Attachment: Cooperation and Standstill Agreement — Draft (v1) (cooperation-standstill-agreement-draft-v1.docx)
Jonathan,
On behalf of our client Redstone Gaming Corp. ("Redstone" or "RGC"), please find attached an initial draft of the Cooperation and Standstill Agreement (the "Agreement") between Redstone Gaming Corp., on the one hand, and Pinnacle Harbor Capital Partners, LP, together with Pinnacle Harbor Capital Management, LLC and Viktor S. Kessler (collectively, "Pinnacle Harbor"), on the other. This draft has been prepared by Calderwood & Harkness LLP and is being transmitted to you and your colleagues at Hargrove Sloane & Birch LLP on behalf of Pinnacle Harbor for review and comment.
As you know, the parties and their respective principals and counsel engaged in productive settlement discussions on January 30, 2023 and February 14, 2023. The attached draft is intended to reflect the principal terms outlined in the non-binding framework term sheet that was exchanged during the February 14 session. These settlement discussions were undertaken with the authorization of the Special Committee of Redstone's Board of Directors, and we believe the draft faithfully captures the framework that emerged from those conversations.
For ease of your review, the key terms incorporated in the draft are summarized below:
- **Standstill Period.** Eighteen (18) months from the date of execution. Based on a target execution date of March 10, 2023, the standstill period would run through September 10, 2024.
- **Ownership Cap.** Pinnacle Harbor may not acquire beneficial ownership of shares of RGC common stock in excess of 9.9% of total outstanding shares during the standstill period.
- **Board Appointment.** Appointment of one (1) mutually agreed independent director to the RGC Board — such director to be neither a Pinnacle Harbor nominee nor a current RGC insider. The independent director will be selected from a pool of candidates identified by a joint selection committee comprising representatives of both parties, and will serve until the 2025 annual meeting of stockholders.
- **Strategic Review.** The RGC Board will conduct an internal review of strategic alternatives for the interactive gaming division, to be completed within one hundred twenty (120) days of execution (i.e., by approximately July 8, 2023). A summary report of that review will be delivered to the full Board. For the avoidance of doubt, RGC has no obligation to share the conclusions of such review with Pinnacle Harbor.
- **Voting Commitment.** During the standstill period, Pinnacle Harbor will vote all shares beneficially owned by it in favor of RGC management's director nominees at each annual or special meeting, and in accordance with Board recommendations on all other proposals submitted to stockholders.
- **Withdrawal of Nominations.** Pinnacle Harbor will withdraw all pending director nominations — specifically, the nominations of Dr. Sandra Trevelyan and Hugh Desmond Grayson — and will agree not to solicit proxies or consent solicitations during the standstill period.
- **Non-Disparagement.** Mutual non-disparagement obligations applicable during the standstill period.
- **Expense Reimbursement.** RGC will reimburse Pinnacle Harbor's documented, reasonable outside legal expenses incurred in connection with this matter, subject to a cap of $750,000.
- **Termination Triggers.** The Agreement may be terminated upon: (i) a material breach that remains uncured for fifteen (15) business days following written notice; (ii) a change of control of RGC; or (iii) Pinnacle Harbor's beneficial ownership falling below 3.5% of outstanding shares.
- **Governing Law.** State of Delaware.
We would appreciate it if you and your team could review the draft and provide any comments or a markup within ten (10) business days — that is, by approximately March 8, 2023. It is our understanding that both sides share an interest in reaching a definitive agreement well in advance of the proxy filing season for RGC's 2023 annual meeting, and we believe a timely exchange of comments will help facilitate that objective. Once your team has had an opportunity to review the draft, we are happy to schedule a call or an in-person meeting to work through any open points.
As a reminder, the attached draft and this communication are exchanged solely for purposes of the ongoing settlement discussions between the parties and are subject to all applicable settlement privilege and confidentiality protections. The draft is marked as a working draft and is not intended to create any binding obligations on either party unless and until a definitive agreement is executed by all parties.
Jonathan, please do not hesitate to reach out if you have any preliminary questions. I am available to discuss at your convenience.
Best regards,
Douglas Fairchild Partner Calderwood & Harkness LLP 3960 Howard Hughes Parkway, Suite 1400 Las Vegas, NV 89169 Direct: (702) 555-4118 Email: dfairchild@calderwoodharkness.com Matter No. 1033-00003
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