Attachment: engagement-letter-rgc.docx
Trish,
I am pleased to confirm that the executed engagement letter (attached) has been fully signed and returned, formalizing Calderwood & Harkness LLP's representation of Redstone Gaming Corp. ("RGC") in connection with the defense against the activist board-seat campaign initiated by Pinnacle Harbor Capital Partners, LP. The engagement letter is dated November 15, 2022, and this matter has been assigned internal matter number 1033-00003. As you know, this engagement follows the Board's emergency meeting held on November 14, 2022, at which the Board resolved to engage outside counsel and formed the Special Committee.
**Our Team**
We have staffed the following team on this matter:
- **Douglas Fairchild** — Engagement/Responsible Partner (Las Vegas office) - **Angela Fontaine** — Billing Partner (Las Vegas office) - **Claire Dempsey** — Lead Associate, Capital Markets practice group - **Marcus Leung** — Working Associate, Banking & Finance practice group
Our Wilmington, Delaware office (1200 Market Street, Suite 3100, Wilmington, DE 19801) is also available to assist on any Delaware corporate law matters as they arise. I will serve as your primary point of contact and will interface directly with you and the Board and Special Committee members — Jim Delacroix (Chair), Carmen Vasquez, and Randall Morse — as needed.
**Engagement Economics — Summary**
For convenience, the key billing terms from the engagement letter are as follows:
- Hourly rates: Partners — $1,450/hr; Senior Associates — $1,050/hr; Associates — $850/hr - Retainer: $150,000 received, to be applied against the final invoice - Billing cycle: Monthly; invoices directed to your attention
**Immediate Next Steps**
The team is already mobilized. Below are the priority workstreams we will be tackling immediately:
1. **Bylaw and Charter Review.** Claire and Marcus will conduct a comprehensive review of RGC's Amended & Restated Certificate of Incorporation (DE Secretary of State file no. 5734821) and Amended & Restated Bylaws (last amended September 12, 2021). The review will focus on the advance-notice provisions (Article II, Section 2.11), board vacancy filling rights, supermajority provisions, the exclusive forum clause, and any other defensive provisions. I would ask that you provide us with the most current certified copies of both documents at your earliest convenience. We are targeting completion of this review within one week — by approximately November 22, 2022.
2. **Schedule 13D Analysis.** We will analyze Pinnacle Harbor's preliminary Schedule 13D filed with the SEC on November 10, 2022, which discloses a 6.8% stake in RGC common stock (7,119,600 shares out of 104,700,000 shares outstanding, acquired at a weighted-average price of $26.42 per share, reflecting a total cost basis of approximately $188.1 million). Our analysis will assess the disclosure for completeness, group formation issues, stated purposes, and compliance with Section 13(d) of the Securities Exchange Act of 1934. We will also carefully review Pinnacle Harbor's stated demands as disclosed in the 13D and in the private letter sent to Board Chair Diane Sheridan on October 28, 2022, namely: (i) appointment of two Pinnacle Harbor nominees to the RGC Board; (ii) a formal strategic review of the interactive gaming division (which generated $412 million in FY 2021 revenue), including a potential sale or spin-off; and (iii) a return of $300 million to shareholders via special dividend or accelerated buyback.
3. **Initial Situational Assessment Memorandum.** Claire and I are preparing an initial situational assessment memo for delivery to the full Board by November 18, 2022. The memo will cover Pinnacle Harbor's background — it is an event-driven/activist fund with approximately $4.2 billion in AUM, led by Managing Partner Viktor S. Kessler and Head of Activism Nadia Johar — along with the activist's track record, the current share ownership landscape, and our preliminary defensive strategy recommendations.
4. **Advisor Coordination.** To ensure the defense team is fully coordinated from the outset, I would appreciate it if you could facilitate introductory calls with RGC's other advisors:
- **Calloway Pinnacle Trust Bank** (financial advisor / investment bank) — Thomas V. Ashford, Managing Director, Activism & Corporate Defense, 200 Park Avenue, 28th Floor, New York, NY 10166. It will be important to coordinate financial analysis of Pinnacle Harbor's demands and the potential shareholder value arguments early on. - **Whitfield Morrow Partners, LLC** (proxy solicitor) — Denise Cavanaugh, Senior Vice President, 501 Madison Avenue, 14th Floor, New York, NY 10022. We need to begin assessing the shareholder base composition and potential voting dynamics in the event of a contested election at the 2023 annual meeting. - **Harlan Ridge Communications, LLC** (investor relations advisor) — Philip Navarette, Partner, 712 Fifth Avenue, Suite 900, New York, NY 10019. We should coordinate on messaging and any public communications or press response strategy.
I would suggest scheduling a joint kickoff call with all advisors and the Special Committee within the next few days if schedules permit.
5. **Advance-Notice Window Awareness.** I want to flag for your awareness that the advance-notice window under Article II, Section 2.11 of the Bylaws will be a critical timeline. Based on the prior annual meeting date of May 11, 2022, the nomination notice window opens 150 days before the anniversary — December 12, 2022 — and closes 120 days before — January 11, 2023. We will have a detailed compliance analysis ready in advance of the window opening.
6. **D&O Insurance Notice.** I recommend that RGC promptly provide notice of circumstances to its D&O insurers in connection with this activist campaign. I understand the primary carrier is Northbridge Indemnity Company and the broker is Glenmore Caulfield Insurance Brokers, Inc. (Sarah Voss, SVP). Marcus can assist with preparing the notice if that would be helpful. I would suggest this be done no later than tomorrow, November 16, 2022.
**Document and Information Requests**
To allow us to move efficiently, I would ask that you assemble and provide the following to the team as promptly as possible:
- Certified copies of the Amended & Restated Certificate of Incorporation and Amended & Restated Bylaws - Copy of the October 28, 2022 private letter from Pinnacle Harbor to Chair Sheridan - Current stockholder list and recent DTC/NOBO reports (we can coordinate directly with Continental Share Services, Inc. / Jason Velmoran, your transfer agent, if that is easier) - Board composition details, committee charters, and corporate governance guidelines - Any prior correspondence with Pinnacle Harbor or its counsel (Hargrove Sloane & Birch LLP, led by Jonathan Birch III) - Current D&O policy declarations pages (primary and excess) - RGC's most recent annual report, proxy statement, and investor presentations
I am confident that our team is well-positioned to help the Board navigate this situation effectively. Please do not hesitate to reach out at any time — I am available on my cell around the clock. I look forward to speaking with you and the Special Committee soon.
Best regards, Doug
---
**Douglas Fairchild** Partner Calderwood & Harkness LLP 3960 Howard Hughes Parkway, Suite 1400 Las Vegas, NV 89169 T: (702) 551-4800 M: (702) 309-6214 E: dfairchild@calderwoodharkness.com
---
*PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION*
*This email and any attachments are protected by the attorney-client privilege and/or work product doctrine and are strictly confidential. They are intended solely for the use of the named recipient(s). If you are not the intended recipient, you are hereby notified that any review, dissemination, distribution, copying, or other use of this communication is strictly prohibited. Please do not forward or disclose this email or its contents without the prior written consent of Calderwood & Harkness LLP. If you have received this email in error, please notify the sender immediately and permanently delete all copies.*