REDSTONE GAMING CORP.

8700 Las Vegas Boulevard South, Suite 2200 Las Vegas, NV 89123

Nasdaq: RGC

November 25, 2022

Mr. Viktor S. Kessler Managing Partner & Chief Investment Officer Pinnacle Harbor Capital Partners, LP 590 Madison Avenue, 34th Floor New York, NY 10022

Dear Mr. Kessler:

On behalf of the Board of Directors (the "Board") of Redstone Gaming Corp. ("Redstone," "RGC," or the "Company"), I write in response to your letter dated October 28, 2022, addressed to me in my capacity as Chair of the Board. The Board has carefully reviewed your letter and the views expressed therein. The matters raised in your correspondence were the subject of thorough discussion at a duly convened meeting of the Board of Directors held on November 14, 2022, at which all nine directors were present and participated. The Board also notes Pinnacle Harbor Capital Partners, LP's ("Pinnacle Harbor") preliminary Schedule 13D filing with the Securities and Exchange Commission on November 10, 2022, disclosing beneficial ownership of approximately 7,119,600 shares of RGC common stock, representing an approximately 6.8% ownership stake in the Company. The Board acknowledges Pinnacle Harbor as a significant stockholder of Redstone whose perspective the Board takes seriously.

The Board's Commitment to Stockholder Value

The Board and the Company's management team, led by Chief Executive Officer Gerald R. Whitmore, are singularly focused on creating sustainable, long-term value for all Redstone stockholders. The Board is confident that the strategic direction it has established, and the operational priorities management is executing against, position the Company well to deliver superior returns over time.

Redstone's operational performance reflects this commitment. In fiscal year 2021, the Company generated revenue of $2.87 billion across its diversified portfolio of casino resort operations, interactive and online gaming platforms, and sports wagering. Based on management's guidance and year-to-date results, the Company projects fiscal year 2022 revenue of approximately $3.05 billion, representing meaningful year-over-year growth of roughly 6.3% and reflecting the strength and resilience of Redstone's operating model across its business segments.

The Board has been deliberate in overseeing strategic investments across each of the Company's three principal operating segments. In particular, the Company's interactive gaming division — which encompasses online casino gaming, digital poker, and related real-money gaming products — generated $412 million in revenue in fiscal year 2021, representing approximately 14.4% of total Company revenue. The growth trajectory of this segment, and the capital the Board has allocated to support its expansion into newly regulated markets, demonstrate the Board's recognition of the strategic importance of interactive gaming to Redstone's future. The Board has also overseen capital investment in the Company's brick-and-mortar casino resort properties, including targeted renovation programs and strategic market entries, as well as investments in the Company's sports wagering platform, which continues to gain market share in key jurisdictions.

The Board's approach to capital allocation has been disciplined and balanced. The Company currently maintains a regular quarterly dividend providing a yield of approximately 1.8%, returning meaningful capital to stockholders while preserving the financial flexibility necessary to invest in high-return growth opportunities. The Board manages the Company's capital structure prudently, with net debt of approximately $1.62 billion — a level the Board believes is appropriate given the Company's cash flow generation profile, its investment pipeline, and prevailing market conditions.

Response to Pinnacle Harbor's Specific Demands

The Board has given careful consideration to each of the specific demands set forth in your October 28, 2022 letter and addresses them in turn below.

Board Composition. Your letter demands the immediate appointment to the Board of two individuals designated by Pinnacle Harbor — Dr. Sandra Trevelyan and Mr. Hugh Desmond Grayson — and asserts that the current Board lacks sufficient expertise in digital gaming and capital markets. The Board respectfully disagrees with this characterization.

The Board currently consists of nine directors, seven of whom are independent under the applicable Nasdaq listing standards and the Company's own Corporate Governance Guidelines. The Board believes that this composition — with a supermajority of independent directors — represents strong and effective independent governance oversight. Notably, I serve as an independent Chair of the Board, ensuring that the Board's leadership structure is not dominated by management. The Board has established a robust committee structure, with each principal standing committee composed entirely of independent directors: the Audit Committee, chaired by Dr. Miriam Kaplan; the Compensation Committee, chaired by Theodore "Ted" Barlowe; and the Nominating and Corporate Governance Committee (the "Governance Committee"), which I chair. Each of these committees operates pursuant to a written charter and meets regularly, both with and without management present.

The Governance Committee, in the ordinary course of its responsibilities, regularly evaluates Board composition, director skills and qualifications, diversity of background and perspective, and refreshment opportunities. This process is ongoing and is informed by a thoughtful assessment of the skills and experience that best complement the Company's strategic priorities at any given time. The Board takes its composition seriously and is committed to ensuring that it reflects an appropriate mix of expertise, independence, and perspective.

That said, the Board does not believe it would be in the best interests of all Redstone stockholders to accede to a demand to appoint specific individuals nominated by a single stockholder outside of the Company's established governance processes. Doing so would circumvent the deliberative procedures that exist to ensure that director nominees are evaluated on their merits and in the context of the Board's overall composition, and would set a precedent that the Board believes would be detrimental to sound corporate governance. The Board is, however, open to considering qualified director candidates through the Governance Committee's existing nomination process. We encourage Pinnacle Harbor to submit any director candidates it wishes to recommend for the Governance Committee's consideration through the procedures set forth in Article II, Section 2.11 of the Company's Amended and Restated Bylaws, as last amended on September 12, 2021, including the advance-notice and informational requirements specified therein.

Strategic Review of Interactive Gaming Division

Your letter further demands that the Board undertake a formal strategic review of the Company's interactive gaming segment, including an evaluation of a potential sale, spin-off, or other separation of the division from the remainder of the Company. Your letter suggests that the interactive gaming division's value is not being fully reflected in the Company's stock price and that a separation would unlock significant value for stockholders.

The Board and management continuously evaluate strategic alternatives for all of the Company's business lines, including the interactive gaming division. This is not a static exercise — it is an integral and ongoing component of the Board's discharge of its fiduciary duties. The Board receives regular updates from management regarding the performance, competitive positioning, and strategic optionality of each business segment, and retains the flexibility to pursue value-enhancing transactions when and if the Board determines, in its business judgment, that such transactions would serve the best interests of all stockholders.

At the present time, the Board believes that the interactive gaming division is a valuable and strategically important part of Redstone's integrated business model. The division benefits from, and contributes to, the Company's established brand portfolio, its existing customer relationships and databases, its regulatory licenses across multiple jurisdictions, and its operational infrastructure. The Board does not believe that conducting a public strategic review process at the direction of a single stockholder — particularly one that, based on publicly available information, appears to have accumulated its position over a period of months rather than years — would serve the best interests of all Redstone stockholders. A public process of this nature carries meaningful execution risks, including potential disruption to the business, management distraction, competitive implications, and uncertainty for employees, customers, and regulatory counterparts. The Board will, of course, continue to evaluate the interactive gaming division's strategic positioning as part of its ongoing responsibilities and will take whatever action it determines to be appropriate in the exercise of its fiduciary duties.

Capital Return Program

Your letter demands that the Company commit to returning $300 million to stockholders through a special dividend or accelerated share repurchase program within the next two fiscal quarters. The Board has carefully considered this demand and addresses it as follows.

As noted above, the Board has a demonstrated track record of returning capital to stockholders through the Company's regular quarterly dividend program, which currently provides a yield of approximately 1.8%. The Board regularly reviews and considers adjustments to the Company's dividend and evaluates the potential use of share repurchases as a component of the Company's overall capital allocation framework.

Capital allocation decisions are made by the Board in the exercise of its fiduciary duties, taking into account a range of factors including the Company's operational requirements, growth investment opportunities, the Company's leverage profile (including net debt of approximately $1.62 billion and the terms and covenants of the Company's existing credit facilities), prevailing market conditions, the Company's cost of capital, and the need to maintain appropriate financial flexibility. The Board does not believe that committing to a specific, large-scale capital return program of the magnitude and timeline you propose at this time would be prudent or in the best interests of all Redstone stockholders. Such a commitment could constrain the Board's ability to pursue value-creating investment opportunities, could adversely affect the Company's credit profile, and would effectively delegate capital allocation authority to a single stockholder — an outcome the Board does not regard as consistent with its duties to the stockholder base as a whole.

Corporate Governance Practices

The Board is proud of the strength and independence of Redstone's corporate governance framework. As described above, the Company's governance structure features an independent Board Chair, a Board on which seven of nine directors are independent, and fully independent Audit, Compensation, and Governance Committees — each operating pursuant to a written charter. The Company is in full compliance with all applicable Nasdaq listing standards with respect to board independence, committee composition, and governance practices.

The Company's Amended and Restated Certificate of Incorporation (Delaware Secretary of State file number 5734821) and Amended and Restated Bylaws, as last amended on September 12, 2021, together establish a governance framework that the Board believes appropriately balances stockholder rights — including the right to nominate directors, to submit proposals, and to vote on fundamental corporate transactions — with the Board's ability and responsibility to act in the long-term interests of all stockholders, not merely those with the largest positions or the most vocal demands. The Board is committed to ongoing engagement with all stockholders and values constructive dialogue as an essential element of sound corporate governance.

Willingness to Engage Constructively

Notwithstanding the Board's disagreement with the specific demands set forth in your October 28, 2022 letter, the Board wishes to express its genuine willingness to engage in constructive, private dialogue with Pinnacle Harbor regarding the Company's strategy, operational performance, capital allocation priorities, and governance practices. The Board believes that candid, private engagement between a company's board and its significant stockholders is far more productive — and far more likely to result in outcomes that benefit all stockholders — than public campaigns, open letters, or adversarial postures. The Board encourages Pinnacle Harbor to pursue such engagement in good faith.

To that end, the Company's General Counsel and Corporate Secretary, Patricia Nakamura, along with the Company's outside advisors, are available to facilitate a constructive dialogue and to arrange a mutually convenient time for further discussion. We invite Pinnacle Harbor to contact Ms. Nakamura at the Company's headquarters at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, NV 89123, to initiate that process. The Board welcomes the input of all of its stockholders as it works to maximize long-term value for the benefit of the entire Redstone stockholder base.

Reservation of Rights

The Board, consistent with its fiduciary duties under the General Corporation Law of the State of Delaware, reserves all rights to take any and all actions it deems necessary or appropriate to protect the interests of Redstone Gaming Corp. and all of its stockholders. The Company's advisors — including its outside counsel, Calderwood & Harkness LLP, and its financial advisors — stand ready to assist the Board as circumstances may warrant.

Nothing in this letter, nor in any prior or subsequent communication between the Company and Pinnacle Harbor, constitutes or shall be construed as a waiver of any rights, remedies, or defenses available to the Company or the Board under applicable law, the Company's Amended and Restated Certificate of Incorporation, or its Amended and Restated Bylaws. The Company expressly reserves all such rights, remedies, and defenses in their entirety.

In closing, the Board remains confident in Redstone's strategic direction and in the leadership of Chief Executive Officer Gerald R. Whitmore and the Company's experienced management team. We are committed to executing on the strategy that we believe will deliver the greatest long-term value for all of our stockholders. It is our sincere hope that the Board and Pinnacle Harbor can engage in a productive and private dialogue, in a spirit of mutual respect and shared purpose, for the benefit of all Redstone stockholders. The Board looks forward to Pinnacle Harbor's response and to the opportunity for constructive engagement.

Very truly yours,

By: ________

Diane K. Sheridan Chair of the Board of Directors Redstone Gaming Corp.

cc: Gerald R. Whitmore, Chief Executive Officer, Redstone Gaming Corp.

cc: Patricia Nakamura, General Counsel & Corporate Secretary, Redstone Gaming Corp.

cc: Douglas Fairchild, Esq., Calderwood & Harkness LLP

Redstone Gaming Corp.

REDSTONE GAMING CORP.
8700 Las Vegas Boulevard South, Suite 2200 Las Vegas, NV 89123
Nasdaq: RGC
November 25, 2022
Mr. Viktor S. Kessler Managing Partner & Chief Investment Officer Pinnacle Harbor Capital Partners, LP 590 Madison Avenue, 34th Floor New York, NY 10022
Dear Mr. Kessler:
On behalf of the Board of Directors (the "Board") of Redstone Gaming Corp. ("Redstone," "RGC," or the "Company"), I write in response to your letter dated October 28, 2022, addressed to me in my capacity as Chair of the Board. The Board has carefully reviewed your letter and the views expressed therein. The matters raised in your correspondence were the subject of thorough discussion at a duly convened meeting of the Board of Directors held on November 14, 2022, at which all nine directors were present and participated. The Board also notes Pinnacle Harbor Capital Partners, LP's ("Pinnacle Harbor") preliminary Schedule 13D filing with the Securities and Exchange Commission on November 10, 2022, disclosing beneficial ownership of approximately 7,119,600 shares of RGC common stock, representing an approximately 6.8% ownership stake in the Company. The Board acknowledges Pinnacle Harbor as a significant stockholder of Redstone whose perspective the Board takes seriously.
The Board's Commitment to Stockholder Value
The Board and the Company's management team, led by Chief Executive Officer Gerald R. Whitmore, are singularly focused on creating sustainable, long-term value for all Redstone stockholders. The Board is confident that the strategic direction it has established, and the operational priorities management is executing against, position the Company well to deliver superior returns over time.
Redstone's operational performance reflects this commitment. In fiscal year 2021, the Company generated revenue of $2.87 billion across its diversified portfolio of casino resort operations, interactive and online gaming platforms, and sports wagering. Based on management's guidance and year-to-date results, the Company projects fiscal year 2022 revenue of approximately $3.05 billion, representing meaningful year-over-year growth of roughly 6.3% and reflecting the strength and resilience of Redstone's operating model across its business segments.
The Board has been deliberate in overseeing strategic investments across each of the Company's three principal operating segments. In particular, the Company's interactive gaming division — which encompasses online casino gaming, digital poker, and related real-money gaming products — generated $412 million in revenue in fiscal year 2021, representing approximately 14.4% of total Company revenue. The growth trajectory of this segment, and the capital the Board has allocated to support its expansion into newly regulated markets, demonstrate the Board's recognition of the strategic importance of interactive gaming to Redstone's future. The Board has also overseen capital investment in the Company's brick-and-mortar casino resort properties, including targeted renovation programs and strategic market entries, as well as investments in the Company's sports wagering platform, which continues to gain market share in key jurisdictions.
The Board's approach to capital allocation has been disciplined and balanced. The Company currently maintains a regular quarterly dividend providing a yield of approximately 1.8%, returning meaningful capital to stockholders while preserving the financial flexibility necessary to invest in high-return growth opportunities. The Board manages the Company's capital structure prudently, with net debt of approximately $1.62 billion — a level the Board believes is appropriate given the Company's cash flow generation profile, its investment pipeline, and prevailing market conditions.
Response to Pinnacle Harbor's Specific Demands
The Board has given careful consideration to each of the specific demands set forth in your October 28, 2022 letter and addresses them in turn below.
Board Composition. Your letter demands the immediate appointment to the Board of two individuals designated by Pinnacle Harbor — Dr. Sandra Trevelyan and Mr. Hugh Desmond Grayson — and asserts that the current Board lacks sufficient expertise in digital gaming and capital markets. The Board respectfully disagrees with this characterization.
The Board currently consists of nine directors, seven of whom are independent under the applicable Nasdaq listing standards and the Company's own Corporate Governance Guidelines. The Board believes that this composition — with a supermajority of independent directors — represents strong and effective independent governance oversight. Notably, I serve as an independent Chair of the Board, ensuring that the Board's leadership structure is not dominated by management. The Board has established a robust committee structure, with each principal standing committee composed entirely of independent directors: the Audit Committee, chaired by Dr. Miriam Kaplan; the Compensation Committee, chaired by Theodore "Ted" Barlowe; and the Nominating and Corporate Governance Committee (the "Governance Committee"), which I chair. Each of these committees operates pursuant to a written charter and meets regularly, both with and without management present.
The Governance Committee, in the ordinary course of its responsibilities, regularly evaluates Board composition, director skills and qualifications, diversity of background and perspective, and refreshment opportunities. This process is ongoing and is informed by a thoughtful assessment of the skills and experience that best complement the Company's strategic priorities at any given time. The Board takes its composition seriously and is committed to ensuring that it reflects an appropriate mix of expertise, independence, and perspective.
That said, the Board does not believe it would be in the best interests of all Redstone stockholders to accede to a demand to appoint specific individuals nominated by a single stockholder outside of the Company's established governance processes. Doing so would circumvent the deliberative procedures that exist to ensure that director nominees are evaluated on their merits and in the context of the Board's overall composition, and would set a precedent that the Board believes would be detrimental to sound corporate governance. The Board is, however, open to considering qualified director candidates through the Governance Committee's existing nomination process. We encourage Pinnacle Harbor to submit any director candidates it wishes to recommend for the Governance Committee's consideration through the procedures set forth in Article II, Section 2.11 of the Company's Amended and Restated Bylaws, as last amended on September 12, 2021, including the advance-notice and informational requirements specified therein.
Strategic Review of Interactive Gaming Division
Your letter further demands that the Board undertake a formal strategic review of the Company's interactive gaming segment, including an evaluation of a potential sale, spin-off, or other separation of the division from the remainder of the Company. Your letter suggests that the interactive gaming division's value is not being fully reflected in the Company's stock price and that a separation would unlock significant value for stockholders.
The Board and management continuously evaluate strategic alternatives for all of the Company's business lines, including the interactive gaming division. This is not a static exercise — it is an integral and ongoing component of the Board's discharge of its fiduciary duties. The Board receives regular updates from management regarding the performance, competitive positioning, and strategic optionality of each business segment, and retains the flexibility to pursue value-enhancing transactions when and if the Board determines, in its business judgment, that such transactions would serve the best interests of all stockholders.
At the present time, the Board believes that the interactive gaming division is a valuable and strategically important part of Redstone's integrated business model. The division benefits from, and contributes to, the Company's established brand portfolio, its existing customer relationships and databases, its regulatory licenses across multiple jurisdictions, and its operational infrastructure. The Board does not believe that conducting a public strategic review process at the direction of a single stockholder — particularly one that, based on publicly available information, appears to have accumulated its position over a period of months rather than years — would serve the best interests of all Redstone stockholders. A public process of this nature carries meaningful execution risks, including potential disruption to the business, management distraction, competitive implications, and uncertainty for employees, customers, and regulatory counterparts. The Board will, of course, continue to evaluate the interactive gaming division's strategic positioning as part of its ongoing responsibilities and will take whatever action it determines to be appropriate in the exercise of its fiduciary duties.
Capital Return Program
Your letter demands that the Company commit to returning $300 million to stockholders through a special dividend or accelerated share repurchase program within the next two fiscal quarters. The Board has carefully considered this demand and addresses it as follows.
As noted above, the Board has a demonstrated track record of returning capital to stockholders through the Company's regular quarterly dividend program, which currently provides a yield of approximately 1.8%. The Board regularly reviews and considers adjustments to the Company's dividend and evaluates the potential use of share repurchases as a component of the Company's overall capital allocation framework.
Capital allocation decisions are made by the Board in the exercise of its fiduciary duties, taking into account a range of factors including the Company's operational requirements, growth investment opportunities, the Company's leverage profile (including net debt of approximately $1.62 billion and the terms and covenants of the Company's existing credit facilities), prevailing market conditions, the Company's cost of capital, and the need to maintain appropriate financial flexibility. The Board does not believe that committing to a specific, large-scale capital return program of the magnitude and timeline you propose at this time would be prudent or in the best interests of all Redstone stockholders. Such a commitment could constrain the Board's ability to pursue value-creating investment opportunities, could adversely affect the Company's credit profile, and would effectively delegate capital allocation authority to a single stockholder — an outcome the Board does not regard as consistent with its duties to the stockholder base as a whole.
Corporate Governance Practices
The Board is proud of the strength and independence of Redstone's corporate governance framework. As described above, the Company's governance structure features an independent Board Chair, a Board on which seven of nine directors are independent, and fully independent Audit, Compensation, and Governance Committees — each operating pursuant to a written charter. The Company is in full compliance with all applicable Nasdaq listing standards with respect to board independence, committee composition, and governance practices.
The Company's Amended and Restated Certificate of Incorporation (Delaware Secretary of State file number 5734821) and Amended and Restated Bylaws, as last amended on September 12, 2021, together establish a governance framework that the Board believes appropriately balances stockholder rights — including the right to nominate directors, to submit proposals, and to vote on fundamental corporate transactions — with the Board's ability and responsibility to act in the long-term interests of all stockholders, not merely those with the largest positions or the most vocal demands. The Board is committed to ongoing engagement with all stockholders and values constructive dialogue as an essential element of sound corporate governance.
Willingness to Engage Constructively
Notwithstanding the Board's disagreement with the specific demands set forth in your October 28, 2022 letter, the Board wishes to express its genuine willingness to engage in constructive, private dialogue with Pinnacle Harbor regarding the Company's strategy, operational performance, capital allocation priorities, and governance practices. The Board believes that candid, private engagement between a company's board and its significant stockholders is far more productive — and far more likely to result in outcomes that benefit all stockholders — than public campaigns, open letters, or adversarial postures. The Board encourages Pinnacle Harbor to pursue such engagement in good faith.
To that end, the Company's General Counsel and Corporate Secretary, Patricia Nakamura, along with the Company's outside advisors, are available to facilitate a constructive dialogue and to arrange a mutually convenient time for further discussion. We invite Pinnacle Harbor to contact Ms. Nakamura at the Company's headquarters at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, NV 89123, to initiate that process. The Board welcomes the input of all of its stockholders as it works to maximize long-term value for the benefit of the entire Redstone stockholder base.
Reservation of Rights
The Board, consistent with its fiduciary duties under the General Corporation Law of the State of Delaware, reserves all rights to take any and all actions it deems necessary or appropriate to protect the interests of Redstone Gaming Corp. and all of its stockholders. The Company's advisors — including its outside counsel, Calderwood & Harkness LLP, and its financial advisors — stand ready to assist the Board as circumstances may warrant.
Nothing in this letter, nor in any prior or subsequent communication between the Company and Pinnacle Harbor, constitutes or shall be construed as a waiver of any rights, remedies, or defenses available to the Company or the Board under applicable law, the Company's Amended and Restated Certificate of Incorporation, or its Amended and Restated Bylaws. The Company expressly reserves all such rights, remedies, and defenses in their entirety.
In closing, the Board remains confident in Redstone's strategic direction and in the leadership of Chief Executive Officer Gerald R. Whitmore and the Company's experienced management team. We are committed to executing on the strategy that we believe will deliver the greatest long-term value for all of our stockholders. It is our sincere hope that the Board and Pinnacle Harbor can engage in a productive and private dialogue, in a spirit of mutual respect and shared purpose, for the benefit of all Redstone stockholders. The Board looks forward to Pinnacle Harbor's response and to the opportunity for constructive engagement.
Very truly yours,
By: ________
Diane K. Sheridan Chair of the Board of Directors Redstone Gaming Corp.
cc: Gerald R. Whitmore, Chief Executive Officer, Redstone Gaming Corp.
cc: Patricia Nakamura, General Counsel & Corporate Secretary, Redstone Gaming Corp.
cc: Douglas Fairchild, Esq., Calderwood & Harkness LLP
Redstone Gaming Corp. | 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, NV 89123 | Nasdaq: RGC

REDSTONE GAMING CORP.

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