1033-00003 · Redstone Gaming Corp · Engagement

matter-status-dormancy-memo.docx DOCUMENT M&A / Corporate

14 / 35 ← → ✕

CALDERWOOD & HARKNESS LLP INTERNAL MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: File — Matter No. 1033-00003

FROM: Douglas Fairchild, Responsible Partner

DATE: June 1, 2023

RE: Redstone Gaming Corp. — Defense Against Pinnacle Harbor Capital Partners, LP Activist Board-Seat Campaign — Transition to Dormant Status

CC: Angela Fontaine (Billing Partner); Claire Dempsey (Lead Associate); Marcus Leung (Working Associate)

I. Purpose

The purpose of this memorandum is to document the formal transition of Calderwood & Harkness LLP Matter No. 1033-00003 (the "Matter") to dormant status, effective as of June 1, 2023, and to memorialize in a single comprehensive reference document the factual background, procedural history, key terms of the resolution, billing summary, outstanding obligations, file retention inventory, and reactivation protocol associated with the Matter.

The Matter involved the defense of Redstone Gaming Corp. ("RGC" or the "Company"), a Delaware corporation headquartered at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, Nevada 89123 (Nasdaq: RGC; CIK 0001847625; EIN 82-4031976), against an activist board-seat campaign initiated by Pinnacle Harbor Capital Partners, LP ("Pinnacle Harbor" or "PHCP"), a Delaware limited partnership with principal offices at 590 Madison Avenue, 34th Floor, New York, New York 10022 (EIN 47-3928154). Pinnacle Harbor, through its general partner Pinnacle Harbor Capital Management, LLC, and its Managing Partner and Chief Investment Officer, Viktor S. Kessler, sought the appointment of two hand-selected director nominees to the RGC Board of Directors and demanded a strategic review of the Company's interactive gaming division and a significant capital return to shareholders.

The campaign was resolved without a contested proxy election through the execution of a Cooperation & Standstill Agreement, dated March 10, 2023, between RGC and Pinnacle Harbor (with Pinnacle Harbor Capital Management, LLC and Viktor S. Kessler as additional signatories). All material work streams associated with the Matter have been completed. No active tasks remain as of the date of this memorandum, and no outstanding deliverables are owed to the client. Accordingly, the Matter is being transitioned to dormant status in compliance with the firm's matter management policies, subject to potential reactivation during the standstill period as described in Section XI below.

II. Engagement Summary

A. Engagement Opening

The engagement was formalized through an engagement letter executed on November 15, 2022, between Calderwood & Harkness LLP and Redstone Gaming Corp. The principal client contact throughout the engagement was Patricia "Trish" Nakamura, General Counsel and Corporate Secretary of RGC. Ms. Nakamura served as the firm's primary point of communication on all substantive and administrative matters and coordinated access to Company officers, Board members, and third-party advisors as needed.

The RGC Board of Directors was chaired at all relevant times by Diane K. Sheridan, an independent director. The Company's Chief Executive Officer was Gerald R. Whitmore, and its Chief Financial Officer was Raymond Choi. Both Mr. Whitmore and Mr. Choi participated in certain discussions and strategy sessions during the course of the engagement at the direction of the Board and the Special Committee described below.

The engagement arose from an emergency meeting of the RGC Board of Directors held on November 14, 2022. That emergency session was convened in response to the filing by Pinnacle Harbor Capital Partners, LP of a preliminary Schedule 13D with the U.S. Securities and Exchange Commission (the "SEC") on November 10, 2022. The Schedule 13D disclosed that Pinnacle Harbor had accumulated a 6.8% ownership position in RGC, consisting of 7,119,600 shares of RGC common stock out of 104,700,000 shares then outstanding, and expressed activist intent with respect to the composition of the Board and strategic direction of the Company.

Pinnacle Harbor's public disclosure followed a private demand letter sent by Viktor S. Kessler to Board Chair Diane K. Sheridan on October 28, 2022, which had outlined Pinnacle Harbor's proposed slate of changes and signaled the fund's willingness to pursue a proxy contest if its demands were not voluntarily accommodated. The Board's emergency meeting on November 14, 2022 resulted in the formation of a Special Committee of independent directors and the authorization to retain outside counsel and financial advisors.

B. Staffing

The following Calderwood & Harkness LLP personnel were assigned to the Matter throughout the engagement:

• Responsible Partner: Douglas Fairchild, Real Estate practice group, resident in the firm's Las Vegas office located at 3960 Howard Hughes Parkway, Suite 1400, Las Vegas, Nevada 89169. Mr. Fairchild served as the lead attorney responsible for overall strategy, client communications, Board presentations, and settlement negotiations.

• Billing Partner: Angela Fontaine, Real Estate practice group. Ms. Fontaine was responsible for all billing administration, invoice review, and compliance with the fee arrangement set forth in the engagement letter.

• Lead Associate: Claire Dempsey, Capital Markets practice group. Ms. Dempsey served as the principal drafting attorney on all memoranda, the Cooperation & Standstill Agreement, and related transactional documents, and was responsible for coordinating with the Company's financial advisor and proxy solicitor on disclosure-related matters.

• Working Associate: Marcus Leung, Banking & Finance practice group. Mr. Leung assisted with research and analysis on SEC regulatory matters, Schedule 13D review and analysis, bylaw and charter review, and stockholder rights plan analysis.

In addition to the Las Vegas office, the engagement utilized resources from Calderwood & Harkness LLP's Wilmington, Delaware office, located at 1200 Market Street, Suite 3100, Wilmington, Delaware 19801, for Delaware corporate law support, including analysis of fiduciary duty issues, advance-notice bylaw provisions under Delaware law, and the Cooperation & Standstill Agreement's choice-of-law implications.

C. Client Advisors Engaged

RGC, at the recommendation of Calderwood & Harkness and with the authorization of the Special Committee and the full Board, retained the following advisors in connection with the Matter:

• Financial Advisor: Calloway Pinnacle Trust Bank, 200 Park Avenue, 28th Floor, New York, New York 10166. The engagement was led by Thomas V. Ashford, Managing Director, Activism & Corporate Defense. Calloway Wainwright provided strategic advice on shareholder composition, activist tactics, settlement valuation, and potential financial implications of the proposed board-seat concession and capital return demands.

• Proxy Solicitor: Whitfield Morrow Partners, LLC, 501 Madison Avenue, 14th Floor, New York, New York 10022. The senior contact was Denise Cavanaugh, Senior Vice President. Whitfield Morrow was retained to advise on vote projections, shareholder outreach strategy, and proxy contest preparedness, and would have managed solicitation logistics if the matter had proceeded to a contested election.

• Investor Relations Advisor: Harlan Ridge Communications, LLC, 712 Fifth Avenue, Suite 900, New York, New York 10019. Philip Navarette, Partner, served as the primary contact. Harlan Ridge advised on messaging strategy, managed investor and media communications, and coordinated the joint press release issued upon execution of the Cooperation & Standstill Agreement.

• Independent Auditor (Consulted): Kettering Marsh & Associates LLP, 725 S. Figueroa Street, Suite 3200, Los Angeles, California 90017. Robert Ogawa, Lead Audit Partner, was consulted on a limited basis with respect to verification of certain financial data points and segment-level metrics relating to the interactive gaming division, which were referenced in Pinnacle Harbor's public demands and which the Company needed to confirm for purposes of its Board-level strategic assessment.

• D&O Insurance Broker: Glenmore Caulfield Insurance Brokers, Inc. The senior contact was Sarah Voss, Senior Vice President. Glenmore Caulfield assisted with the submission of the notice of circumstances to D&O carriers and provided guidance on coverage implications.

• Transfer Agent: Continental Share Services, Inc., 1 Ashbury Asset Advisors, 30th Floor, New York, New York 10004. Jason Velmoran, Vice President, served as the primary contact. Continental Share Services provided stock ledger data, NOBO/OBO lists, and DTC participant reports utilized for shareholder identification and vote modeling purposes.

D. Opposing Parties and Their Advisors

The following parties and advisors were identified on the opposing side of the Matter:

• Activist Fund: Pinnacle Harbor Capital Partners, LP, a Delaware limited partnership with principal offices at 590 Madison Avenue, 34th Floor, New York, New York 10022. The general partner of the fund is Pinnacle Harbor Capital Management, LLC, also a Delaware entity. The Managing Partner and Chief Investment Officer of Pinnacle Harbor is Viktor S. Kessler. The Head of Activism and relevant Portfolio Manager is Nadia Johar. Mr. Kessler and Ms. Johar were the principal decision-makers on the activist side throughout the engagement.

• Activist's Counsel: Hargrove Sloane & Birch LLP, 1585 Broadway, 40th Floor, New York, New York 10036. The engagement was led by Jonathan "Jon" Birch III, Lead Partner. Elise Marchetti served as the associate on the matter. Hargrove Sloane & Birch handled all legal filings, correspondence, and negotiation of the Cooperation & Standstill Agreement on behalf of Pinnacle Harbor.

• Activist's Proxy Solicitor: Garrison Proxy Advisors, LLC, 17 Ashbury Asset Advisors, Suite 1600, New York, New York 10004. The Managing Director assigned to the engagement was Alicia Trent. Garrison Proxy Advisors would have managed Pinnacle Harbor's proxy solicitation had the matter proceeded to a contested election.

III. Chronological Summary of Key Events

The following chronological summary sets forth the material events and milestones in the Matter from Pinnacle Harbor's initial accumulation of its RGC position through the completion of the 2023 Annual Meeting of Stockholders. This summary is intended to serve as a comprehensive reference for any future reactivation of the Matter and as a record for the firm's institutional files.

A. Activist Accumulation and Initial Demands (June – November 2022)

Between approximately June 2022 and November 2022, Pinnacle Harbor Capital Partners, LP accumulated a 6.8% ownership position in RGC common stock, totaling 7,119,600 shares of the 104,700,000 shares then outstanding. Based on publicly available information and the disclosures in Pinnacle Harbor's Schedule 13D, the weighted-average purchase price for the position was approximately $26.42 per share, resulting in a total cost basis of approximately $188.1 million.

During this accumulation period, the RGC share price exhibited a steady upward trajectory. As of June 1, 2022, the closing share price was $24.18. By September 30, 2022, the share price had risen to $27.55. By November 10, 2022 — the date on which Pinnacle Harbor filed its preliminary Schedule 13D with the SEC — the share price had further increased to $29.12, reflecting broader market tailwinds in the gaming and leisure sector as well as, in retrospect, likely market awareness of increased institutional accumulation.

On October 28, 2022, Pinnacle Harbor, through Viktor S. Kessler, transmitted a private demand letter to Board Chair Diane K. Sheridan. The letter outlined three principal demands:

(1) The immediate appointment of two Pinnacle Harbor-selected director nominees to the RGC Board: Dr. Sandra Trevelyan, former Chief Operating Officer of Meridian Interactive Holdings, Inc., and Hugh Desmond Grayson, former Chief Financial Officer of Atlas Leisure Group, Inc.;

(2) A comprehensive strategic review of the Company's interactive gaming division, which had generated fiscal year 2021 revenue of approximately $412 million, representing 14.4% of total Company revenue of approximately $2.87 billion; and

(3) The return of $300 million to shareholders through either a special dividend or an accelerated share repurchase program, which Pinnacle Harbor contended was warranted in light of the Company's balance sheet capacity and what the fund characterized as underinvestment returns in the interactive gaming segment.

On November 10, 2022, Pinnacle Harbor filed its preliminary Schedule 13D with the SEC, publicly disclosing its 6.8% position and activist intent. The filing attracted significant market and media attention and prompted a $2.57 increase in RGC's share price over the following two trading sessions.

On November 14, 2022, the RGC Board of Directors convened an emergency meeting. At that meeting, the Board formed a Special Committee consisting of three independent directors — Jim Delacroix (Committee Chair), Carmen Vasquez, and Randall Morse — and authorized the Special Committee to oversee the Company's response to the activist campaign and to engage outside counsel, financial advisors, and other professionals as necessary. The Board's formation of the Special Committee followed the recommendation of General Counsel Patricia Nakamura, who had previously identified Calderwood & Harkness LLP as a potential outside counsel engagement.

B. Engagement and Defensive Analysis Phase (November – December 2022)

On November 15, 2022, Calderwood & Harkness LLP's engagement was formally opened through execution of the engagement letter between the firm and RGC. At the time of engagement, the RGC market capitalization was approximately $3.14 billion, based on 104,700,000 shares outstanding and a closing share price of approximately $30.00 per share. Pinnacle Harbor's position, marked to market at that price, was valued at approximately $213.6 million, reflecting an unrealized gain of approximately $25.5 million, or 13.5%, over the fund's cost basis.

On November 16, 2022, Calderwood & Harkness, acting on behalf of RGC, submitted a notice of circumstances to the Company's directors' and officers' liability insurance carriers through broker Glenmore Caulfield Insurance Brokers, Inc. (Sarah Voss, SVP). The notice was submitted to both the primary carrier, Northbridge Indemnity Company (policy number NBI-DOP-1025-00008, $15 million limit, $500,000 retention), and the first excess carrier, Creston National Insurance Co. (policy number CNI-XS-2022-31004, $10 million excess of $15 million). The notice was submitted on a precautionary basis to preserve the Company's and its directors' coverage rights in the event that the activist campaign escalated into litigation or other proceedings that could give rise to covered loss.

On November 18, 2022, Calderwood & Harkness delivered to the Board an initial situational assessment memorandum. This memorandum provided a preliminary analysis of Pinnacle Harbor's demands, a profile of the activist fund's track record and methodology, an assessment of the Company's vulnerabilities, and a recommended framework for the Board's response.

On November 22, 2022, Calderwood & Harkness completed its review of the Company's Amended & Restated Bylaws (last amended September 12, 2021) and Amended & Restated Certificate of Incorporation (Delaware Secretary of State file number 5734821). This review focused on the Company's existing structural defenses and governance provisions, including advance-notice requirements, board vacancy filling provisions, classified board provisions (if any), supermajority voting requirements, and exclusive forum clauses.

On or about November 25, 2022, a response letter was transmitted on behalf of Board Chair Diane K. Sheridan to Viktor S. Kessler, acknowledging receipt of the October 28 demand letter and expressing the Board's willingness to consider Pinnacle Harbor's views through appropriate channels while reserving all rights.

On November 30, 2022, Pinnacle Harbor escalated its campaign by publishing an open letter addressed to the RGC Board and shareholders. The open letter reiterated the fund's demands for the appointment of Dr. Sandra Trevelyan and Hugh Desmond Grayson to the Board and threatened to initiate a proxy contest at the Company's 2023 annual meeting of stockholders if the Board did not accede to Pinnacle Harbor's demands. The RGC share price closed at $31.74 on that date.

On December 5, 2022, Calderwood & Harkness delivered to the Board and the Special Committee a comprehensive bylaw and charter defensive review memorandum. The memorandum analyzed the Company's advance-notice provisions (Article II, Section 2.11 of the Amended & Restated Bylaws), board vacancy filling rights, supermajority vote requirements applicable to certain amendments, and the exclusive forum provision designating the Court of Chancery of the State of Delaware as the exclusive forum for certain intra-corporate disputes. The memorandum assessed the enforceability of each provision under Delaware law and recommended strategies for utilizing these provisions in the defense.

On December 8, 2022, Hargrove Sloane & Birch LLP, acting on behalf of Pinnacle Harbor, transmitted to RGC a formal notice of intent to nominate directors pursuant to the advance-notice bylaw provisions contained in the Company's Amended & Restated Bylaws. This notice signaled Pinnacle Harbor's formal preparation for a potential proxy contest.

On December 12, 2022, the advance-notice window under the Company's bylaws opened. The window was calculated at 150 days before May 11, 2023, the anniversary of the prior annual meeting, which had been held on May 11, 2022. Under the Company's bylaws, stockholder nominations for directors were required to be received by the Corporate Secretary no earlier than 150 days and no later than 120 days before the anniversary of the prior annual meeting.

On December 14, 2022, Calderwood & Harkness delivered an advance-notice compliance analysis to the Board and General Counsel, confirming the applicable window dates, identifying the specific informational requirements imposed by the bylaws on any nominating stockholder, and establishing a framework for evaluating the sufficiency of any nomination notice received from Pinnacle Harbor.

On December 19, 2022, Calderwood & Harkness presented to the Board a detailed analysis of a potential limited-duration stockholder rights plan (commonly referred to as a "poison pill"). The analysis addressed the fiduciary duty considerations under Delaware law governing the adoption of a rights plan in the activist context, the anticipated reactions of the two leading proxy advisory firms — Centurion Governance Services, Inc. and Hartley Shareholder Advisory Group, LLC — and the strategic risks associated with adoption, including the potential for such adoption to alienate institutional shareholders and undermine the Company's governance profile. Following discussion, the Board declined to adopt a stockholder rights plan at that time.

C. Nomination Review Phase (January 2023)

On January 6, 2023, Pinnacle Harbor filed an amended Schedule 13D with the SEC, which included updated disclosure reflecting the fund's intention to pursue a proxy contest at the 2023 annual meeting if a negotiated resolution could not be reached. The RGC share price closed at $32.90 on that date.

On January 9, 2023, RGC received Pinnacle Harbor's formal nomination notice, submitted in accordance with the advance-notice provisions of Article II, Section 2.11 of the Company's Amended & Restated Bylaws. The notice was received two days before the close of the advance-notice window on January 11, 2023, which was 120 days before the May 11, 2023 anniversary date. The nomination notice identified Dr. Sandra Trevelyan and Hugh Desmond Grayson as Pinnacle Harbor's nominees for election to the Board at the 2023 annual meeting.

On January 11, 2023, the advance-notice window closed. No other stockholder submitted a nomination notice during the applicable period.

On January 13, 2023, Calderwood & Harkness delivered to the Board and the Special Committee a nominee qualification and deficiency review memorandum. The memorandum analyzed the backgrounds and qualifications of both nominees — Dr. Sandra Trevelyan and Hugh Desmond Grayson — and assessed their compliance with the informational requirements of the Company's advance-notice bylaws. The memorandum also addressed Nasdaq Stock Market independence requirements applicable to listed company directors and, critically, analyzed the gaming regulatory licensing implications of the proposed nominees' appointment, including the need for suitability findings and background investigations by the Nevada Gaming Control Board and the Nevada Gaming Commission. While certain technical deficiencies were identified in the nomination notice, these deficiencies were assessed as potentially curable and were not, standing alone, considered a sufficient basis for rejecting the nominations.

D. Settlement Negotiations Phase (January – March 2023)

On January 20, 2023, the Special Committee (Delacroix, Vasquez, Morse) authorized direct engagement with Pinnacle Harbor to explore the possibility of a negotiated settlement that would avoid the expense, distraction, and uncertainty of a contested proxy election. The Special Committee concluded, based on the advice of Calderwood & Harkness and Calloway Pinnacle Trust Bank, that a constructive dialogue with Pinnacle Harbor could yield a resolution that addressed certain legitimate concerns raised by the fund while preserving the Board's strategic prerogatives and avoiding the significant costs associated with a full proxy contest.

On January 28, 2023, Douglas Fairchild communicated with Jonathan Birch III of Hargrove Sloane & Birch LLP to propose direct discussions between the parties.

On January 30, 2023, the first settlement discussion took place between Douglas Fairchild and Patricia Nakamura on behalf of RGC and Jonathan Birch III and Viktor S. Kessler on behalf of Pinnacle Harbor. The discussion covered the general parameters of a potential resolution, including the concept of a mutually agreed independent director appointment, the scope and nature of any strategic review commitment, and the framework for a standstill arrangement.

On February 9, 2023, it came to our attention through counsel-to-counsel communications that Pinnacle Harbor had transmitted a draft preliminary proxy statement to Hargrove Sloane & Birch for SEC filing preparation. However, no preliminary proxy statement was ultimately filed with the SEC, which we interpreted as a signal that Pinnacle Harbor was using the filing preparation as leverage in the settlement discussions while maintaining a genuine interest in reaching a negotiated outcome.

On February 14, 2023, a second settlement discussion took place. During this session, the parties exchanged a non-binding framework term sheet setting forth the principal economic and governance terms under discussion. The framework term sheet addressed the key pillars of the eventual agreement, including board representation, standstill duration, ownership cap, and voting commitments.

On February 22, 2023, Calderwood & Harkness circulated to Hargrove Sloane & Birch LLP the initial draft (v1) of a Cooperation & Standstill Agreement, which reflected the terms discussed in the February 14 session and incorporated additional protective provisions for the Company.

In late February 2023, Hargrove Sloane & Birch returned a marked-up version of the agreement (v2) with comments on several key provisions, including the duration of the standstill period, the proposed ownership cap, and Pinnacle Harbor's request for reimbursement of its documented legal expenses incurred in connection with the campaign.

On or about March 1, 2023, Calderwood & Harkness circulated a revised draft (v3) incorporating the firm's responses to the Hargrove Sloane markup and reflecting compromises discussed in intervening telephone conferences between counsel.

On March 3, 2023, a final negotiation session was held, during which the remaining open issues — principally the standstill duration (which was agreed at 18 months), the ownership cap percentage (9.9%), the expense reimbursement cap ($750,000), and the identification of the mutually agreed director candidate (Franklin Chu, selected from a pool of three candidates evaluated by a joint committee) — were resolved.

E. Execution and Resolution Phase (March 2023)

On or about March 9, 2023, the RGC Board of Directors adopted resolutions approving the Cooperation & Standstill Agreement, authorizing the appointment of Franklin Chu as a new independent director effective April 1, 2023, and directing management to conduct a 120-day internal strategic review of the interactive gaming division.

On March 10, 2023, the Cooperation & Standstill Agreement was executed by and among Redstone Gaming Corp., Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, and Viktor S. Kessler. The agreement set forth the comprehensive terms of the settlement, as summarized in Section IV below. The RGC share price closed at $33.25 on the date of execution.

On March 13, 2023, a joint press release was issued by RGC and Pinnacle Harbor, coordinated through Harlan Ridge Communications, LLC. The press release announced the terms of the settlement, including the appointment of Franklin Chu and the Company's commitment to conduct the interactive gaming strategic review. Concurrently with the issuance of the press release, Pinnacle Harbor formally withdrew all director nominations for the 2023 annual meeting.

On March 15, 2023, Pinnacle Harbor filed an amended Schedule 13D with the SEC, reflecting the standstill arrangement, the withdrawal of all director nominations, and the terms of the Cooperation & Standstill Agreement.

F. Post-Settlement Events (April – May 2023)

On April 1, 2023, Franklin Chu was formally appointed to the RGC Board of Directors as the mutually agreed independent director contemplated by the Cooperation & Standstill Agreement. Mr. Chu, age 52, is the former Chief Executive Officer of Prism Digital Entertainment, LLC. He was selected from a pool of three candidates evaluated by a joint committee comprising representatives of both RGC and Pinnacle Harbor. Mr. Chu's appointment was effective immediately, and he will serve until the Company's 2025 annual meeting of stockholders. In connection with the appointment, the Board size was increased from nine to ten directors.

On May 18, 2023, RGC held its 2023 Annual Meeting of Stockholders. The meeting proceeded as an uncontested election. All nine management-slate director nominees were elected, and Franklin Chu continued to serve as a director (his seat was not up for election at the 2023 meeting). The RGC share price closed at $35.60 on the date of the annual meeting, reflecting positive market reception of the resolution and the Company's governance posture.

IV. Summary of Cooperation & Standstill Agreement Key Terms

The Cooperation & Standstill Agreement, dated March 10, 2023, was executed by and among Redstone Gaming Corp., Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, and Viktor S. Kessler. The following is a summary of the material terms of the agreement:

• Standstill Period: Eighteen (18) months from the date of execution, commencing on March 10, 2023 and expiring on September 10, 2024.

• Ownership Cap: During the standstill period, Pinnacle Harbor and its affiliates may not acquire, directly or indirectly, shares of RGC common stock that would cause the group's aggregate beneficial ownership to exceed 9.9% of RGC's outstanding common stock.

• Board Concession: RGC agreed to appoint one new independent director mutually agreed upon by RGC and Pinnacle Harbor. The selected director was to be neither a Pinnacle Harbor nominee (i.e., neither Dr. Sandra Trevelyan nor Hugh Desmond Grayson) nor a current RGC insider. The director was to be selected from a pool of three candidates identified and evaluated by a joint committee comprising representatives of both parties. Franklin Chu was selected through this process and appointed effective April 1, 2023.

• Strategic Review: The RGC Board committed to conducting an internal review of the interactive gaming division's strategic alternatives. The review was required to be completed within 120 days of the date of execution of the agreement (i.e., by July 8, 2023). A summary report was to be provided to the Board only. Notably, the agreement imposed no obligation on RGC to share the conclusions of the review with Pinnacle Harbor or to take any particular action based on the findings.

• Voting Commitment: During the standstill period, Pinnacle Harbor agreed to vote all shares of RGC common stock beneficially owned by the fund and its affiliates in favor of the RGC management director nominees at each annual meeting and in accordance with the Board's recommendations on all other proposals submitted to a vote of stockholders.

• Withdrawal of Nominations: Pinnacle Harbor withdrew all pending director nominations. During the standstill period, Pinnacle Harbor agreed not to nominate any candidates for election to the Board or to solicit proxies or written consents from RGC stockholders.

• Non-Disparagement: The parties agreed to mutual non-disparagement provisions effective during the standstill period.

• Expense Reimbursement: RGC agreed to reimburse Pinnacle Harbor for its documented legal expenses incurred in connection with the activist campaign, subject to a cap of $750,000. Reimbursable expenses were limited to legal fees and did not include proxy solicitor fees, public relations costs, or internal fund expenses.

• Termination Triggers: The agreement provides for early termination upon the occurrence of any of the following: (i) a material breach by either party that remains uncured for fifteen (15) business days after written notice from the non-breaching party; (ii) a change-of-control of RGC; or (iii) Pinnacle Harbor's beneficial ownership of RGC common stock dropping below 3.5% of outstanding shares.

• Governing Law: The agreement is governed by the laws of the State of Delaware, without regard to conflict-of-laws principles.

V. Key Shareholder Positions (At Time of Resolution)

The following table sets forth the principal institutional shareholders of record known to Calderwood & Harkness as of the time of the resolution in March 2023, based on Schedule 13D and 13F filings, NOBO/OBO list data obtained from Continental Share Services, Inc., and information provided by the Company's investor relations advisor, Harlan Ridge Communications, LLC:

Total shares outstanding at the time of resolution: 104,700,000.

It should be noted that Ridgeway Asset Management, LP was the single largest known institutional holder at 8.2%, exceeding Pinnacle Harbor's position. Ridgeway's stance with respect to the activist campaign was assessed as neutral-to-supportive of the incumbent Board based on shareholder engagement calls conducted by Whitfield Morrow Partners and Harlan Ridge Communications. Stillwater Capital Advisors, LLC was identified as a governance-focused holder whose support would have been critical in a contested election scenario. The Canfield Municipal Employees' Retirement System, while a smaller holder, was considered potentially influential given its status as a public pension fund with a track record of supporting governance reform proposals.

VI. RGC Board Composition (Current — Post-Chu Appointment)

As of the date of this memorandum, following the appointment of Franklin Chu effective April 1, 2023, the RGC Board of Directors consists of ten directors, as set forth below:

The Special Committee, consisting of Jim Delacroix (Chair), Carmen Vasquez, and Randall Morse, was discharged following the completion of its mandate upon execution of the Cooperation & Standstill Agreement and the successful conclusion of the 2023 Annual Meeting of Stockholders. The Special Committee's discharge was memorialized by Board resolution.

VII. Billing and Fee Summary

A. Fee Arrangement

The fee arrangement for the Matter was established in the engagement letter dated November 15, 2022. Fees were billed on an hourly basis at the following standard rates:

• Partners: $1,450 per hour

• Senior Associates: $1,050 per hour

• Associates: $850 per hour

All time was recorded and billed in increments of one-tenth of an hour in accordance with the firm's standard timekeeping practices. Disbursements, including filing fees, travel expenses, electronic research charges, and document production costs, were billed at cost. No alternative fee arrangement or success fee was utilized in connection with this engagement.

B. Retainer

A retainer in the amount of $150,000 was received from RGC at the time of engagement opening. In accordance with the terms of the engagement letter, the retainer was held in the firm's client trust account and has been applied against the final invoice issued in connection with the Matter.

C. Estimated Total Fees

The estimated total fees incurred by Calderwood & Harkness LLP in connection with the Matter from the date of engagement opening (November 15, 2022) through the transition to dormant status (June 1, 2023) are approximately $1,380,000. This figure includes all partner, senior associate, and associate time billed during the engagement period, as well as disbursements. Billing Partner Angela Fontaine will finalize and issue the closing invoice, reflecting the retainer credit of $150,000, within thirty (30) days of the date of this memorandum.

The fees incurred are considered reasonable in the context of the engagement, which encompassed a full-spectrum activist defense including Board presentations, bylaw and charter review, rights plan analysis, nominee qualification review, settlement negotiations, drafting and negotiation of the Cooperation & Standstill Agreement, and coordination with multiple third-party advisors. The matter was resolved approximately five months after engagement opening, substantially sooner than the projected timeline for a fully contested proxy election, which would have been expected to involve significantly higher legal fees, proxy solicitor costs, and financial advisory fees.

VIII. D&O Insurance Status

As noted in Section III.B above, a notice of circumstances was submitted on November 16, 2022 to RGC's directors' and officers' liability insurance carriers through broker Glenmore Caulfield Insurance Brokers, Inc. (Sarah Voss, SVP). The notice was submitted to the following carriers:

• Primary Layer: Northbridge Indemnity Company, policy number NBI-DOP-1025-00008. The policy provides a $15 million limit of liability with a $500,000 retention. The policy was renewed on January 1, 2023, and the notice of circumstances has been carried forward into the renewal policy period.

• First Excess Layer: Creston National Insurance Co., policy number CNI-XS-2022-31004. The policy provides $10 million in excess of the $15 million primary limit. The policy was renewed on January 1, 2023, and the notice of circumstances has likewise been carried forward into the renewal period.

No claims payment was required in connection with the Matter, as the activist campaign was resolved without litigation or other proceedings that would have triggered defense costs or loss payments under the D&O policies. The notice of circumstances remains on file with both carriers. This is significant because the notice preserves the Company's and its directors' ability to seek coverage in the event that any future claim arises out of the circumstances described in the notice, even if such claim is not asserted until after the current policy period has expired.

Both carriers should be advised of the transition of the Matter to dormant status. Glenmore Caulfield Insurance Brokers, Inc. should be notified and requested to coordinate any necessary communications with the carriers. This notification should be made by RGC's General Counsel Patricia Nakamura, with a copy to Calderwood & Harkness for the file.

IX. Outstanding Matters and Continuing Obligations

Although the Matter is being transitioned to dormant status, certain obligations arising from the Cooperation & Standstill Agreement remain in effect and will require monitoring during the standstill period. The following matters are identified for the Company's ongoing attention.

A. Standstill Period

The standstill period under the Cooperation & Standstill Agreement runs for eighteen months from the date of execution, commencing on March 10, 2023 and expiring on September 10, 2024. During this period, Pinnacle Harbor is subject to the ownership cap (9.9% of outstanding common stock), voting commitments (voting in favor of management director nominees and in accordance with Board recommendations), non-disparagement obligations, and restrictions on proxy solicitation and director nominations.

RGC and its advisors should actively monitor Pinnacle Harbor's compliance with these provisions throughout the standstill period. Monitoring should include periodic review of Schedule 13D/A amendments filed by Pinnacle Harbor with the SEC, Form 4 filings (if applicable), and any public statements made by Pinnacle Harbor or its principals that could constitute a violation of the non-disparagement provisions. Any potential breach or suspected non-compliance should be reported immediately to Calderwood & Harkness. In the event of a confirmed or suspected breach, the Matter can be reactivated from dormant status, and appropriate enforcement actions — including demands for cure within the fifteen-business-day cure period and, if necessary, litigation in the Court of Chancery of the State of Delaware — can be pursued.

B. Interactive Gaming Strategic Review

The Cooperation & Standstill Agreement requires the RGC Board to conduct an internal strategic review of the interactive gaming division's strategic alternatives, to be completed within 120 days of the date of execution of the agreement — i.e., by July 8, 2023. A summary report of the review is to be provided to the Board. The agreement expressly provides that RGC has no obligation to share the conclusions of the review with Pinnacle Harbor or to take any particular action as a result of the review's findings.

Calderwood & Harkness has not been retained to assist with this work stream. The review is to be conducted internally by RGC management and the Board, with such financial advisory and consulting support as the Board may deem appropriate. However, if legal issues arise in connection with the review — including questions regarding the Board's fiduciary duties in evaluating strategic alternatives for the interactive gaming division — RGC should consult Calderwood & Harkness or other appropriate counsel.

C. Termination Triggers to Monitor

The Cooperation & Standstill Agreement provides for early termination upon the occurrence of any of the following events:

(i) A material breach by either party that remains uncured for fifteen (15) business days after written notice from the non-breaching party;

(ii) A change-of-control of RGC, as defined in the agreement; or

(iii) Pinnacle Harbor's beneficial ownership of RGC common stock dropping below 3.5% of outstanding shares (approximately 3,664,500 shares based on current shares outstanding).

If any of these termination triggers occurs, the standstill and all associated obligations would terminate, and Pinnacle Harbor would be free to resume activist activities, including nominations and proxy solicitation, subject only to applicable securities laws and the Company's bylaw provisions. In the event that any trigger occurs or appears imminent, RGC should immediately consult Calderwood & Harkness regarding the Company's rights and obligations under the agreement and the potential reactivation of the Matter.

D. Proxy Advisory Firm Matters

During the pendency of the Matter, both Centurion Governance Services, Inc. and Hartley Shareholder Advisory Group, LLC were in the process of evaluating the activist campaign and preparing recommendations in connection with the anticipated proxy contest at the 2023 annual meeting. Because the matter was resolved before a contested election, neither proxy advisory firm finalized or published formal recommendations with respect to the Pinnacle Harbor director nominees. No further action is required with respect to proxy advisory firm matters at this time.

X. Document Repository and File Retention

The following is a comprehensive summary of all key work product generated by Calderwood & Harkness LLP during the course of the engagement. All documents listed below are maintained in electronic form under Matter No. 1033-00003 in the firm's document management system and are subject to the firm's document retention policy.

1. Engagement letter, dated November 15, 2022

2. Conflicts clearance memorandum, dated November 14, 2022

3. Initial situational assessment memorandum, dated November 18, 2022

4. Bylaw and charter defensive review memorandum, dated December 5, 2022

5. Advance-notice compliance analysis, dated December 14, 2022

6. Stockholder rights plan (poison pill) analysis, dated December 19, 2022

7. Nominee qualification and deficiency review memorandum, dated January 13, 2023

8. Shareholder ownership and voting power analysis (spreadsheet, multiple versions updated through March 2023)

9. Proxy contest readiness and defense strategy memorandum, dated January 18, 2023

10. Schedule 13D analysis memorandum (covering initial filing and all amendments through March 15, 2023)

11. Settlement strategy memorandum, dated January 19, 2023

12. D&O insurance notice of circumstances and coverage review memoranda, dated November 16, 2022 and updated January 2023

13. Framework term sheet, dated February 14, 2023

14. Cooperation & Standstill Agreement — draft v1 (February 22, 2023), draft v2 (Hargrove Sloane & Birch redline, late February 2023), draft v3 (March 1, 2023), and execution version (March 10, 2023)

15. Joint press release — draft and final version, dated March 13, 2023

16. Board resolutions — Special Committee formation (November 14, 2022), settlement authorization (January 20, 2023), Cooperation & Standstill Agreement approval and Chu appointment authorization (March 9, 2023), Special Committee discharge (May 2023)

17. Draft Form 8-K (prepared for potential filing in connection with the settlement announcement)

18. Amended Schedule 13D review memorandum, dated March 15, 2023

19. Shareholder outreach strategy memorandum (prepared in coordination with Whitfield Morrow Partners and Harlan Ridge Communications)

20. Relevant correspondence with Hargrove Sloane & Birch LLP (including the initial outreach from Douglas Fairchild to Jonathan Birch III and all subsequent counsel-to-counsel communications)

21. Relevant correspondence with client (including email communications with Patricia Nakamura and memoranda to the Board and Special Committee)

All files are to be retained in accordance with Calderwood & Harkness LLP's document retention policy. Electronic files are stored under Matter No. 1033-00003 in the firm's document management system and are accessible to all team members identified in Section II.B above. Physical files, if any, are maintained at the firm's Las Vegas office. No documents have been produced to third parties, and all work product remains subject to the attorney-client privilege and the work product doctrine.

XI. Reactivation Protocol

The Matter may be reactivated from dormant status upon the occurrence of any of the following circumstances:

• A breach or alleged breach of the Cooperation & Standstill Agreement by either party;

• Renewed activist activity by Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, Viktor S. Kessler, or any affiliate of the foregoing, whether during or following expiration of the standstill period on September 10, 2024;

• A new activist campaign directed at RGC by any other stockholder or group of stockholders;

• A request from RGC management, General Counsel Patricia Nakamura, or the Board of Directors for the resumption of Calderwood & Harkness's advisory services in connection with matters related to or arising from the engagement.

Reactivation of the Matter is to be coordinated through Douglas Fairchild (Responsible Partner) and Patricia Nakamura (General Counsel, RGC). Upon reactivation, the matter will be removed from dormant status in the firm's billing and matter management systems, and the existing engagement letter will govern the resumed work unless the parties agree to modified terms.

All team members — Angela Fontaine (Billing Partner), Claire Dempsey (Lead Associate), and Marcus Leung (Working Associate) — are to remain available for reactivation during the standstill period through September 10, 2024. In the event that any team member is unavailable due to departure from the firm, reassignment, or other circumstances, a replacement will be designated by Douglas Fairchild with notice to the client.

XII. Conclusion

Calderwood & Harkness LLP Matter No. 1033-00003 is hereby formally transitioned to dormant status as of June 1, 2023. The activist board-seat campaign initiated by Pinnacle Harbor Capital Partners, LP against Redstone Gaming Corp. was resolved without a contested proxy election through the execution of the Cooperation & Standstill Agreement on March 10, 2023. The agreement provided for the appointment of a mutually agreed independent director (Franklin Chu, effective April 1, 2023), an 18-month standstill period (through September 10, 2024), a 120-day internal strategic review of the interactive gaming division, and other customary cooperation and standstill provisions.

The 2023 Annual Meeting of Stockholders of Redstone Gaming Corp. was held on May 18, 2023 without contest. All nine management-slate director nominees were duly elected by the stockholders. The RGC share price at the time of the annual meeting was $35.60, representing an increase of approximately 22.3% from the $29.12 closing price on the date of Pinnacle Harbor's initial Schedule 13D filing (November 10, 2022) and reflecting broadly positive market reception of the Company's handling of the activist campaign and the terms of the resolution.

Calderwood & Harkness will continue to monitor the Matter through the standstill expiration date of September 10, 2024, and stands ready to reactivate the engagement in the event that any of the circumstances described in Section XI above arise. All work product, correspondence, and files have been catalogued and retained in accordance with the firm's document retention policy.

Any questions regarding this memorandum or the status of the Matter should be directed to:

Douglas Fairchild, Partner Calderwood & Harkness LLP 3960 Howard Hughes Parkway, Suite 1400 Las Vegas, Nevada 89169 Telephone: (702) 555-4100

Email: d.fairchild@calderwoodharkness.com

Prepared by:

Douglas Fairchild Partner Calderwood & Harkness LLP 3960 Howard Hughes Parkway, Suite 1400 Las Vegas, Nevada 89169

Date: June 1, 2023

This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP personnel assigned to Matter No. 1033-00003 and is not to be disclosed to any third party without the prior written consent of the Responsible Partner. Distribution is limited to the individuals identified on the distribution list above.

Shareholder	Contact	Shares Held	Percentage of Outstanding
Pinnacle Harbor Capital Partners, LP	Viktor S. Kessler, Managing Partner & CIO	7,119,600	6.8%
Ridgeway Asset Management, LP	Franklin Osei, Portfolio Manager	8,585,400	8.2%
Stillwater Capital Advisors, LLC	Margaret "Meg" Liu, Head of Governance	5,653,800	5.4%
Canfield Municipal Employees' Retirement System	David Proulx, Chief Investment Officer	2,198,700	2.1%
Director	Position / Status	Independence
Diane K. Sheridan	Board Chair	Independent
Gerald R. Whitmore	Chief Executive Officer	Non-Independent (Management)
Raymond Choi	Chief Financial Officer	Non-Independent (Management)
Dr. Aaron Kaplan	Director	Independent
Constance Barlowe	Director	Independent
Yuki Fujikawa	Director	Independent
Jim Delacroix	Director (former Special Committee Chair)	Independent
Carmen Vasquez	Director (former Special Committee member)	Independent
Randall Morse	Director (former Special Committee member)	Independent
Franklin Chu	Director (appointed April 1, 2023; to serve until 2025 annual meeting)	Independent

CALDERWOOD & HARKNESS LLP INTERNAL MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: File — Matter No. 1033-00003
FROM: Douglas Fairchild, Responsible Partner
DATE: June 1, 2023
RE: Redstone Gaming Corp. — Defense Against Pinnacle Harbor Capital Partners, LP Activist Board-Seat Campaign — Transition to Dormant Status
CC: Angela Fontaine (Billing Partner); Claire Dempsey (Lead Associate); Marcus Leung (Working Associate)
I. Purpose
The purpose of this memorandum is to document the formal transition of Calderwood & Harkness LLP Matter No. 1033-00003 (the "Matter") to dormant status, effective as of June 1, 2023, and to memorialize in a single comprehensive reference document the factual background, procedural history, key terms of the resolution, billing summary, outstanding obligations, file retention inventory, and reactivation protocol associated with the Matter.
The Matter involved the defense of Redstone Gaming Corp. ("RGC" or the "Company"), a Delaware corporation headquartered at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, Nevada 89123 (Nasdaq: RGC; CIK 0001847625; EIN 82-4031976), against an activist board-seat campaign initiated by Pinnacle Harbor Capital Partners, LP ("Pinnacle Harbor" or "PHCP"), a Delaware limited partnership with principal offices at 590 Madison Avenue, 34th Floor, New York, New York 10022 (EIN 47-3928154). Pinnacle Harbor, through its general partner Pinnacle Harbor Capital Management, LLC, and its Managing Partner and Chief Investment Officer, Viktor S. Kessler, sought the appointment of two hand-selected director nominees to the RGC Board of Directors and demanded a strategic review of the Company's interactive gaming division and a significant capital return to shareholders.
The campaign was resolved without a contested proxy election through the execution of a Cooperation & Standstill Agreement, dated March 10, 2023, between RGC and Pinnacle Harbor (with Pinnacle Harbor Capital Management, LLC and Viktor S. Kessler as additional signatories). All material work streams associated with the Matter have been completed. No active tasks remain as of the date of this memorandum, and no outstanding deliverables are owed to the client. Accordingly, the Matter is being transitioned to dormant status in compliance with the firm's matter management policies, subject to potential reactivation during the standstill period as described in Section XI below.
II. Engagement Summary
A. Engagement Opening
The engagement was formalized through an engagement letter executed on November 15, 2022, between Calderwood & Harkness LLP and Redstone Gaming Corp. The principal client contact throughout the engagement was Patricia "Trish" Nakamura, General Counsel and Corporate Secretary of RGC. Ms. Nakamura served as the firm's primary point of communication on all substantive and administrative matters and coordinated access to Company officers, Board members, and third-party advisors as needed.
The RGC Board of Directors was chaired at all relevant times by Diane K. Sheridan, an independent director. The Company's Chief Executive Officer was Gerald R. Whitmore, and its Chief Financial Officer was Raymond Choi. Both Mr. Whitmore and Mr. Choi participated in certain discussions and strategy sessions during the course of the engagement at the direction of the Board and the Special Committee described below.
The engagement arose from an emergency meeting of the RGC Board of Directors held on November 14, 2022. That emergency session was convened in response to the filing by Pinnacle Harbor Capital Partners, LP of a preliminary Schedule 13D with the U.S. Securities and Exchange Commission (the "SEC") on November 10, 2022. The Schedule 13D disclosed that Pinnacle Harbor had accumulated a 6.8% ownership position in RGC, consisting of 7,119,600 shares of RGC common stock out of 104,700,000 shares then outstanding, and expressed activist intent with respect to the composition of the Board and strategic direction of the Company.
Pinnacle Harbor's public disclosure followed a private demand letter sent by Viktor S. Kessler to Board Chair Diane K. Sheridan on October 28, 2022, which had outlined Pinnacle Harbor's proposed slate of changes and signaled the fund's willingness to pursue a proxy contest if its demands were not voluntarily accommodated. The Board's emergency meeting on November 14, 2022 resulted in the formation of a Special Committee of independent directors and the authorization to retain outside counsel and financial advisors.
B. Staffing
The following Calderwood & Harkness LLP personnel were assigned to the Matter throughout the engagement:
•  Responsible Partner: Douglas Fairchild, Real Estate practice group, resident in the firm's Las Vegas office located at 3960 Howard Hughes Parkway, Suite 1400, Las Vegas, Nevada 89169. Mr. Fairchild served as the lead attorney responsible for overall strategy, client communications, Board presentations, and settlement negotiations.
•  Billing Partner: Angela Fontaine, Real Estate practice group. Ms. Fontaine was responsible for all billing administration, invoice review, and compliance with the fee arrangement set forth in the engagement letter.
•  Lead Associate: Claire Dempsey, Capital Markets practice group. Ms. Dempsey served as the principal drafting attorney on all memoranda, the Cooperation & Standstill Agreement, and related transactional documents, and was responsible for coordinating with the Company's financial advisor and proxy solicitor on disclosure-related matters.
•  Working Associate: Marcus Leung, Banking & Finance practice group. Mr. Leung assisted with research and analysis on SEC regulatory matters, Schedule 13D review and analysis, bylaw and charter review, and stockholder rights plan analysis.
In addition to the Las Vegas office, the engagement utilized resources from Calderwood & Harkness LLP's Wilmington, Delaware office, located at 1200 Market Street, Suite 3100, Wilmington, Delaware 19801, for Delaware corporate law support, including analysis of fiduciary duty issues, advance-notice bylaw provisions under Delaware law, and the Cooperation & Standstill Agreement's choice-of-law implications.
C. Client Advisors Engaged
RGC, at the recommendation of Calderwood & Harkness and with the authorization of the Special Committee and the full Board, retained the following advisors in connection with the Matter:
•  Financial Advisor: Calloway Pinnacle Trust Bank, 200 Park Avenue, 28th Floor, New York, New York 10166. The engagement was led by Thomas V. Ashford, Managing Director, Activism & Corporate Defense. Calloway Wainwright provided strategic advice on shareholder composition, activist tactics, settlement valuation, and potential financial implications of the proposed board-seat concession and capital return demands.
•  Proxy Solicitor: Whitfield Morrow Partners, LLC, 501 Madison Avenue, 14th Floor, New York, New York 10022. The senior contact was Denise Cavanaugh, Senior Vice President. Whitfield Morrow was retained to advise on vote projections, shareholder outreach strategy, and proxy contest preparedness, and would have managed solicitation logistics if the matter had proceeded to a contested election.
•  Investor Relations Advisor: Harlan Ridge Communications, LLC, 712 Fifth Avenue, Suite 900, New York, New York 10019. Philip Navarette, Partner, served as the primary contact. Harlan Ridge advised on messaging strategy, managed investor and media communications, and coordinated the joint press release issued upon execution of the Cooperation & Standstill Agreement.
•  Independent Auditor (Consulted): Kettering Marsh & Associates LLP, 725 S. Figueroa Street, Suite 3200, Los Angeles, California 90017. Robert Ogawa, Lead Audit Partner, was consulted on a limited basis with respect to verification of certain financial data points and segment-level metrics relating to the interactive gaming division, which were referenced in Pinnacle Harbor's public demands and which the Company needed to confirm for purposes of its Board-level strategic assessment.
•  D&O Insurance Broker: Glenmore Caulfield Insurance Brokers, Inc. The senior contact was Sarah Voss, Senior Vice President. Glenmore Caulfield assisted with the submission of the notice of circumstances to D&O carriers and provided guidance on coverage implications.
•  Transfer Agent: Continental Share Services, Inc., 1 Ashbury Asset Advisors, 30th Floor, New York, New York 10004. Jason Velmoran, Vice President, served as the primary contact. Continental Share Services provided stock ledger data, NOBO/OBO lists, and DTC participant reports utilized for shareholder identification and vote modeling purposes.
D. Opposing Parties and Their Advisors
The following parties and advisors were identified on the opposing side of the Matter:
•  Activist Fund: Pinnacle Harbor Capital Partners, LP, a Delaware limited partnership with principal offices at 590 Madison Avenue, 34th Floor, New York, New York 10022. The general partner of the fund is Pinnacle Harbor Capital Management, LLC, also a Delaware entity. The Managing Partner and Chief Investment Officer of Pinnacle Harbor is Viktor S. Kessler. The Head of Activism and relevant Portfolio Manager is Nadia Johar. Mr. Kessler and Ms. Johar were the principal decision-makers on the activist side throughout the engagement.
•  Activist's Counsel: Hargrove Sloane & Birch LLP, 1585 Broadway, 40th Floor, New York, New York 10036. The engagement was led by Jonathan "Jon" Birch III, Lead Partner. Elise Marchetti served as the associate on the matter. Hargrove Sloane & Birch handled all legal filings, correspondence, and negotiation of the Cooperation & Standstill Agreement on behalf of Pinnacle Harbor.
•  Activist's Proxy Solicitor: Garrison Proxy Advisors, LLC, 17 Ashbury Asset Advisors, Suite 1600, New York, New York 10004. The Managing Director assigned to the engagement was Alicia Trent. Garrison Proxy Advisors would have managed Pinnacle Harbor's proxy solicitation had the matter proceeded to a contested election.
III. Chronological Summary of Key Events
The following chronological summary sets forth the material events and milestones in the Matter from Pinnacle Harbor's initial accumulation of its RGC position through the completion of the 2023 Annual Meeting of Stockholders. This summary is intended to serve as a comprehensive reference for any future reactivation of the Matter and as a record for the firm's institutional files.
A. Activist Accumulation and Initial Demands (June – November 2022)
Between approximately June 2022 and November 2022, Pinnacle Harbor Capital Partners, LP accumulated a 6.8% ownership position in RGC common stock, totaling 7,119,600 shares of the 104,700,000 shares then outstanding. Based on publicly available information and the disclosures in Pinnacle Harbor's Schedule 13D, the weighted-average purchase price for the position was approximately $26.42 per share, resulting in a total cost basis of approximately $188.1 million.
During this accumulation period, the RGC share price exhibited a steady upward trajectory. As of June 1, 2022, the closing share price was $24.18. By September 30, 2022, the share price had risen to $27.55. By November 10, 2022 — the date on which Pinnacle Harbor filed its preliminary Schedule 13D with the SEC — the share price had further increased to $29.12, reflecting broader market tailwinds in the gaming and leisure sector as well as, in retrospect, likely market awareness of increased institutional accumulation.
On October 28, 2022, Pinnacle Harbor, through Viktor S. Kessler, transmitted a private demand letter to Board Chair Diane K. Sheridan. The letter outlined three principal demands:
(1) The immediate appointment of two Pinnacle Harbor-selected director nominees to the RGC Board: Dr. Sandra Trevelyan, former Chief Operating Officer of Meridian Interactive Holdings, Inc., and Hugh Desmond Grayson, former Chief Financial Officer of Atlas Leisure Group, Inc.;
(2) A comprehensive strategic review of the Company's interactive gaming division, which had generated fiscal year 2021 revenue of approximately $412 million, representing 14.4% of total Company revenue of approximately $2.87 billion; and
(3) The return of $300 million to shareholders through either a special dividend or an accelerated share repurchase program, which Pinnacle Harbor contended was warranted in light of the Company's balance sheet capacity and what the fund characterized as underinvestment returns in the interactive gaming segment.
On November 10, 2022, Pinnacle Harbor filed its preliminary Schedule 13D with the SEC, publicly disclosing its 6.8% position and activist intent. The filing attracted significant market and media attention and prompted a $2.57 increase in RGC's share price over the following two trading sessions.
On November 14, 2022, the RGC Board of Directors convened an emergency meeting. At that meeting, the Board formed a Special Committee consisting of three independent directors — Jim Delacroix (Committee Chair), Carmen Vasquez, and Randall Morse — and authorized the Special Committee to oversee the Company's response to the activist campaign and to engage outside counsel, financial advisors, and other professionals as necessary. The Board's formation of the Special Committee followed the recommendation of General Counsel Patricia Nakamura, who had previously identified Calderwood & Harkness LLP as a potential outside counsel engagement.
B. Engagement and Defensive Analysis Phase (November – December 2022)
On November 15, 2022, Calderwood & Harkness LLP's engagement was formally opened through execution of the engagement letter between the firm and RGC. At the time of engagement, the RGC market capitalization was approximately $3.14 billion, based on 104,700,000 shares outstanding and a closing share price of approximately $30.00 per share. Pinnacle Harbor's position, marked to market at that price, was valued at approximately $213.6 million, reflecting an unrealized gain of approximately $25.5 million, or 13.5%, over the fund's cost basis.
On November 16, 2022, Calderwood & Harkness, acting on behalf of RGC, submitted a notice of circumstances to the Company's directors' and officers' liability insurance carriers through broker Glenmore Caulfield Insurance Brokers, Inc. (Sarah Voss, SVP). The notice was submitted to both the primary carrier, Northbridge Indemnity Company (policy number NBI-DOP-1025-00008, $15 million limit, $500,000 retention), and the first excess carrier, Creston National Insurance Co. (policy number CNI-XS-2022-31004, $10 million excess of $15 million). The notice was submitted on a precautionary basis to preserve the Company's and its directors' coverage rights in the event that the activist campaign escalated into litigation or other proceedings that could give rise to covered loss.
On November 18, 2022, Calderwood & Harkness delivered to the Board an initial situational assessment memorandum. This memorandum provided a preliminary analysis of Pinnacle Harbor's demands, a profile of the activist fund's track record and methodology, an assessment of the Company's vulnerabilities, and a recommended framework for the Board's response.
On November 22, 2022, Calderwood & Harkness completed its review of the Company's Amended & Restated Bylaws (last amended September 12, 2021) and Amended & Restated Certificate of Incorporation (Delaware Secretary of State file number 5734821). This review focused on the Company's existing structural defenses and governance provisions, including advance-notice requirements, board vacancy filling provisions, classified board provisions (if any), supermajority voting requirements, and exclusive forum clauses.
On or about November 25, 2022, a response letter was transmitted on behalf of Board Chair Diane K. Sheridan to Viktor S. Kessler, acknowledging receipt of the October 28 demand letter and expressing the Board's willingness to consider Pinnacle Harbor's views through appropriate channels while reserving all rights.
On November 30, 2022, Pinnacle Harbor escalated its campaign by publishing an open letter addressed to the RGC Board and shareholders. The open letter reiterated the fund's demands for the appointment of Dr. Sandra Trevelyan and Hugh Desmond Grayson to the Board and threatened to initiate a proxy contest at the Company's 2023 annual meeting of stockholders if the Board did not accede to Pinnacle Harbor's demands. The RGC share price closed at $31.74 on that date.
On December 5, 2022, Calderwood & Harkness delivered to the Board and the Special Committee a comprehensive bylaw and charter defensive review memorandum. The memorandum analyzed the Company's advance-notice provisions (Article II, Section 2.11 of the Amended & Restated Bylaws), board vacancy filling rights, supermajority vote requirements applicable to certain amendments, and the exclusive forum provision designating the Court of Chancery of the State of Delaware as the exclusive forum for certain intra-corporate disputes. The memorandum assessed the enforceability of each provision under Delaware law and recommended strategies for utilizing these provisions in the defense.
On December 8, 2022, Hargrove Sloane & Birch LLP, acting on behalf of Pinnacle Harbor, transmitted to RGC a formal notice of intent to nominate directors pursuant to the advance-notice bylaw provisions contained in the Company's Amended & Restated Bylaws. This notice signaled Pinnacle Harbor's formal preparation for a potential proxy contest.
On December 12, 2022, the advance-notice window under the Company's bylaws opened. The window was calculated at 150 days before May 11, 2023, the anniversary of the prior annual meeting, which had been held on May 11, 2022. Under the Company's bylaws, stockholder nominations for directors were required to be received by the Corporate Secretary no earlier than 150 days and no later than 120 days before the anniversary of the prior annual meeting.
On December 14, 2022, Calderwood & Harkness delivered an advance-notice compliance analysis to the Board and General Counsel, confirming the applicable window dates, identifying the specific informational requirements imposed by the bylaws on any nominating stockholder, and establishing a framework for evaluating the sufficiency of any nomination notice received from Pinnacle Harbor.
On December 19, 2022, Calderwood & Harkness presented to the Board a detailed analysis of a potential limited-duration stockholder rights plan (commonly referred to as a "poison pill"). The analysis addressed the fiduciary duty considerations under Delaware law governing the adoption of a rights plan in the activist context, the anticipated reactions of the two leading proxy advisory firms — Centurion Governance Services, Inc. and Hartley Shareholder Advisory Group, LLC — and the strategic risks associated with adoption, including the potential for such adoption to alienate institutional shareholders and undermine the Company's governance profile. Following discussion, the Board declined to adopt a stockholder rights plan at that time.
C. Nomination Review Phase (January 2023)
On January 6, 2023, Pinnacle Harbor filed an amended Schedule 13D with the SEC, which included updated disclosure reflecting the fund's intention to pursue a proxy contest at the 2023 annual meeting if a negotiated resolution could not be reached. The RGC share price closed at $32.90 on that date.
On January 9, 2023, RGC received Pinnacle Harbor's formal nomination notice, submitted in accordance with the advance-notice provisions of Article II, Section 2.11 of the Company's Amended & Restated Bylaws. The notice was received two days before the close of the advance-notice window on January 11, 2023, which was 120 days before the May 11, 2023 anniversary date. The nomination notice identified Dr. Sandra Trevelyan and Hugh Desmond Grayson as Pinnacle Harbor's nominees for election to the Board at the 2023 annual meeting.
On January 11, 2023, the advance-notice window closed. No other stockholder submitted a nomination notice during the applicable period.
On January 13, 2023, Calderwood & Harkness delivered to the Board and the Special Committee a nominee qualification and deficiency review memorandum. The memorandum analyzed the backgrounds and qualifications of both nominees — Dr. Sandra Trevelyan and Hugh Desmond Grayson — and assessed their compliance with the informational requirements of the Company's advance-notice bylaws. The memorandum also addressed Nasdaq Stock Market independence requirements applicable to listed company directors and, critically, analyzed the gaming regulatory licensing implications of the proposed nominees' appointment, including the need for suitability findings and background investigations by the Nevada Gaming Control Board and the Nevada Gaming Commission. While certain technical deficiencies were identified in the nomination notice, these deficiencies were assessed as potentially curable and were not, standing alone, considered a sufficient basis for rejecting the nominations.
D. Settlement Negotiations Phase (January – March 2023)
On January 20, 2023, the Special Committee (Delacroix, Vasquez, Morse) authorized direct engagement with Pinnacle Harbor to explore the possibility of a negotiated settlement that would avoid the expense, distraction, and uncertainty of a contested proxy election. The Special Committee concluded, based on the advice of Calderwood & Harkness and Calloway Pinnacle Trust Bank, that a constructive dialogue with Pinnacle Harbor could yield a resolution that addressed certain legitimate concerns raised by the fund while preserving the Board's strategic prerogatives and avoiding the significant costs associated with a full proxy contest.
On January 28, 2023, Douglas Fairchild communicated with Jonathan Birch III of Hargrove Sloane & Birch LLP to propose direct discussions between the parties.
On January 30, 2023, the first settlement discussion took place between Douglas Fairchild and Patricia Nakamura on behalf of RGC and Jonathan Birch III and Viktor S. Kessler on behalf of Pinnacle Harbor. The discussion covered the general parameters of a potential resolution, including the concept of a mutually agreed independent director appointment, the scope and nature of any strategic review commitment, and the framework for a standstill arrangement.
On February 9, 2023, it came to our attention through counsel-to-counsel communications that Pinnacle Harbor had transmitted a draft preliminary proxy statement to Hargrove Sloane & Birch for SEC filing preparation. However, no preliminary proxy statement was ultimately filed with the SEC, which we interpreted as a signal that Pinnacle Harbor was using the filing preparation as leverage in the settlement discussions while maintaining a genuine interest in reaching a negotiated outcome.
On February 14, 2023, a second settlement discussion took place. During this session, the parties exchanged a non-binding framework term sheet setting forth the principal economic and governance terms under discussion. The framework term sheet addressed the key pillars of the eventual agreement, including board representation, standstill duration, ownership cap, and voting commitments.
On February 22, 2023, Calderwood & Harkness circulated to Hargrove Sloane & Birch LLP the initial draft (v1) of a Cooperation & Standstill Agreement, which reflected the terms discussed in the February 14 session and incorporated additional protective provisions for the Company.
In late February 2023, Hargrove Sloane & Birch returned a marked-up version of the agreement (v2) with comments on several key provisions, including the duration of the standstill period, the proposed ownership cap, and Pinnacle Harbor's request for reimbursement of its documented legal expenses incurred in connection with the campaign.
On or about March 1, 2023, Calderwood & Harkness circulated a revised draft (v3) incorporating the firm's responses to the Hargrove Sloane markup and reflecting compromises discussed in intervening telephone conferences between counsel.
On March 3, 2023, a final negotiation session was held, during which the remaining open issues — principally the standstill duration (which was agreed at 18 months), the ownership cap percentage (9.9%), the expense reimbursement cap ($750,000), and the identification of the mutually agreed director candidate (Franklin Chu, selected from a pool of three candidates evaluated by a joint committee) — were resolved.
E. Execution and Resolution Phase (March 2023)
On or about March 9, 2023, the RGC Board of Directors adopted resolutions approving the Cooperation & Standstill Agreement, authorizing the appointment of Franklin Chu as a new independent director effective April 1, 2023, and directing management to conduct a 120-day internal strategic review of the interactive gaming division.
On March 10, 2023, the Cooperation & Standstill Agreement was executed by and among Redstone Gaming Corp., Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, and Viktor S. Kessler. The agreement set forth the comprehensive terms of the settlement, as summarized in Section IV below. The RGC share price closed at $33.25 on the date of execution.
On March 13, 2023, a joint press release was issued by RGC and Pinnacle Harbor, coordinated through Harlan Ridge Communications, LLC. The press release announced the terms of the settlement, including the appointment of Franklin Chu and the Company's commitment to conduct the interactive gaming strategic review. Concurrently with the issuance of the press release, Pinnacle Harbor formally withdrew all director nominations for the 2023 annual meeting.
On March 15, 2023, Pinnacle Harbor filed an amended Schedule 13D with the SEC, reflecting the standstill arrangement, the withdrawal of all director nominations, and the terms of the Cooperation & Standstill Agreement.
F. Post-Settlement Events (April – May 2023)
On April 1, 2023, Franklin Chu was formally appointed to the RGC Board of Directors as the mutually agreed independent director contemplated by the Cooperation & Standstill Agreement. Mr. Chu, age 52, is the former Chief Executive Officer of Prism Digital Entertainment, LLC. He was selected from a pool of three candidates evaluated by a joint committee comprising representatives of both RGC and Pinnacle Harbor. Mr. Chu's appointment was effective immediately, and he will serve until the Company's 2025 annual meeting of stockholders. In connection with the appointment, the Board size was increased from nine to ten directors.
On May 18, 2023, RGC held its 2023 Annual Meeting of Stockholders. The meeting proceeded as an uncontested election. All nine management-slate director nominees were elected, and Franklin Chu continued to serve as a director (his seat was not up for election at the 2023 meeting). The RGC share price closed at $35.60 on the date of the annual meeting, reflecting positive market reception of the resolution and the Company's governance posture.
IV. Summary of Cooperation & Standstill Agreement Key Terms
The Cooperation & Standstill Agreement, dated March 10, 2023, was executed by and among Redstone Gaming Corp., Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, and Viktor S. Kessler. The following is a summary of the material terms of the agreement:
•  Standstill Period: Eighteen (18) months from the date of execution, commencing on March 10, 2023 and expiring on September 10, 2024.
•  Ownership Cap: During the standstill period, Pinnacle Harbor and its affiliates may not acquire, directly or indirectly, shares of RGC common stock that would cause the group's aggregate beneficial ownership to exceed 9.9% of RGC's outstanding common stock.
•  Board Concession: RGC agreed to appoint one new independent director mutually agreed upon by RGC and Pinnacle Harbor. The selected director was to be neither a Pinnacle Harbor nominee (i.e., neither Dr. Sandra Trevelyan nor Hugh Desmond Grayson) nor a current RGC insider. The director was to be selected from a pool of three candidates identified and evaluated by a joint committee comprising representatives of both parties. Franklin Chu was selected through this process and appointed effective April 1, 2023.
•  Strategic Review: The RGC Board committed to conducting an internal review of the interactive gaming division's strategic alternatives. The review was required to be completed within 120 days of the date of execution of the agreement (i.e., by July 8, 2023). A summary report was to be provided to the Board only. Notably, the agreement imposed no obligation on RGC to share the conclusions of the review with Pinnacle Harbor or to take any particular action based on the findings.
•  Voting Commitment: During the standstill period, Pinnacle Harbor agreed to vote all shares of RGC common stock beneficially owned by the fund and its affiliates in favor of the RGC management director nominees at each annual meeting and in accordance with the Board's recommendations on all other proposals submitted to a vote of stockholders.
•  Withdrawal of Nominations: Pinnacle Harbor withdrew all pending director nominations. During the standstill period, Pinnacle Harbor agreed not to nominate any candidates for election to the Board or to solicit proxies or written consents from RGC stockholders.
•  Non-Disparagement: The parties agreed to mutual non-disparagement provisions effective during the standstill period.
•  Expense Reimbursement: RGC agreed to reimburse Pinnacle Harbor for its documented legal expenses incurred in connection with the activist campaign, subject to a cap of $750,000. Reimbursable expenses were limited to legal fees and did not include proxy solicitor fees, public relations costs, or internal fund expenses.
•  Termination Triggers: The agreement provides for early termination upon the occurrence of any of the following: (i) a material breach by either party that remains uncured for fifteen (15) business days after written notice from the non-breaching party; (ii) a change-of-control of RGC; or (iii) Pinnacle Harbor's beneficial ownership of RGC common stock dropping below 3.5% of outstanding shares.
•  Governing Law: The agreement is governed by the laws of the State of Delaware, without regard to conflict-of-laws principles.
V. Key Shareholder Positions (At Time of Resolution)
The following table sets forth the principal institutional shareholders of record known to Calderwood & Harkness as of the time of the resolution in March 2023, based on Schedule 13D and 13F filings, NOBO/OBO list data obtained from Continental Share Services, Inc., and information provided by the Company's investor relations advisor, Harlan Ridge Communications, LLC:
Total shares outstanding at the time of resolution: 104,700,000.
It should be noted that Ridgeway Asset Management, LP was the single largest known institutional holder at 8.2%, exceeding Pinnacle Harbor's position. Ridgeway's stance with respect to the activist campaign was assessed as neutral-to-supportive of the incumbent Board based on shareholder engagement calls conducted by Whitfield Morrow Partners and Harlan Ridge Communications. Stillwater Capital Advisors, LLC was identified as a governance-focused holder whose support would have been critical in a contested election scenario. The Canfield Municipal Employees' Retirement System, while a smaller holder, was considered potentially influential given its status as a public pension fund with a track record of supporting governance reform proposals.
VI. RGC Board Composition (Current — Post-Chu Appointment)
As of the date of this memorandum, following the appointment of Franklin Chu effective April 1, 2023, the RGC Board of Directors consists of ten directors, as set forth below:
The Special Committee, consisting of Jim Delacroix (Chair), Carmen Vasquez, and Randall Morse, was discharged following the completion of its mandate upon execution of the Cooperation & Standstill Agreement and the successful conclusion of the 2023 Annual Meeting of Stockholders. The Special Committee's discharge was memorialized by Board resolution.
VII. Billing and Fee Summary
A. Fee Arrangement
The fee arrangement for the Matter was established in the engagement letter dated November 15, 2022. Fees were billed on an hourly basis at the following standard rates:
•  Partners: $1,450 per hour
•  Senior Associates: $1,050 per hour
•  Associates: $850 per hour
All time was recorded and billed in increments of one-tenth of an hour in accordance with the firm's standard timekeeping practices. Disbursements, including filing fees, travel expenses, electronic research charges, and document production costs, were billed at cost. No alternative fee arrangement or success fee was utilized in connection with this engagement.
B. Retainer
A retainer in the amount of $150,000 was received from RGC at the time of engagement opening. In accordance with the terms of the engagement letter, the retainer was held in the firm's client trust account and has been applied against the final invoice issued in connection with the Matter.
C. Estimated Total Fees
The estimated total fees incurred by Calderwood & Harkness LLP in connection with the Matter from the date of engagement opening (November 15, 2022) through the transition to dormant status (June 1, 2023) are approximately $1,380,000. This figure includes all partner, senior associate, and associate time billed during the engagement period, as well as disbursements. Billing Partner Angela Fontaine will finalize and issue the closing invoice, reflecting the retainer credit of $150,000, within thirty (30) days of the date of this memorandum.
The fees incurred are considered reasonable in the context of the engagement, which encompassed a full-spectrum activist defense including Board presentations, bylaw and charter review, rights plan analysis, nominee qualification review, settlement negotiations, drafting and negotiation of the Cooperation & Standstill Agreement, and coordination with multiple third-party advisors. The matter was resolved approximately five months after engagement opening, substantially sooner than the projected timeline for a fully contested proxy election, which would have been expected to involve significantly higher legal fees, proxy solicitor costs, and financial advisory fees.
VIII. D&O Insurance Status
As noted in Section III.B above, a notice of circumstances was submitted on November 16, 2022 to RGC's directors' and officers' liability insurance carriers through broker Glenmore Caulfield Insurance Brokers, Inc. (Sarah Voss, SVP). The notice was submitted to the following carriers:
•  Primary Layer: Northbridge Indemnity Company, policy number NBI-DOP-1025-00008. The policy provides a $15 million limit of liability with a $500,000 retention. The policy was renewed on January 1, 2023, and the notice of circumstances has been carried forward into the renewal policy period.
•  First Excess Layer: Creston National Insurance Co., policy number CNI-XS-2022-31004. The policy provides $10 million in excess of the $15 million primary limit. The policy was renewed on January 1, 2023, and the notice of circumstances has likewise been carried forward into the renewal period.
No claims payment was required in connection with the Matter, as the activist campaign was resolved without litigation or other proceedings that would have triggered defense costs or loss payments under the D&O policies. The notice of circumstances remains on file with both carriers. This is significant because the notice preserves the Company's and its directors' ability to seek coverage in the event that any future claim arises out of the circumstances described in the notice, even if such claim is not asserted until after the current policy period has expired.
Both carriers should be advised of the transition of the Matter to dormant status. Glenmore Caulfield Insurance Brokers, Inc. should be notified and requested to coordinate any necessary communications with the carriers. This notification should be made by RGC's General Counsel Patricia Nakamura, with a copy to Calderwood & Harkness for the file.
IX. Outstanding Matters and Continuing Obligations
Although the Matter is being transitioned to dormant status, certain obligations arising from the Cooperation & Standstill Agreement remain in effect and will require monitoring during the standstill period. The following matters are identified for the Company's ongoing attention.
A. Standstill Period
The standstill period under the Cooperation & Standstill Agreement runs for eighteen months from the date of execution, commencing on March 10, 2023 and expiring on September 10, 2024. During this period, Pinnacle Harbor is subject to the ownership cap (9.9% of outstanding common stock), voting commitments (voting in favor of management director nominees and in accordance with Board recommendations), non-disparagement obligations, and restrictions on proxy solicitation and director nominations.
RGC and its advisors should actively monitor Pinnacle Harbor's compliance with these provisions throughout the standstill period. Monitoring should include periodic review of Schedule 13D/A amendments filed by Pinnacle Harbor with the SEC, Form 4 filings (if applicable), and any public statements made by Pinnacle Harbor or its principals that could constitute a violation of the non-disparagement provisions. Any potential breach or suspected non-compliance should be reported immediately to Calderwood & Harkness. In the event of a confirmed or suspected breach, the Matter can be reactivated from dormant status, and appropriate enforcement actions — including demands for cure within the fifteen-business-day cure period and, if necessary, litigation in the Court of Chancery of the State of Delaware — can be pursued.
B. Interactive Gaming Strategic Review
The Cooperation & Standstill Agreement requires the RGC Board to conduct an internal strategic review of the interactive gaming division's strategic alternatives, to be completed within 120 days of the date of execution of the agreement — i.e., by July 8, 2023. A summary report of the review is to be provided to the Board. The agreement expressly provides that RGC has no obligation to share the conclusions of the review with Pinnacle Harbor or to take any particular action as a result of the review's findings.
Calderwood & Harkness has not been retained to assist with this work stream. The review is to be conducted internally by RGC management and the Board, with such financial advisory and consulting support as the Board may deem appropriate. However, if legal issues arise in connection with the review — including questions regarding the Board's fiduciary duties in evaluating strategic alternatives for the interactive gaming division — RGC should consult Calderwood & Harkness or other appropriate counsel.
C. Termination Triggers to Monitor
The Cooperation & Standstill Agreement provides for early termination upon the occurrence of any of the following events:
(i) A material breach by either party that remains uncured for fifteen (15) business days after written notice from the non-breaching party;
(ii) A change-of-control of RGC, as defined in the agreement; or
(iii) Pinnacle Harbor's beneficial ownership of RGC common stock dropping below 3.5% of outstanding shares (approximately 3,664,500 shares based on current shares outstanding).
If any of these termination triggers occurs, the standstill and all associated obligations would terminate, and Pinnacle Harbor would be free to resume activist activities, including nominations and proxy solicitation, subject only to applicable securities laws and the Company's bylaw provisions. In the event that any trigger occurs or appears imminent, RGC should immediately consult Calderwood & Harkness regarding the Company's rights and obligations under the agreement and the potential reactivation of the Matter.
D. Proxy Advisory Firm Matters
During the pendency of the Matter, both Centurion Governance Services, Inc. and Hartley Shareholder Advisory Group, LLC were in the process of evaluating the activist campaign and preparing recommendations in connection with the anticipated proxy contest at the 2023 annual meeting. Because the matter was resolved before a contested election, neither proxy advisory firm finalized or published formal recommendations with respect to the Pinnacle Harbor director nominees. No further action is required with respect to proxy advisory firm matters at this time.
X. Document Repository and File Retention
The following is a comprehensive summary of all key work product generated by Calderwood & Harkness LLP during the course of the engagement. All documents listed below are maintained in electronic form under Matter No. 1033-00003 in the firm's document management system and are subject to the firm's document retention policy.
1.  Engagement letter, dated November 15, 2022
2.  Conflicts clearance memorandum, dated November 14, 2022
3.  Initial situational assessment memorandum, dated November 18, 2022
4.  Bylaw and charter defensive review memorandum, dated December 5, 2022
5.  Advance-notice compliance analysis, dated December 14, 2022
6.  Stockholder rights plan (poison pill) analysis, dated December 19, 2022
7.  Nominee qualification and deficiency review memorandum, dated January 13, 2023
8.  Shareholder ownership and voting power analysis (spreadsheet, multiple versions updated through March 2023)
9.  Proxy contest readiness and defense strategy memorandum, dated January 18, 2023
10.  Schedule 13D analysis memorandum (covering initial filing and all amendments through March 15, 2023)
11.  Settlement strategy memorandum, dated January 19, 2023
12.  D&O insurance notice of circumstances and coverage review memoranda, dated November 16, 2022 and updated January 2023
13.  Framework term sheet, dated February 14, 2023
14.  Cooperation & Standstill Agreement — draft v1 (February 22, 2023), draft v2 (Hargrove Sloane & Birch redline, late February 2023), draft v3 (March 1, 2023), and execution version (March 10, 2023)
15.  Joint press release — draft and final version, dated March 13, 2023
16.  Board resolutions — Special Committee formation (November 14, 2022), settlement authorization (January 20, 2023), Cooperation & Standstill Agreement approval and Chu appointment authorization (March 9, 2023), Special Committee discharge (May 2023)
17.  Draft Form 8-K (prepared for potential filing in connection with the settlement announcement)
18.  Amended Schedule 13D review memorandum, dated March 15, 2023
19.  Shareholder outreach strategy memorandum (prepared in coordination with Whitfield Morrow Partners and Harlan Ridge Communications)
20.  Relevant correspondence with Hargrove Sloane & Birch LLP (including the initial outreach from Douglas Fairchild to Jonathan Birch III and all subsequent counsel-to-counsel communications)
21.  Relevant correspondence with client (including email communications with Patricia Nakamura and memoranda to the Board and Special Committee)
All files are to be retained in accordance with Calderwood & Harkness LLP's document retention policy. Electronic files are stored under Matter No. 1033-00003 in the firm's document management system and are accessible to all team members identified in Section II.B above. Physical files, if any, are maintained at the firm's Las Vegas office. No documents have been produced to third parties, and all work product remains subject to the attorney-client privilege and the work product doctrine.
XI. Reactivation Protocol
The Matter may be reactivated from dormant status upon the occurrence of any of the following circumstances:
•  A breach or alleged breach of the Cooperation & Standstill Agreement by either party;
•  Renewed activist activity by Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, Viktor S. Kessler, or any affiliate of the foregoing, whether during or following expiration of the standstill period on September 10, 2024;
•  A new activist campaign directed at RGC by any other stockholder or group of stockholders;
•  A request from RGC management, General Counsel Patricia Nakamura, or the Board of Directors for the resumption of Calderwood & Harkness's advisory services in connection with matters related to or arising from the engagement.
Reactivation of the Matter is to be coordinated through Douglas Fairchild (Responsible Partner) and Patricia Nakamura (General Counsel, RGC). Upon reactivation, the matter will be removed from dormant status in the firm's billing and matter management systems, and the existing engagement letter will govern the resumed work unless the parties agree to modified terms.
All team members — Angela Fontaine (Billing Partner), Claire Dempsey (Lead Associate), and Marcus Leung (Working Associate) — are to remain available for reactivation during the standstill period through September 10, 2024. In the event that any team member is unavailable due to departure from the firm, reassignment, or other circumstances, a replacement will be designated by Douglas Fairchild with notice to the client.
XII. Conclusion
Calderwood & Harkness LLP Matter No. 1033-00003 is hereby formally transitioned to dormant status as of June 1, 2023. The activist board-seat campaign initiated by Pinnacle Harbor Capital Partners, LP against Redstone Gaming Corp. was resolved without a contested proxy election through the execution of the Cooperation & Standstill Agreement on March 10, 2023. The agreement provided for the appointment of a mutually agreed independent director (Franklin Chu, effective April 1, 2023), an 18-month standstill period (through September 10, 2024), a 120-day internal strategic review of the interactive gaming division, and other customary cooperation and standstill provisions.
The 2023 Annual Meeting of Stockholders of Redstone Gaming Corp. was held on May 18, 2023 without contest. All nine management-slate director nominees were duly elected by the stockholders. The RGC share price at the time of the annual meeting was $35.60, representing an increase of approximately 22.3% from the $29.12 closing price on the date of Pinnacle Harbor's initial Schedule 13D filing (November 10, 2022) and reflecting broadly positive market reception of the Company's handling of the activist campaign and the terms of the resolution.
Calderwood & Harkness will continue to monitor the Matter through the standstill expiration date of September 10, 2024, and stands ready to reactivate the engagement in the event that any of the circumstances described in Section XI above arise. All work product, correspondence, and files have been catalogued and retained in accordance with the firm's document retention policy.
Any questions regarding this memorandum or the status of the Matter should be directed to:
Douglas Fairchild, Partner Calderwood & Harkness LLP 3960 Howard Hughes Parkway, Suite 1400 Las Vegas, Nevada 89169 Telephone: (702) 555-4100
Email: d.fairchild@calderwoodharkness.com
Prepared by:
Douglas Fairchild Partner Calderwood & Harkness LLP 3960 Howard Hughes Parkway, Suite 1400 Las Vegas, Nevada 89169
Date: June 1, 2023
This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP personnel assigned to Matter No. 1033-00003 and is not to be disclosed to any third party without the prior written consent of the Responsible Partner. Distribution is limited to the individuals identified on the distribution list above.
Shareholder | Contact | Shares Held | Percentage of Outstanding
Pinnacle Harbor Capital Partners, LP | Viktor S. Kessler, Managing Partner & CIO | 7,119,600 | 6.8%
Ridgeway Asset Management, LP | Franklin Osei, Portfolio Manager | 8,585,400 | 8.2%
Stillwater Capital Advisors, LLC | Margaret "Meg" Liu, Head of Governance | 5,653,800 | 5.4%
Canfield Municipal Employees' Retirement System | David Proulx, Chief Investment Officer | 2,198,700 | 2.1%
Director | Position / Status | Independence
Diane K. Sheridan | Board Chair | Independent
Gerald R. Whitmore | Chief Executive Officer | Non-Independent (Management)
Raymond Choi | Chief Financial Officer | Non-Independent (Management)
Dr. Aaron Kaplan | Director | Independent
Constance Barlowe | Director | Independent
Yuki Fujikawa | Director | Independent
Jim Delacroix | Director (former Special Committee Chair) | Independent
Carmen Vasquez | Director (former Special Committee member) | Independent
Randall Morse | Director (former Special Committee member) | Independent
Franklin Chu | Director (appointed April 1, 2023; to serve until 2025 annual meeting) | Independent

CALDERWOOD & HARKNESS LLP INTERNAL MEMORANDUM

Record

Parties

Dates

Amounts