Doug, Marcus —
I've completed my initial review of Redstone Gaming Corp.'s Amended & Restated Certificate of Incorporation (Delaware Secretary of State file no. 5734821) and Amended & Restated Bylaws (last amended September 12, 2021). I reviewed these against the backdrop of Pinnacle Harbor Capital Partners, LP's preliminary Schedule 13D filed November 10, 2022, disclosing a 6.8% stake (7,119,600 shares out of 104,700,000 shares outstanding), as well as Pinnacle Harbor's October 28, 2022 private demand letter to Board Chair Diane K. Sheridan seeking two board seats, a strategic review of the interactive gaming division, and a $300 million capital return. I'm summarizing the key findings below and will prepare a full defensive review memorandum for the Board, targeting delivery by December 5.
**1. Advance-Notice Provisions (Article II, Section 2.11)**
The bylaws contain an advance-notice provision at Article II, Section 2.11, governing stockholder nominations of director candidates. The nomination window is keyed to the anniversary of the prior year's annual meeting. The 2022 Annual Meeting was held on May 11, 2022, which gives us the following window calculation:
- Opens: Not earlier than 150 days before May 11, 2023 = **December 12, 2022** - Closes: Not later than 120 days before May 11, 2023 = **January 11, 2023**
Hargrove Sloane & Birch LLP (Pinnacle Harbor's counsel; lead partner Jonathan Birch III) has not yet submitted a formal nomination notice, but we should expect one within this window. We need to watch for it closely and analyze compliance immediately upon receipt.
Section 2.11 requires the nominating stockholder to provide specified information about both the nominee(s) and the nominating stockholder, including beneficial ownership details, any agreements or arrangements relating to the nomination, and representations regarding intent to solicit proxies. I will prepare a detailed compliance checklist as part of the full memo.
Overall, the advance-notice provisions appear well-drafted and consistent with current Delaware law standards. They provide a solid procedural gatekeeper. That said, any deficiencies in a nomination notice must be identified promptly to preserve the company's ability to challenge timeliness or completeness — so speed of review once we receive a notice will be critical.
**2. Board Vacancy Filling**
The Certificate of Incorporation and bylaws vest the authority to fill newly created directorships and vacancies exclusively in the Board of Directors (not stockholders). This is a standard defensive feature. The current board size is 9 directors (7 independent, 2 management: CEO Gerald R. Whitmore and CFO Raymond Choi). This provision is particularly relevant because it means the Board controls the ability to expand its size and fill any new seats — important in the context of any negotiated settlement involving the addition of a mutually agreed director.
**3. Classified Board / Annual Elections**
RGC does **not** have a classified (staggered) board — all directors stand for election annually. This is a significant point. The absence of a classified board means Pinnacle Harbor could theoretically seek to replace the entire board at a single annual meeting in a proxy contest, which materially increases the activist's leverage compared to a staggered board situation. I recommend we flag this prominently in the defensive review memo and discuss it with the Special Committee (Jim Delacroix (Chair), Carmen Vasquez, Randall Morse) and the full Board.
**4. Supermajority Voting Requirements**
The Certificate of Incorporation contains certain supermajority voting provisions (e.g., for amendments to certain charter and bylaw provisions), which provide some incremental protection against unilateral stockholder action. I'll detail the specific thresholds and the provisions they protect in the full memo.
**5. Exclusive Forum Provision**
The bylaws contain a Delaware exclusive forum provision designating the Court of Chancery of the State of Delaware (or, if the Court of Chancery lacks jurisdiction, another state court in Delaware or the federal district court for the District of Delaware) as the exclusive forum for certain intra-corporate disputes, including fiduciary duty claims. This is consistent with Delaware law post-*Salzberg* and provides a helpful procedural defense if any litigation arises from the activist campaign. Governing law for the company's organizational documents is the State of Delaware.
**6. No Existing Stockholder Rights Plan (Poison Pill)**
RGC does not currently have a stockholder rights plan in place. The Board may wish to consider whether to adopt a limited-duration rights plan as a defensive measure, particularly given that Pinnacle Harbor holds 6.8% and could continue to accumulate shares. Worth noting that the standstill ownership cap concept (potentially 9.9%, based on preliminary settlement parameters being discussed by Calloway Pinnacle Trust Bank / Thomas Ashford) could serve a similar function contractually if a settlement is reached.
However, we should be mindful that the proxy advisory firms — Centurion Governance Services, Inc. and Hartley Shareholder Advisory Group, LLC — generally view rights plan adoptions negatively absent an imminent threat, and this should be weighed carefully in any Board discussion. Doug, if you'd like me to prepare a separate analysis of the rights plan question to present that option to the Board, I'm happy to do so — just let me know.
**7. Areas for Potential Defensive Enhancement**
I've identified the following areas where bylaw amendments could strengthen RGC's defenses:
1. **Tightening advance-notice informational requirements** — We could add more granular disclosure requirements regarding derivative positions, hedging arrangements, and short interests held by the nominating stockholder and its affiliates. 2. **Proxy access limitations** — We should review whether existing provisions (if any) are appropriately calibrated. 3. **Forum selection clause updates** — Consider whether to add a federal forum provision for Securities Act claims.
Any bylaw amendments must be evaluated for consistency with Delaware law and fiduciary duty obligations, and amending bylaws in the face of an active campaign may draw scrutiny. I'd recommend discussing timing considerations with you, Doug, and with Trish Nakamura (RGC General Counsel & Corporate Secretary) before moving forward on any of these.
**Action Items / Next Steps**
1. **Claire** — I will prepare the full bylaw/charter defensive review memorandum for Board delivery by December 5, 2022. 2. **Marcus** — Can you pull together the stockholder ownership data from Continental Share Services, Inc. (Jason Velmoran) and cross-reference against the 13D disclosures? This will feed into the shareholder ownership and voting power analysis. For reference, total shares outstanding are 104,700,000, and known significant holders are: - Pinnacle Harbor Capital Partners, LP — 6.8% / 7,119,600 shares - Ridgeway Asset Management, LP — 8.2% / 8,585,400 shares - Stillwater Capital Advisors, LLC — 5.4% / 5,653,800 shares - Canfield Municipal Employees' Retirement System — 2.1% / 2,198,700 shares 3. **Advance-notice window** — Once the window opens on December 12, we need to be prepared to receive and immediately analyze any nomination notice from Hargrove Sloane & Birch on behalf of Pinnacle Harbor. 4. **Doug** — Would you like to schedule a call with Trish Nakamura and the Calloway Wainwright team (Thomas Ashford) to discuss the defensive landscape before the full memo goes to the Board? 5. **D&O notice** — The notice of circumstances was submitted on November 16 through Glenmore Caulfield Insurance Brokers (Sarah Voss) to Northbridge Indemnity Company (primary, policy NBI-DOP-1025-00008) and Creston National Insurance Co. (excess, policy CNI-XS-2022-31004). Marcus, have we heard anything back on acknowledgment?
I'm also coordinating with Whitfield Morrow Partners (Denise Cavanaugh) and Harlan Ridge Communications (Philip Navarette) on the shareholder outreach and messaging side — I'll loop you in, Doug, once those conversations are further along. All underlying documents (bylaws, certificate of incorporation, Schedule 13D, October 28 demand letter) are in the matter file.
Happy to discuss any of the above. Thanks, both.
Claire
Claire Dempsey Associate, Capital Markets Calderwood & Harkness LLP 3960 Howard Hughes Parkway, Suite 1400 Las Vegas, NV 89169
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