustment shall become effective immediately after the record date for such distribution.

Section 5.3 — Reclassifications, Mergers, and Consolidations.

In the event of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value or from par value to no par value, or a subdivision or combination for which adjustment is provided under Section 5.1), or in the event of any merger, consolidation, statutory share exchange, or sale, lease, or other transfer of all or substantially all of the assets of the Company to another Person (each, a "Fundamental Transaction"), then as a condition of such Fundamental Transaction, lawful and adequate provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of the Warrants the kind and amount of shares of stock, other securities, cash, or other property receivable upon such Fundamental Transaction by a holder of the number of shares of Common Stock for which the Warrants were exercisable immediately prior to such Fundamental Transaction (without regard to any limitations on exercise), all subject to further adjustment as provided herein. In any such case, appropriate provision shall be made with respect to the Holder's rights and interests to the end that the provisions of this Agreement (including without limitation the adjustment provisions of this Article V) shall thereafter be applicable, as nearly as practicable, in relation to any shares of stock, securities, cash, or other property deliverable upon exercise of the Warrants after such Fundamental Transaction. The Company shall not effect any Fundamental Transaction unless, prior to the consummation thereof, the successor entity (if other than the Company) resulting from such Fundamental Transaction shall assume, by written instrument in form and substance reasonably satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities, cash, or other property as, in accordance with the foregoing provisions, the Holder may be entitled to receive upon exercise of the Warrants, and the other obligations of the Company under this Agreement.

Section 5.4 — Issuance of Additional Common Stock Below Exercise Price (Weighted Average Anti-Dilution).

If, at any time while the Warrants are outstanding, the Company issues or sells any additional shares of Common Stock (other than Excluded Issuances, as defined below) at a price per share (or, in the case of convertible securities, at an effective conversion or exercise price per share) that is less than the Exercise Price then in effect (a "Dilutive Issuance"), then the Exercise Price shall be adjusted immediately after such Dilutive Issuance using the following broad-based weighted average formula:

Adjusted EP = EP × (OS + (Consideration / EP)) / (OS + New Shares)

Where:

EP = the Exercise Price in effect immediately prior to such Dilutive Issuance;

OS = the number of shares of Common Stock outstanding immediately prior to such Dilutive Issuance (on a Fully Diluted Basis);

Consideration = the aggregate consideration received or deemed received by the Company in connection with such Dilutive Issuance; and

New Shares = the number of additional shares of Common Stock issued or sold (or, in the case of convertible securities, the maximum number of shares issuable upon exercise or conversion thereof) in such Dilutive Issuance.

Upon any adjustment to the Exercise Price pursuant to this Section 5.4, the number of Warrant Shares shall be simultaneously adjusted so that the aggregate Exercise Price payable upon exercise in full of the Warrants shall remain the same as the aggregate Exercise Price in effect immediately prior to such adjustment (i.e., the product of the Warrant Shares and the Exercise Price shall remain constant).

For purposes of this Section 5.4, "Excluded Issuances" means shares of Common Stock (or options, warrants, or convertible securities exercisable or convertible into shares of Common Stock) issued:

(a) pursuant to any employee stock option plan, employee stock purchase plan, restricted stock plan, or other equity incentive plan or arrangement approved by the Board (including the Company's 2019 Equity Incentive Plan), in an aggregate amount not to exceed ten percent (10%) of the outstanding shares of Common Stock on a Fully Diluted Basis as of the Effective Date;

(b) upon the exercise, conversion, or exchange of any options, warrants, convertible securities, or other rights to acquire shares of Common Stock outstanding as of the Effective Date, including the Warrants;

(c) in connection with any bona fide acquisition, merger, joint venture, strategic alliance, licensing arrangement, or other strategic transaction approved by the Board, provided that such issuance is not primarily for equity financing purposes; and

(d) upon the exercise of the Warrants in accordance with this Agreement.

Section 5.5 — Certificate of Adjustment.

Upon any adjustment to the Exercise Price or the number of Warrant Shares pursuant to this Article V, the Company shall promptly (and in any event within ten (10) Business Days after such adjustment) deliver to the Holder a certificate signed by the Chief Financial Officer or Treasurer of the Company (currently Priya Sandoval, Chief Financial Officer, or Angela Fong, Treasurer) setting forth in reasonable detail (a) the adjusted Exercise Price, (b) the adjusted number of Warrant Shares, (c) the facts requiring such adjustment, and (d) the computation thereof. Such certificate shall be conclusive and binding on the Holder absent manifest error.

Section 5.6 — No Adjustment for Certain Issuances.

Notwithstanding anything to the contrary in this Article V, no adjustment to the Exercise Price or the number of Warrant Shares shall be made in respect of any Excluded Issuance, as defined in Section 5.4 above.

ARTICLE VI — COVENANTS OF THE COMPANY

Section 6.1 — Reservation of Shares.

The Company covenants and agrees that, at all times during the Exercise Period, it shall reserve and keep available, out of its authorized but unissued shares of Common Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the exercise in full of all outstanding Warrants, including any additional Warrant Shares that may become issuable as a result of any adjustment pursuant to Article V. If at any time the Company does not have a sufficient number of authorized but unissued shares of Common Stock to satisfy this obligation, the Company shall promptly take all corporate action necessary to increase the number of authorized shares of Common Stock, including recommending to its stockholders an amendment to the Company's articles of incorporation to increase the authorized number of shares.

Section 6.2 — Listing.

The Company shall use commercially reasonable efforts to maintain the listing of the Common Stock on Nasdaq (or such other national securities exchange on which the Common Stock is then listed) and to comply with all requirements of Nasdaq (or such other exchange) in connection therewith. Prior to, or promptly following, the first exercise of any Warrants, the Company shall apply for listing of the Warrant Shares on Nasdaq (or such other national securities exchange on which the Common Stock is then listed) and shall use commercially reasonable efforts to cause such Warrant Shares to be so listed. The Company shall pay all fees and expenses in connection with the listing of the Warrant Shares.

Section 6.3 — Compliance with Laws.

The Company shall comply in all material respects with all applicable federal and state securities laws, rules, and regulations in connection with the issuance of the Warrants and the Warrant Shares, including without limitation the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. The Company shall also comply in all material respects with all applicable state gaming laws and regulations, including those administered by the Nevada Gaming Control Board, the Arizona Department of Gaming, and the New Mexico Gaming Control Board. The Company shall timely file all reports, forms, and other documents required to be filed by it with the SEC and shall maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended.

Section 6.4 — No Impairment.

The Company shall not, by amendment of its articles of incorporation or bylaws, or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company hereunder, and the Company shall at all times in good faith assist in the carrying out of all the provisions of this Agreement and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall not increase the par value of any shares of Common Stock receivable upon exercise of the Warrants above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon exercise of the Warrants.

Section 6.5 — Notice of Certain Events.

The Company shall provide the Holder with written notice at least twenty (20) days prior to:

(a) any record date established for the payment of any dividend, the making of any distribution, or the granting of any right to subscribe for or purchase any shares of any class of stock or any other securities of the Company;

(b) the consummation of any merger, consolidation, statutory share exchange, or sale of all or substantially all of the Company's assets;

(d) any reclassification, recapitalization, or other change in the Common Stock (other than a change in par value or from par value to no par value).

Each such notice shall describe in reasonable detail the event to which it relates, including the anticipated date of such event and, to the extent known, the terms and conditions thereof. Failure to give such notice or any defect therein shall not affect the validity of any action taken by the Company, but the Holder shall be entitled to seek damages for any actual losses suffered as a result of such failure.

Section 6.6 — Gaming Regulatory Compliance.

The Company shall provide reasonable cooperation to the Holder in connection with any gaming regulatory filings that may be required in connection with the ownership, transfer, or exercise of the Warrants or the Warrant Shares, including without limitation filings with the Nevada Gaming Control Board, the Arizona Department of Gaming, and the New Mexico Gaming Control Board. Such cooperation shall include, without limitation, providing the Holder with copies of relevant gaming license applications and compliance filings, responding in a timely manner to reasonable requests for information from the Holder or applicable gaming regulatory authorities, and taking such other actions as may be reasonably necessary to facilitate the Holder's compliance with applicable gaming regulatory requirements.

The parties acknowledge and agree that the warrant coverage provided hereunder (representing approximately 3.00% of the fully diluted equity of the Company based on 1,650,000 Warrant Shares and 55,000,000 shares of Common Stock outstanding) falls below the five percent (5%) threshold that would trigger a finding-of-suitability requirement under Nevada Revised Statutes Chapter 463 and the regulations of the Nevada Gaming Control Board. However, the parties further acknowledge that if anti-dilution adjustments pursuant to Article V, PIK accrual under the Note Purchase Agreement, or other events effectively increase the Holder's potential equity percentage above five percent (5%), additional gaming regulatory filings may be required, and the Company and the Holder shall cooperate in good faith to make such filings in a timely manner. The Company's primary gaming license reference number is NGC-2019-00847.

ARTICLE VII — REPRESENTATIONS AND WARRANTIES

Section 7.1 — Representations and Warranties of the Company.

The Company hereby represents and warrants to the Holder as follows, as of the Effective Date:

(a) Organization and Good Standing. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, with its principal executive offices located at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103. The Company has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as presently conducted. The Company is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, operations, assets, liabilities, financial condition, or results of operations of the Company.

(b) Authorization. The execution, delivery, and performance of this Agreement and the issuance of the Warrants and the Warrant Shares issuable upon exercise thereof have been duly authorized by all necessary corporate action on the part of the Company, including approval by the Board. No further corporate authorization or approval, and no authorization, approval, or consent of any governmental authority, is required for the valid issuance and delivery of this Agreement, the Warrants, or the Warrant Shares (other than any filings required under applicable federal or state securities laws, Nasdaq listing rules, or gaming regulatory requirements, which the Company shall make on a timely basis).

(c) Valid Issuance. The Warrants, when issued and delivered in accordance with this Agreement, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). The Warrant Shares, when issued upon exercise of the Warrants in accordance with this Agreement and upon payment of the Exercise Price (or upon valid Cashless Exercise), will be validly issued, fully paid, and non-assessable, and will not be subject to any preemptive rights, rights of first refusal, or similar rights of any Person.

(d) No Conflicts. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby do not, and will not, (i) conflict with, violate, or result in a breach or default under the Company's articles of incorporation or bylaws, each as currently in effect, (ii) conflict with, violate, or result in a breach or default under, or give rise to any right of termination, cancellation, acceleration, or loss of any benefit under, any material agreement, contract, indenture, or instrument to which the Company is a party or by which any of its properties or assets are bound, or (iii) violate any law, statute, regulation, rule, judgment, order, or decree applicable to the Company or any of its properties or assets. The Company notes that this representation is subject to the required analysis of (A) the covenants and restrictions set forth in the Senior Credit Facility and (B) the terms of the Intercreditor and Subordination Agreement among the Company, Cornerstone National Bank, N.A., as Administrative Agent under the Senior Credit Facility, and Pinnacle Bridge, as collateral agent under the Note Purchase Agreement, each of which requires further review by counsel for the Company and for the Holder.

(e) Capitalization. As of the date hereof, the Company has approximately 55,000,000 shares of Common Stock issued and outstanding. The Company's authorized capital stock consists of 200,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, of which no shares of preferred stock are issued and outstanding. All outstanding shares of Common Stock have been duly authorized, validly issued, fully paid, and non-assessable. The Company's Common Stock is listed on Nasdaq under the ticker symbol "RDGM."

(f) Gaming Licenses. The Company holds active gaming licenses from the Nevada Gaming Control Board (License No. NGC-2019-00847), the Arizona Department of Gaming, and the New Mexico Gaming Control Board, each of which is in full force and effect and in good standing. The Company is not aware of any pending or threatened proceeding to revoke, suspend, limit, or otherwise modify any of its gaming licenses.

(g) SEC Reporting. The Company is a reporting company under the Securities Exchange Act of 1934, as amended, and is current in all of its SEC reporting obligations. The Company has filed all reports, schedules, forms, statements, and other documents required to be filed by it with the SEC in a timely manner and all such filings, as amended, comply in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended.

Section 7.2 — Representations and Warranties of the Holder.

The Holder hereby represents and warrants to the Company as follows, as of the Effective Date:

(a) Organization. The Holder is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware. The general partner of the Holder is Pinnacle Bridge Capital Management, LLC, a limited liability company duly organized and existing under the laws of the State of Delaware.

(b) Authorization. The Holder has full power and authority (including all necessary partnership and limited liability company authorizations, as applicable) to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Holder and its general partner.

(c) Accredited Investor Status. The Holder is an "accredited investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act and is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. The Holder has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Warrants and the Warrant Shares.

(d) Investment Intent. The Holder is acquiring the Warrants and any Warrant Shares issuable upon exercise thereof for its own account, for investment purposes only, and not with a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act or any other applicable securities law. The Holder understands that the Warrants and the Warrant Shares have not been registered under the Securities Act and that the Warrants and the Warrant Shares may not be sold, transferred, offered for sale, pledged, hypothecated, or otherwise disposed of except pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from such registration requirements.

(e) Experience. The Holder, through its general partner, Pinnacle Bridge Capital Management, LLC, and its principals, including Victor Hargrove, Managing Partner, and Danielle Okonkwo, Head of Credit Investments, has sufficient knowledge and experience in financial and business matters, including investments in private placements of securities, to evaluate the merits and risks of the investment in the Warrants and the Warrant Shares. The Holder has had the opportunity to ask questions of, and receive answers from, representatives of the Company concerning the terms and conditions of this investment and has had access to such information concerning the Company as the Holder has deemed necessary to make an informed investment decision.

(f) Restricted Securities. The Holder acknowledges and agrees that (i) the Warrants and the Warrant Shares are "restricted securities" as defined in Rule 144 under the Securities Act, (ii) the Warrants and the Warrant Shares have not been registered under the Securities Act or any state securities laws, and (iii) the Warrants and the Warrant Shares may not be sold, transferred, or otherwise disposed of except pursuant to an effective registration statement or an available exemption from registration requirements.

(g) Gaming Regulatory Compliance. The Holder acknowledges that the ownership, transfer, or exercise of the Warrants, and the ownership of the Warrant Shares, may subject the Holder, its general partner, and certain of their respective principals, members, partners, managers, officers, directors, and key employees to investigation, regulation, and licensing requirements under the gaming laws and regulations of the State of Nevada, the State of Arizona, and the State of New Mexico. The Holder agrees to cooperate with all required gaming regulatory filings and investigations and to comply with all applicable gaming laws and regulations in connection with the ownership and exercise of the Warrants and the ownership of the Warrant Shares.

ARTICLE VIII — REGISTRATION RIGHTS

Section 8.1 — Demand Registration.

At any time after six (6) months following the Effective Date, the Holder may request in writing (a "Demand Notice") that the Company file a registration statement under the Securities Act covering the resale of all or a portion of the Registrable Securities (the "Demand Registration"). Upon receipt of a Demand Notice, the Company shall use commercially reasonable efforts to file a registration statement with the SEC within sixty (60) days after the date of receipt of such Demand Notice, and shall use commercially reasonable efforts to cause such registration statement to become effective under the Securities Act as soon as practicable after such filing. The Company shall be required to effect no more than two (2) Demand Registrations pursuant to this Section 8.1. A registration shall not count as a Demand Registration unless (a) the registration statement relating to such Demand Registration has become effective under the Securities Act and (b) the Holder has been able to sell at least seventy-five percent (75%) of the Registrable Securities requested to be included in such registration statement, unless such inability to sell is attributable to the Holder's own actions or inaction. The Company shall keep each such registration statement effective for a period of at least one hundred eighty (180) days (or such shorter period as may be necessary for the Holder to sell all of the Registrable Securities included therein) following the effective date of such registration statement.

Section 8.2 — Piggyback Registration.

If the Company at any time proposes to register any shares of Common Stock under the Securities Act for its own account or for the account of any other securityholder (other than a registration statement on Form S-4 or Form S-8, or any successor forms thereto, or a registration statement filed in connection with an exchange offer or an offering of securities solely to the Company's existing stockholders), the Company shall give the Holder written notice of such proposed registration at least fifteen (15) Business Days prior to the anticipated filing date of such registration statement (the "Piggyback Notice"). The Holder shall have the right, exercisable by written notice delivered to the Company within ten (10) Business Days after receipt of such Piggyback Notice, to request inclusion of all or a portion of the Registrable Securities in such registration on the same terms and conditions as the other securities being registered thereunder (a "Piggyback Registration"). If the managing underwriter of any such offering advises the Company in writing that, in its reasonable opinion, the number of securities requested to be included in such registration would materially and adversely affect the price, timing, or distribution of the securities offered in such registration, the Company may reduce the number of Registrable Securities to be included in such registration on a pro rata basis among all securityholders exercising piggyback registration rights; provided, however, that the number of Registrable Securities included in such registration shall not be reduced below twenty-five percent (25%) of the total number of securities included in such registration, unless the offering would not be consummated in the reasonable opinion of the managing underwriter.

Section 8.3 — Shelf Registration.

The Company shall use commercially reasonable efforts to file with the SEC, and to maintain as effective, a shelf registration statement on Form S-3 (or any successor form thereto) under the Securities Act covering the resale of all of the Registrable Securities, provided that the Company is then eligible to use Form S-3 for such purpose. If the Company is not eligible to use Form S-3 at any time when it would otherwise be required to file or maintain such shelf registration statement, the Company shall use commercially reasonable efforts to become eligible to use Form S-3 and, promptly upon becoming so eligible, shall file such shelf registration statement. The Company shall use commercially reasonable efforts to keep such shelf registration statement continuously effective until such time as all of the Registrable Securities covered thereby have been sold or are no longer Registrable Securities.

Section 8.4 — Registration Expenses.

All fees, costs, and expenses incurred in connection with any registration pursuant to this Article VIII (collectively, "Registration Expenses") shall be borne by the Company, including without limitation (a) all SEC registration and filing fees, (b) all Nasdaq listing fees, (c) all printing and duplicating expenses, (d) all fees and disbursements of counsel for the Company, (e) all fees and disbursements of the Company's independent registered public accounting firm, (f) all fees and expenses of compliance with applicable state securities or "blue sky" laws, and (g) all fees and expenses of any transfer agent and registrar. Notwithstanding the foregoing, the Holder shall be responsible for (i) fees and disbursements of the Holder's own counsel, (ii) any underwriting discounts, selling commissions, or stock transfer taxes attributable to the sale of the Registrable Securities by the Holder, and (iii) the Holder's own internal costs and expenses.

Section 8.5 — Indemnification.

(a) Indemnification by the Company. The Company shall indemnify, defend, and hold harmless the Holder, each of its Affiliates, and each of their respective partners, members, managers, directors, officers, employees, agents, and representatives (each, a "Holder Indemnified Party"), from and against any and all losses, claims, damages, liabilities, judgments, costs, and expenses (including reasonable attorneys' fees and expenses of investigation) (collectively, "Losses"), arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement, any prospectus included therein, any amendment or supplement thereto, or any preliminary prospectus, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be liable to any Holder Indemnified Party to the extent that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement, or any omission or alleged omission, that was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder specifically for inclusion in such registration statement, prospectus, amendment, supplement, or preliminary prospectus.

(b) Indemnification by the Holder. The Holder shall indemnify, defend, and hold harmless the Company, each of its directors, each of its officers who signs the registration statement, and each Person who controls the Company within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended, from and against any and all Losses arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement, any prospectus included therein, any amendment or supplement thereto, or any preliminary prospectus, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement, or omission or alleged omission, was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder specifically for inclusion in such registration statement, prospectus, amendment, supplement, or preliminary prospectus. The liability of the Holder under this Section 8.5(b) shall be limited to the net proceeds received by the Holder from the sale of Registrable Securities pursuant to such registration statement.

(c) Contribution. If the indemnification provided for in Sections 8.5(a) or 8.5(b) is unavailable to or insufficient to hold harmless an indemnified party in respect of any Losses, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the Holder, on the other hand, in connection with the statements or omissions that resulte

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
WARRANT AGREEMENT
DRAFT — For Discussion Purposes Only — Subject to Review and Comment
Dated: January 27, 2023
by and between
REDSTONE GAMING CORP.
a Nevada corporation
and
PINNACLE BRIDGE MEZZANINE OPPORTUNITIES FUND IV, LP
a Delaware limited partnership
Prepared by:
Calderwood & Harkness LLP 300 South Fourth Street, Suite 2800 Las Vegas, NV 89101
C&H Matter No. 1033-00001
UNEXECUTED DRAFT
Right-click to update Table of Contents
WARRANT AGREEMENT
This Warrant Agreement (this "Agreement") is entered into as of [●], 2023 (the "Effective Date"), by and between Redstone Gaming Corp., a corporation organized and existing under the laws of the State of Nevada (the "Company"), and Pinnacle Bridge Mezzanine Opportunities Fund IV, LP, a limited partnership organized and existing under the laws of the State of Delaware (the "Holder").
RECITALS
WHEREAS, the Company and Pinnacle Bridge Capital Partners, LP ("Pinnacle Bridge"), an Affiliate of the Holder, have entered into that certain Mezzanine Note Purchase Agreement, dated as of [●], 2023 (the "Note Purchase Agreement"), pursuant to which the Company will issue and sell to Pinnacle Bridge $35,000,000 aggregate principal amount of 13.50% Senior Subordinated Notes due 2028 (the "Notes");
WHEREAS, as a condition to, and in connection with, the transactions contemplated by the Note Purchase Agreement, the Company has agreed to issue to the Holder warrants to purchase shares of the Company's common stock, par value $0.001 per share ("Common Stock"), on the terms and conditions set forth herein;
WHEREAS, the Company's Common Stock is listed on the Nasdaq Stock Market LLC ("Nasdaq") under the ticker symbol "RDGM";
WHEREAS, the Company has approximately 55,000,000 shares of Common Stock issued and outstanding as of the date hereof; and
WHEREAS, the Company desires to issue the Warrants (as defined below) in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506(b) of Regulation D promulgated thereunder.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — 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 controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the 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. Without limiting the generality of the foregoing, a Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors (or comparable governing body) of such other Person.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, a Sunday, or any day on which banking institutions in Las Vegas, Nevada or New York, New York are authorized or required by law, regulation, or executive order to close.
"Cashless Exercise" has the meaning set forth in Section 3.3.
"Common Stock" means the common stock, par value $0.001 per share, of Redstone Gaming Corp., and any securities into which such common stock may hereafter be reclassified or changed.
"Company" means Redstone Gaming Corp., a corporation organized under the laws of the State of Nevada, with its principal executive offices located at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103, and its successors and assigns.
"Effective Date" means the date of execution and delivery of this Agreement by each of the parties hereto, which date shall be the "Closing Date" as defined in the Note Purchase Agreement.
"Excluded Issuances" has the meaning set forth in Section 5.4.
"Exercise Date" means the date on which a properly completed Notice of Exercise is delivered to the Company in accordance with Section 3.2 or Section 3.3, as applicable.
"Exercise Period" means the period commencing on the Effective Date and ending on the Expiration Date.
"Exercise Price" means $9.24 per Warrant Share, as such price may be adjusted from time to time in accordance with the provisions of Article V. The initial Exercise Price has been calculated as one hundred ten percent (110%) of the thirty (30)-day volume-weighted average price ("VWAP") of the Common Stock on Nasdaq as of the date immediately preceding the date hereof, which thirty (30)-day VWAP equals $8.40 per share.
"Expiration Date" means the seventh (7th) anniversary of the Effective Date; provided, however, that if such date is not a Business Day, the Expiration Date shall be the next succeeding Business Day. In no event shall the Warrants be exercisable after the close of business on the Expiration Date.
"Fair Market Value" means, as of any date of determination, (a) if the Common Stock is listed on Nasdaq or any other national securities exchange, the closing price of a share of Common Stock as reported on Nasdaq (or such other exchange) on the trading day immediately preceding the applicable date, or (b) if the Common Stock is not listed on any national securities exchange, the fair market value of a share of Common Stock as determined in good faith by the Board, which determination shall be set forth in a written certificate delivered to the Holder and shall take into account such factors as the Board reasonably determines to be relevant, including without limitation recent arm's-length transactions in the Common Stock, comparable company analyses, and discounted cash flow analyses.
"Fully Diluted Basis" means, as of any date of determination, all shares of Common Stock issued and outstanding on such date, plus all shares of Common Stock issuable upon the exercise, conversion, or exchange of all outstanding options, warrants, convertible securities, and other rights to acquire shares of Common Stock (whether or not then vested, exercisable, or convertible), including the Warrants.
"Holder" means Pinnacle Bridge Mezzanine Opportunities Fund IV, LP, a limited partnership organized under the laws of the State of Delaware, and its successors and permitted assigns in accordance with this Agreement.
"Note Purchase Agreement" means the Mezzanine Note Purchase Agreement, dated as of [●], 2023, by and among the Company, Pinnacle Bridge Capital Partners, LP, and the Holder, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Notes" means the $35,000,000 aggregate principal amount of 13.50% Senior Subordinated Notes due 2028 issued pursuant to the Note Purchase Agreement.
"Person" means any individual, corporation, limited liability company, partnership, limited partnership, joint venture, trust, unincorporated organization, government, governmental department or agency, or other entity.
"Pinnacle Bridge" means Pinnacle Bridge Capital Partners, LP, a limited partnership organized under the laws of the State of Delaware, and an Affiliate of the Holder.
"Registrable Securities" means the Warrant Shares issued or issuable upon exercise of the Warrants; provided, that any such Warrant Shares shall cease to be Registrable Securities at such time as (a) a registration statement covering the resale of such Warrant Shares has been declared effective by the SEC and such Warrant Shares have been sold or otherwise disposed of pursuant to such effective registration statement, (b) such Warrant Shares have been sold or disposed of pursuant to Rule 144 under the Securities Act (or any successor rule), or (c) such Warrant Shares are eligible for sale without restriction under Rule 144 (including without limitation the volume and manner of sale limitations thereof).
"Registration Rights Agreement" means the registration rights provisions set forth in Article VIII of this Agreement.
"SEC" means the United States Securities and Exchange Commission, or any successor governmental agency performing similar functions.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Senior Credit Facility" means the Second Amended and Restated Credit Agreement, dated as of March 15, 2021, by and among the Company, Cornerstone National Bank, N.A., as Administrative Agent, and the lenders from time to time party thereto, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Transfer" has the meaning set forth in Section 4.1.
"Transfer Agent" means the Company's transfer agent for the Common Stock, as designated by the Company from time to time.
"Warrant Certificate" means a physical certificate or book-entry notation evidencing the Warrants, substantially in the form attached hereto as Exhibit A.
"Warrant Register" has the meaning set forth in Section 4.3.
"Warrant Shares" means 1,650,000 shares of Common Stock (representing approximately three percent (3.00%) of the fully diluted equity of the Company based on 55,000,000 shares of Common Stock outstanding as of the date hereof), as such number may be adjusted from time to time pursuant to Article V.
"Warrants" means the warrants to purchase shares of Common Stock issued to the Holder pursuant to this Agreement.
Section 1.2 — Rules of Construction.
Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section," "Exhibit," and "Schedule" refer to the specified Article, Section, Exhibit, or Schedule of or to this Agreement, unless otherwise specified; (e) the word "including" (and words of similar import) means "including, without limitation"; (f) references to any Person include such Person's successors and permitted assigns; (g) references to any agreement, document, or instrument mean such agreement, document, or instrument as amended, supplemented, or otherwise modified from time to time to the extent permitted by the provisions thereof; (h) headings and captions used in this Agreement are inserted for convenience of reference only and shall not be used in interpreting or construing this Agreement; and (i) all references to currency are to United States Dollars unless otherwise specified.
ARTICLE II — ISSUANCE OF WARRANTS
Section 2.1 — Issuance.
Upon execution and delivery of this Agreement on the Effective Date, the Company shall issue to the Holder Warrants to purchase an aggregate of 1,650,000 Warrant Shares at an initial Exercise Price of $9.24 per Warrant Share, subject in each case to adjustment as provided in Article V. The Warrants shall be issued for no additional cash consideration beyond the consideration provided under the Note Purchase Agreement, the issuance of the Warrants being a condition to the Holder's and Pinnacle Bridge's obligations under the Note Purchase Agreement. The number of Warrant Shares is equal to three percent (3.00%) of the fully diluted Common Stock outstanding as of the date hereof (55,000,000 shares × 3.00% = 1,650,000 shares).
Section 2.2 — Warrant Certificate.
The Warrants shall be evidenced by one or more Warrant Certificates substantially in the form attached hereto as Exhibit A, which shall be registered in the name of the Holder and shall indicate (a) the number of Warrant Shares for which the Warrants are exercisable and (b) the Exercise Price. Each Warrant Certificate shall be executed on behalf of the Company by a duly authorized officer of the Company. The Company shall deliver the Warrant Certificate(s) to the Holder (or its designee) on the Effective Date. The form of Warrant Certificate attached as Exhibit A is incorporated herein by reference and made a part of this Agreement.
Section 2.3 — No Fractional Shares.
No fractional Warrant Shares shall be issued upon exercise of the Warrants. If any exercise of the Warrants would otherwise result in the issuance of a fractional share of Common Stock, the Company shall, in lieu of issuing such fractional share, pay to the Holder a cash amount equal to such fraction multiplied by the excess, if any, of the Fair Market Value of one share of Common Stock on the Exercise Date over the Exercise Price. For the avoidance of doubt, any calculation of the number of Warrant Shares issuable upon exercise shall be rounded down to the nearest whole number, and the Company shall make a cash payment in respect of any resulting fractional share as provided in this Section 2.3.
Section 2.4 — Reservation of Shares.
The Company shall at all times during the Exercise Period reserve and keep available, out of the aggregate of its authorized but unissued shares of Common Stock, a number of shares of Common Stock sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock so reserved shall be free from preemptive rights and shall, upon issuance upon the exercise of the Warrants in accordance with this Agreement and upon payment of the Exercise Price (or upon valid Cashless Exercise), be validly issued, fully paid, and non-assessable, and free and clear of all liens, charges, encumbrances, claims, and restrictions (other than restrictions on transfer under applicable securities laws and this Agreement). If at any time the number of authorized but unissued shares of Common Stock is not sufficient to permit the exercise in full of all outstanding Warrants, the Company shall promptly take all corporate action necessary to increase its authorized shares of Common Stock to a number sufficient for such purpose, including by calling a meeting of stockholders and recommending approval of an amendment to the Company's articles of incorporation.
ARTICLE III — EXERCISE OF WARRANTS
Section 3.1 — Exercise Period.
The Warrants shall be exercisable at any time and from time to time during the Exercise Period, which commences on the Effective Date and expires at 5:00 p.m. Pacific Time on the Expiration Date (the seventh (7th) anniversary of the Effective Date). Any Warrants that have not been exercised prior to the expiration of the Exercise Period shall thereupon become void and of no further force or effect, and the Holder shall have no further rights with respect to such unexercised Warrants. The Company shall have no obligation to notify the Holder of the impending expiration of the Warrants; provided, however, that the Company shall, upon written request of the Holder, confirm in writing the current Exercise Price and the number of Warrant Shares issuable upon exercise.
Section 3.2 — Exercise for Cash.
To exercise the Warrants for cash, the Holder shall deliver to the Company, at its principal executive offices at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103, Attention: General Counsel, or at such other office or agency of the Company as it may designate by written notice to the Holder:
(a) a duly completed and executed Notice of Exercise substantially in the form attached hereto as Exhibit B, specifying the number of Warrant Shares the Holder elects to purchase and the election to exercise for cash; and
(b) payment of the aggregate Exercise Price for the number of Warrant Shares specified in such Notice of Exercise, which payment shall be made by wire transfer of immediately available funds in United States Dollars to an account designated by the Company in writing.
The aggregate Exercise Price payable upon a full cash exercise of all 1,650,000 Warrants at the Exercise Price of $9.24 per share shall be $15,246,000. The Holder shall not be required to deliver the original Warrant Certificate in order to effect an exercise; provided, however, that if the Holder has been issued a physical Warrant Certificate, the Holder shall surrender such Warrant Certificate to the Company within five (5) Business Days following such exercise (in the case of a full exercise) or shall present such Warrant Certificate to the Company for notation of the partial exercise (in the case of a partial exercise).
Section 3.3 — Cashless Exercise (Net Exercise).
In lieu of making a cash payment of the Exercise Price pursuant to Section 3.2, the Holder may elect to exercise the Warrants, in whole or in part, on a cashless basis (a "Cashless Exercise") by surrendering such Warrants and receiving, in exchange therefor, a net number of shares of Common Stock determined in accordance with the following formula:
Net Shares = (A × (B − C)) / B
Where:
A = the total number of Warrant Shares as to which the Warrant is being exercised;
B = the Fair Market Value per share of Common Stock on the Exercise Date; and
C = the Exercise Price then in effect (initially $9.24 per Warrant Share).
To effect a Cashless Exercise, the Holder shall deliver to the Company a duly completed and executed Notice of Exercise substantially in the form attached hereto as Exhibit B, indicating the Holder's election to effect a Cashless Exercise and specifying the number of Warrants being exercised. If the Fair Market Value per share of Common Stock on the Exercise Date is less than or equal to the Exercise Price, the Holder shall not be entitled to receive any Warrant Shares upon a Cashless Exercise, and such attempted exercise shall be deemed null and void.
Example Illustration. By way of illustration only, and not as a limitation on the Holder's rights hereunder: If the Fair Market Value of one share of Common Stock on the Exercise Date is $14.75 per share and the Holder exercises all 1,650,000 Warrants on a cashless basis, the Net Shares issuable to the Holder would be calculated as follows:
Net Shares = (1,650,000 × ($14.75 − $9.24)) / $14.75
Net Shares = (1,650,000 × $5.51) / $14.75
Net Shares = $9,091,500 / $14.75
Net Shares = 616,372 shares (rounded down to the nearest whole share)
In the foregoing example, the Holder would receive 616,372 shares of Common Stock upon the Cashless Exercise of all 1,650,000 Warrants, and no cash payment would be required.
Section 3.4 — Partial Exercise.
The Warrants may be exercised in whole or in part at any time and from time to time during the Exercise Period. In the event of a partial exercise, the Company shall, at the time of delivery of the Warrant Shares pursuant to Section 3.5, issue to the Holder a new Warrant Certificate (or shall cause the Warrant Register to be updated, in the case of book-entry Warrants) evidencing the right to purchase the remaining number of Warrant Shares for which the Warrants have not been exercised, and such new Warrant Certificate (or updated book-entry notation) shall in all other respects be identical to the Warrant Certificate surrendered upon such partial exercise.
Section 3.5 — Delivery of Warrant Shares.
The Company shall, within three (3) Business Days after its receipt of a properly completed and executed Notice of Exercise together with the applicable payment (in the case of a cash exercise) or cashless exercise election (in the case of a Cashless Exercise), cause to be issued and delivered to the Holder (or to such other Person as the Holder may direct in the Notice of Exercise) the number of Warrant Shares to which the Holder is entitled, either (a) in certificated form, registered in the name of the Holder (or its designee), or (b) by book-entry notation on the records of the Transfer Agent, as the Holder may elect in the Notice of Exercise. The Company shall instruct the Transfer Agent to effect such issuance promptly upon receipt of the Company's instructions. The Company shall bear all costs and expenses associated with the issuance and delivery of the Warrant Shares, including without limitation all Transfer Agent fees, Nasdaq listing fees, and any applicable stamp, transfer, documentary, or similar taxes or duties (other than any income, capital gains, or similar taxes imposed on the Holder by reason of the exercise of the Warrants or the receipt of the Warrant Shares).
Section 3.6 — Validity of Warrant Shares.
All Warrant Shares issued upon the exercise of the Warrants in accordance with this Agreement shall be validly issued, fully paid, and non-assessable, and free and clear of all liens, pledges, security interests, charges, claims, encumbrances, and restrictions of any kind (other than (a) restrictions on transfer under applicable federal and state securities laws, (b) restrictions set forth in this Agreement, and (c) any legends required to be placed on certificates (or book-entry notations) representing such Warrant Shares pursuant to Section 4.2).
ARTICLE IV — TRANSFER AND ASSIGNMENT
Section 4.1 — Restrictions on Transfer.
The Warrants and the Warrant Shares have not been registered under the Securities Act or under any state securities laws and are being issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The Holder shall not, directly or indirectly, sell, assign, transfer, pledge, hypothecate, encumber, or otherwise dispose of (each, a "Transfer") any Warrant or any Warrant Shares, except as follows:
(a) Transfers to Affiliates. The Holder may Transfer any Warrants or Warrant Shares to any Affiliate of the Holder, provided that such Affiliate transferee agrees in writing to be bound by all of the terms and conditions of this Agreement (including this Article IV) as if such Affiliate were the Holder hereunder.
(b) Transfers Pursuant to Registration. The Holder may Transfer any Warrant Shares pursuant to an effective registration statement under the Securities Act.
(c) Transfers Pursuant to Exemption. The Holder may Transfer any Warrants or Warrant Shares pursuant to an available exemption from registration under the Securities Act, including Rule 144 thereunder; provided, that prior to any such Transfer, the Holder shall deliver to the Company a written opinion of counsel (which counsel shall be reasonably acceptable to the Company) to the effect that such Transfer may be effected without registration under the Securities Act.
Any attempted Transfer in violation of this Section 4.1 shall be null and void, and the Company shall not register or give effect to any such purported Transfer on its books and records or with the Transfer Agent.
Section 4.2 — Legends.
Each Warrant Certificate and any certificate or book-entry notation representing Warrant Shares shall bear the following restrictive legend (or a legend substantially to the following effect):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THESE SECURITIES ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE WARRANT AGREEMENT, DATED AS OF [●], 2023, BY AND BETWEEN REDSTONE GAMING CORP. AND PINNACLE BRIDGE MEZZANINE OPPORTUNITIES FUND IV, LP, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
In addition to the foregoing legend, each Warrant Certificate and any certificate or book-entry notation representing Warrant Shares shall bear such additional legends as may be required by Nevada or other applicable state securities laws.
Notwithstanding the foregoing, the Company acknowledges and the Holder agrees that if the Holder or any transferee would, after giving effect to any Transfer or exercise of the Warrants, hold or have the right to acquire more than five percent (5%) of the outstanding Common Stock of the Company, such Transfer or exercise may require a finding of suitability by the Nevada Gaming Control Board, the Arizona Department of Gaming, or the New Mexico Gaming Control Board, as applicable, and additional legends or notifications may be required in connection therewith. The Company and the Holder shall cooperate in good faith with respect to any such gaming regulatory requirements.
Section 4.3 — Warrant Register.
The Company shall maintain, or cause to be maintained, at its principal executive offices (or at such other office as the Company may designate by written notice to the Holder), a register (the "Warrant Register") in which the Company shall record the name and address of the Holder of each Warrant and each permitted transferee. Until a Transfer is duly effected in accordance with this Article IV and reflected in the Warrant Register, the Company may treat the Person in whose name any Warrant is registered as the absolute owner thereof for all purposes. The initial entry in the Warrant Register for the Holder shall be as follows:
Holder: Pinnacle Bridge Mezzanine Opportunities Fund IV, LP c/o Pinnacle Bridge Capital Partners, LP 280 Park Avenue, 22nd Floor New York, NY 10017
Attention: Danielle Okonkwo, Head of Credit Investments
Section 4.4 — Replacement Certificates.
Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant Certificate, and in the case of loss, theft, or destruction, upon delivery of an indemnity agreement or surety bond, in each case in form and substance reasonably satisfactory to the Company and, if required by the Company, with surety in an amount equal to one hundred fifty percent (150%) of the Fair Market Value of the Warrant Shares issuable upon exercise of the Warrants evidenced by such lost, stolen, or destroyed Warrant Certificate, the Company shall issue a new Warrant Certificate of like tenor and date. In the case of mutilation, the Holder shall surrender the mutilated Warrant Certificate to the Company, and the Company shall issue a new Warrant Certificate of like tenor and date. The Company may charge the Holder for any reasonable expenses incurred by the Company in issuing such replacement Warrant Certificate.
ARTICLE V — ANTI-DILUTION ADJUSTMENTS
Section 5.1 — Stock Dividends and Splits.
If, at any time while the Warrants are outstanding, the Company (a) pays a stock dividend on the Common Stock, (b) subdivides or splits the outstanding shares of Common Stock into a larger number of shares, or (c) combines or effects a reverse stock split of the outstanding shares of Common Stock into a smaller number of shares, then the number of Warrant Shares and the Exercise Price shall be proportionally adjusted as follows:
Adjusted Warrant Shares = Prior Warrant Shares × (New Outstanding Shares / Prior Outstanding Shares)
Adjusted Exercise Price = Prior Exercise Price × (Prior Outstanding Shares / New Outstanding Shares)
Such adjustment shall become effective immediately after the record date for such dividend, subdivision, or combination, as applicable. If any event requiring an adjustment under this Section 5.1 shall occur during the period that an earlier event has occurred but the adjustment relating to such earlier event has not yet been effected, then the adjustments required by both events shall be made simultaneously. For the avoidance of doubt, no adjustment under this Section 5.1 shall reduce the Exercise Price below the par value of the Common Stock.
Section 5.2 — Distributions.
If the Company shall distribute to all holders of outstanding Common Stock any assets, properties, rights, or securities (other than shares of Common Stock for which an adjustment is provided under Section 5.1), including without limitation any extraordinary cash dividend, any non-cash dividend, or any distribution of evidences of indebtedness, warrants, options, or rights to subscribe for or purchase any securities (other than regular quarterly cash dividends paid out of earnings or retained earnings of the Company in amounts consistent with past practice), then the Exercise Price in effect immediately prior to such distribution shall be reduced (but not below zero) to an amount equal to:
Adjusted Exercise Price = Prior Exercise Price − Per-Share Distribution Amount
where "Per-Share Distribution Amount" means the fair market value (as determined by the Board in good faith) of the assets, properties, rights, or securities distributed per share of Common Stock. If the Board determines that the fair market value of any such distribution equals or exceeds the Exercise Price in effect immediately prior to such distribution, then in lieu of the foregoing adjustment, the Company shall provide the Holder with notice at least twenty (20) days prior to such distribution and an opportunity to exercise the Warrants prior to the record date for such distribution. Such adjustment shall become effective immediately after the record date for such distribution.
Section 5.3 — Reclassifications, Mergers, and Consolidations.
In the event of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value or from par value to no par value, or a subdivision or combination for which adjustment is provided under Section 5.1), or in the event of any merger, consolidation, statutory share exchange, or sale, lease, or other transfer of all or substantially all of the assets of the Company to another Person (each, a "Fundamental Transaction"), then as a condition of such Fundamental Transaction, lawful and adequate provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of the Warrants the kind and amount of shares of stock, other securities, cash, or other property receivable upon such Fundamental Transaction by a holder of the number of shares of Common Stock for which the Warrants were exercisable immediately prior to such Fundamental Transaction (without regard to any limitations on exercise), all subject to further adjustment as provided herein. In any such case, appropriate provision shall be made with respect to the Holder's rights and interests to the end that the provisions of this Agreement (including without limitation the adjustment provisions of this Article V) shall thereafter be applicable, as nearly as practicable, in relation to any shares of stock, securities, cash, or other property deliverable upon exercise of the Warrants after such Fundamental Transaction. The Company shall not effect any Fundamental Transaction unless, prior to the consummation thereof, the successor entity (if other than the Company) resulting from such Fundamental Transaction shall assume, by written instrument in form and substance reasonably satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities, cash, or other property as, in accordance with the foregoing provisions, the Holder may be entitled to receive upon exercise of the Warrants, and the other obligations of the Company under this Agreement.
Section 5.4 — Issuance of Additional Common Stock Below Exercise Price (Weighted Average Anti-Dilution).
If, at any time while the Warrants are outstanding, the Company issues or sells any additional shares of Common Stock (other than Excluded Issuances, as defined below) at a price per share (or, in the case of convertible securities, at an effective conversion or exercise price per share) that is less than the Exercise Price then in effect (a "Dilutive Issuance"), then the Exercise Price shall be adjusted immediately after such Dilutive Issuance using the following broad-based weighted average formula:
Adjusted EP = EP × (OS + (Consideration / EP)) / (OS + New Shares)
Where:
EP = the Exercise Price in effect immediately prior to such Dilutive Issuance;
OS = the number of shares of Common Stock outstanding immediately prior to such Dilutive Issuance (on a Fully Diluted Basis);
Consideration = the aggregate consideration received or deemed received by the Company in connection with such Dilutive Issuance; and
New Shares = the number of additional shares of Common Stock issued or sold (or, in the case of convertible securities, the maximum number of shares issuable upon exercise or conversion thereof) in such Dilutive Issuance.
Upon any adjustment to the Exercise Price pursuant to this Section 5.4, the number of Warrant Shares shall be simultaneously adjusted so that the aggregate Exercise Price payable upon exercise in full of the Warrants shall remain the same as the aggregate Exercise Price in effect immediately prior to such adjustment (i.e., the product of the Warrant Shares and the Exercise Price shall remain constant).
For purposes of this Section 5.4, "Excluded Issuances" means shares of Common Stock (or options, warrants, or convertible securities exercisable or convertible into shares of Common Stock) issued:
(a) pursuant to any employee stock option plan, employee stock purchase plan, restricted stock plan, or other equity incentive plan or arrangement approved by the Board (including the Company's 2019 Equity Incentive Plan), in an aggregate amount not to exceed ten percent (10%) of the outstanding shares of Common Stock on a Fully Diluted Basis as of the Effective Date;
(b) upon the exercise, conversion, or exchange of any options, warrants, convertible securities, or other rights to acquire shares of Common Stock outstanding as of the Effective Date, including the Warrants;
(c) in connection with any bona fide acquisition, merger, joint venture, strategic alliance, licensing arrangement, or other strategic transaction approved by the Board, provided that such issuance is not primarily for equity financing purposes; and
(d) upon the exercise of the Warrants in accordance with this Agreement.
Section 5.5 — Certificate of Adjustment.
Upon any adjustment to the Exercise Price or the number of Warrant Shares pursuant to this Article V, the Company shall promptly (and in any event within ten (10) Business Days after such adjustment) deliver to the Holder a certificate signed by the Chief Financial Officer or Treasurer of the Company (currently Priya Sandoval, Chief Financial Officer, or Angela Fong, Treasurer) setting forth in reasonable detail (a) the adjusted Exercise Price, (b) the adjusted number of Warrant Shares, (c) the facts requiring such adjustment, and (d) the computation thereof. Such certificate shall be conclusive and binding on the Holder absent manifest error.
Section 5.6 — No Adjustment for Certain Issuances.
Notwithstanding anything to the contrary in this Article V, no adjustment to the Exercise Price or the number of Warrant Shares shall be made in respect of any Excluded Issuance, as defined in Section 5.4 above.
ARTICLE VI — COVENANTS OF THE COMPANY
Section 6.1 — Reservation of Shares.
The Company covenants and agrees that, at all times during the Exercise Period, it shall reserve and keep available, out of its authorized but unissued shares of Common Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the exercise in full of all outstanding Warrants, including any additional Warrant Shares that may become issuable as a result of any adjustment pursuant to Article V. If at any time the Company does not have a sufficient number of authorized but unissued shares of Common Stock to satisfy this obligation, the Company shall promptly take all corporate action necessary to increase the number of authorized shares of Common Stock, including recommending to its stockholders an amendment to the Company's articles of incorporation to increase the authorized number of shares.
Section 6.2 — Listing.
The Company shall use commercially reasonable efforts to maintain the listing of the Common Stock on Nasdaq (or such other national securities exchange on which the Common Stock is then listed) and to comply with all requirements of Nasdaq (or such other exchange) in connection therewith. Prior to, or promptly following, the first exercise of any Warrants, the Company shall apply for listing of the Warrant Shares on Nasdaq (or such other national securities exchange on which the Common Stock is then listed) and shall use commercially reasonable efforts to cause such Warrant Shares to be so listed. The Company shall pay all fees and expenses in connection with the listing of the Warrant Shares.
Section 6.3 — Compliance with Laws.
The Company shall comply in all material respects with all applicable federal and state securities laws, rules, and regulations in connection with the issuance of the Warrants and the Warrant Shares, including without limitation the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. The Company shall also comply in all material respects with all applicable state gaming laws and regulations, including those administered by the Nevada Gaming Control Board, the Arizona Department of Gaming, and the New Mexico Gaming Control Board. The Company shall timely file all reports, forms, and other documents required to be filed by it with the SEC and shall maintain its status as a reporting company under the Securities Exchange Act of 1934, as amended.
Section 6.4 — No Impairment.
The Company shall not, by amendment of its articles of incorporation or bylaws, or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company hereunder, and the Company shall at all times in good faith assist in the carrying out of all the provisions of this Agreement and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall not increase the par value of any shares of Common Stock receivable upon exercise of the Warrants above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon exercise of the Warrants.
Section 6.5 — Notice of Certain Events.
The Company shall provide the Holder with written notice at least twenty (20) days prior to:
(a) any record date established for the payment of any dividend, the making of any distribution, or the granting of any right to subscribe for or purchase any shares of any class of stock or any other securities of the Company;
(b) the consummation of any merger, consolidation, statutory share exchange, or sale of all or substantially all of the Company's assets;
(c) any voluntary or involuntary dissolution, liquidation, or winding up of the Company; and
(d) any reclassification, recapitalization, or other change in the Common Stock (other than a change in par value or from par value to no par value).
Each such notice shall describe in reasonable detail the event to which it relates, including the anticipated date of such event and, to the extent known, the terms and conditions thereof. Failure to give such notice or any defect therein shall not affect the validity of any action taken by the Company, but the Holder shall be entitled to seek damages for any actual losses suffered as a result of such failure.
Section 6.6 — Gaming Regulatory Compliance.
The Company shall provide reasonable cooperation to the Holder in connection with any gaming regulatory filings that may be required in connection with the ownership, transfer, or exercise of the Warrants or the Warrant Shares, including without limitation filings with the Nevada Gaming Control Board, the Arizona Department of Gaming, and the New Mexico Gaming Control Board. Such cooperation shall include, without limitation, providing the Holder with copies of relevant gaming license applications and compliance filings, responding in a timely manner to reasonable requests for information from the Holder or applicable gaming regulatory authorities, and taking such other actions as may be reasonably necessary to facilitate the Holder's compliance with applicable gaming regulatory requirements.
The parties acknowledge and agree that the warrant coverage provided hereunder (representing approximately 3.00% of the fully diluted equity of the Company based on 1,650,000 Warrant Shares and 55,000,000 shares of Common Stock outstanding) falls below the five percent (5%) threshold that would trigger a finding-of-suitability requirement under Nevada Revised Statutes Chapter 463 and the regulations of the Nevada Gaming Control Board. However, the parties further acknowledge that if anti-dilution adjustments pursuant to Article V, PIK accrual under the Note Purchase Agreement, or other events effectively increase the Holder's potential equity percentage above five percent (5%), additional gaming regulatory filings may be required, and the Company and the Holder shall cooperate in good faith to make such filings in a timely manner. The Company's primary gaming license reference number is NGC-2019-00847.
ARTICLE VII — REPRESENTATIONS AND WARRANTIES
Section 7.1 — Representations and Warranties of the Company.
The Company hereby represents and warrants to the Holder as follows, as of the Effective Date:
(a) Organization and Good Standing. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, with its principal executive offices located at 4250 South Decatur Boulevard, Suite 1100, Las Vegas, NV 89103. The Company has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as presently conducted. The Company is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, operations, assets, liabilities, financial condition, or results of operations of the Company.
(b) Authorization. The execution, delivery, and performance of this Agreement and the issuance of the Warrants and the Warrant Shares issuable upon exercise thereof have been duly authorized by all necessary corporate action on the part of the Company, including approval by the Board. No further corporate authorization or approval, and no authorization, approval, or consent of any governmental authority, is required for the valid issuance and delivery of this Agreement, the Warrants, or the Warrant Shares (other than any filings required under applicable federal or state securities laws, Nasdaq listing rules, or gaming regulatory requirements, which the Company shall make on a timely basis).
(c) Valid Issuance. The Warrants, when issued and delivered in accordance with this Agreement, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). The Warrant Shares, when issued upon exercise of the Warrants in accordance with this Agreement and upon payment of the Exercise Price (or upon valid Cashless Exercise), will be validly issued, fully paid, and non-assessable, and will not be subject to any preemptive rights, rights of first refusal, or similar rights of any Person.
(d) No Conflicts. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby do not, and will not, (i) conflict with, violate, or result in a breach or default under the Company's articles of incorporation or bylaws, each as currently in effect, (ii) conflict with, violate, or result in a breach or default under, or give rise to any right of termination, cancellation, acceleration, or loss of any benefit under, any material agreement, contract, indenture, or instrument to which the Company is a party or by which any of its properties or assets are bound, or (iii) violate any law, statute, regulation, rule, judgment, order, or decree applicable to the Company or any of its properties or assets. The Company notes that this representation is subject to the required analysis of (A) the covenants and restrictions set forth in the Senior Credit Facility and (B) the terms of the Intercreditor and Subordination Agreement among the Company, Cornerstone National Bank, N.A., as Administrative Agent under the Senior Credit Facility, and Pinnacle Bridge, as collateral agent under the Note Purchase Agreement, each of which requires further review by counsel for the Company and for the Holder.
(e) Capitalization. As of the date hereof, the Company has approximately 55,000,000 shares of Common Stock issued and outstanding. The Company's authorized capital stock consists of 200,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, of which no shares of preferred stock are issued and outstanding. All outstanding shares of Common Stock have been duly authorized, validly issued, fully paid, and non-assessable. The Company's Common Stock is listed on Nasdaq under the ticker symbol "RDGM."
(f) Gaming Licenses. The Company holds active gaming licenses from the Nevada Gaming Control Board (License No. NGC-2019-00847), the Arizona Department of Gaming, and the New Mexico Gaming Control Board, each of which is in full force and effect and in good standing. The Company is not aware of any pending or threatened proceeding to revoke, suspend, limit, or otherwise modify any of its gaming licenses.
(g) SEC Reporting. The Company is a reporting company under the Securities Exchange Act of 1934, as amended, and is current in all of its SEC reporting obligations. The Company has filed all reports, schedules, forms, statements, and other documents required to be filed by it with the SEC in a timely manner and all such filings, as amended, comply in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended.
Section 7.2 — Representations and Warranties of the Holder.
The Holder hereby represents and warrants to the Company as follows, as of the Effective Date:
(a) Organization. The Holder is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware. The general partner of the Holder is Pinnacle Bridge Capital Management, LLC, a limited liability company duly organized and existing under the laws of the State of Delaware.
(b) Authorization. The Holder has full power and authority (including all necessary partnership and limited liability company authorizations, as applicable) to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Holder and its general partner.
(c) Accredited Investor Status. The Holder is an "accredited investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act and is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. The Holder has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Warrants and the Warrant Shares.
(d) Investment Intent. The Holder is acquiring the Warrants and any Warrant Shares issuable upon exercise thereof for its own account, for investment purposes only, and not with a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act or any other applicable securities law. The Holder understands that the Warrants and the Warrant Shares have not been registered under the Securities Act and that the Warrants and the Warrant Shares may not be sold, transferred, offered for sale, pledged, hypothecated, or otherwise disposed of except pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from such registration requirements.
(e) Experience. The Holder, through its general partner, Pinnacle Bridge Capital Management, LLC, and its principals, including Victor Hargrove, Managing Partner, and Danielle Okonkwo, Head of Credit Investments, has sufficient knowledge and experience in financial and business matters, including investments in private placements of securities, to evaluate the merits and risks of the investment in the Warrants and the Warrant Shares. The Holder has had the opportunity to ask questions of, and receive answers from, representatives of the Company concerning the terms and conditions of this investment and has had access to such information concerning the Company as the Holder has deemed necessary to make an informed investment decision.
(f) Restricted Securities. The Holder acknowledges and agrees that (i) the Warrants and the Warrant Shares are "restricted securities" as defined in Rule 144 under the Securities Act, (ii) the Warrants and the Warrant Shares have not been registered under the Securities Act or any state securities laws, and (iii) the Warrants and the Warrant Shares may not be sold, transferred, or otherwise disposed of except pursuant to an effective registration statement or an available exemption from registration requirements.
(g) Gaming Regulatory Compliance. The Holder acknowledges that the ownership, transfer, or exercise of the Warrants, and the ownership of the Warrant Shares, may subject the Holder, its general partner, and certain of their respective principals, members, partners, managers, officers, directors, and key employees to investigation, regulation, and licensing requirements under the gaming laws and regulations of the State of Nevada, the State of Arizona, and the State of New Mexico. The Holder agrees to cooperate with all required gaming regulatory filings and investigations and to comply with all applicable gaming laws and regulations in connection with the ownership and exercise of the Warrants and the ownership of the Warrant Shares.
ARTICLE VIII — REGISTRATION RIGHTS
Section 8.1 — Demand Registration.
At any time after six (6) months following the Effective Date, the Holder may request in writing (a "Demand Notice") that the Company file a registration statement under the Securities Act covering the resale of all or a portion of the Registrable Securities (the "Demand Registration"). Upon receipt of a Demand Notice, the Company shall use commercially reasonable efforts to file a registration statement with the SEC within sixty (60) days after the date of receipt of such Demand Notice, and shall use commercially reasonable efforts to cause such registration statement to become effective under the Securities Act as soon as practicable after such filing. The Company shall be required to effect no more than two (2) Demand Registrations pursuant to this Section 8.1. A registration shall not count as a Demand Registration unless (a) the registration statement relating to such Demand Registration has become effective under the Securities Act and (b) the Holder has been able to sell at least seventy-five percent (75%) of the Registrable Securities requested to be included in such registration statement, unless such inability to sell is attributable to the Holder's own actions or inaction. The Company shall keep each such registration statement effective for a period of at least one hundred eighty (180) days (or such shorter period as may be necessary for the Holder to sell all of the Registrable Securities included therein) following the effective date of such registration statement.
Section 8.2 — Piggyback Registration.
If the Company at any time proposes to register any shares of Common Stock under the Securities Act for its own account or for the account of any other securityholder (other than a registration statement on Form S-4 or Form S-8, or any successor forms thereto, or a registration statement filed in connection with an exchange offer or an offering of securities solely to the Company's existing stockholders), the Company shall give the Holder written notice of such proposed registration at least fifteen (15) Business Days prior to the anticipated filing date of such registration statement (the "Piggyback Notice"). The Holder shall have the right, exercisable by written notice delivered to the Company within ten (10) Business Days after receipt of such Piggyback Notice, to request inclusion of all or a portion of the Registrable Securities in such registration on the same terms and conditions as the other securities being registered thereunder (a "Piggyback Registration"). If the managing underwriter of any such offering advises the Company in writing that, in its reasonable opinion, the number of securities requested to be included in such registration would materially and adversely affect the price, timing, or distribution of the securities offered in such registration, the Company may reduce the number of Registrable Securities to be included in such registration on a pro rata basis among all securityholders exercising piggyback registration rights; provided, however, that the number of Registrable Securities included in such registration shall not be reduced below twenty-five percent (25%) of the total number of securities included in such registration, unless the offering would not be consummated in the reasonable opinion of the managing underwriter.
Section 8.3 — Shelf Registration.
The Company shall use commercially reasonable efforts to file with the SEC, and to maintain as effective, a shelf registration statement on Form S-3 (or any successor form thereto) under the Securities Act covering the resale of all of the Registrable Securities, provided that the Company is then eligible to use Form S-3 for such purpose. If the Company is not eligible to use Form S-3 at any time when it would otherwise be required to file or maintain such shelf registration statement, the Company shall use commercially reasonable efforts to become eligible to use Form S-3 and, promptly upon becoming so eligible, shall file such shelf registration statement. The Company shall use commercially reasonable efforts to keep such shelf registration statement continuously effective until such time as all of the Registrable Securities covered thereby have been sold or are no longer Registrable Securities.
Section 8.4 — Registration Expenses.
All fees, costs, and expenses incurred in connection with any registration pursuant to this Article VIII (collectively, "Registration Expenses") shall be borne by the Company, including without limitation (a) all SEC registration and filing fees, (b) all Nasdaq listing fees, (c) all printing and duplicating expenses, (d) all fees and disbursements of counsel for the Company, (e) all fees and disbursements of the Company's independent registered public accounting firm, (f) all fees and expenses of compliance with applicable state securities or "blue sky" laws, and (g) all fees and expenses of any transfer agent and registrar. Notwithstanding the foregoing, the Holder shall be responsible for (i) fees and disbursements of the Holder's own counsel, (ii) any underwriting discounts, selling commissions, or stock transfer taxes attributable to the sale of the Registrable Securities by the Holder, and (iii) the Holder's own internal costs and expenses.
Section 8.5 — Indemnification.
(a) Indemnification by the Company. The Company shall indemnify, defend, and hold harmless the Holder, each of its Affiliates, and each of their respective partners, members, managers, directors, officers, employees, agents, and representatives (each, a "Holder Indemnified Party"), from and against any and all losses, claims, damages, liabilities, judgments, costs, and expenses (including reasonable attorneys' fees and expenses of investigation) (collectively, "Losses"), arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement, any prospectus included therein, any amendment or supplement thereto, or any preliminary prospectus, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be liable to any Holder Indemnified Party to the extent that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement, or any omission or alleged omission, that was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder specifically for inclusion in such registration statement, prospectus, amendment, supplement, or preliminary prospectus.
(b) Indemnification by the Holder. The Holder shall indemnify, defend, and hold harmless the Company, each of its directors, each of its officers who signs the registration statement, and each Person who controls the Company within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended, from and against any and all Losses arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement, any prospectus included therein, any amendment or supplement thereto, or any preliminary prospectus, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement, or omission or alleged omission, was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder specifically for inclusion in such registration statement, prospectus, amendment, supplement, or preliminary prospectus. The liability of the Holder under this Section 8.5(b) shall be limited to the net proceeds received by the Holder from the sale of Registrable Securities pursuant to such registration statement.
(c) Contribution. If the indemnification provided for in Sections 8.5(a) or 8.5(b) is unavailable to or insufficient to hold harmless an indemnified party in respect of any Losses, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the Holder, on the other hand, in connection with the statements or omissions that resulte

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

WARRANT AGREEMENT

REDSTONE GAMING CORP.

PINNACLE BRIDGE MEZZANINE OPPORTUNITIES FUND IV, LP

UNEXECUTED DRAFT

WARRANT AGREEMENT

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