1033-00003 · Redstone Gaming Corp · Memos & Analyses

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

January 15, 2023

MEMORANDUM

FROM: Douglas Fairchild, Engagement Partner, and Claire Dempsey, Lead Associate, Calderwood & Harkness LLP

TO: Patricia "Trish" Nakamura, General Counsel & Corporate Secretary, Redstone Gaming Corp. Special Committee of the Board of Directors of Redstone Gaming Corp.:

• James "Jim" Delacroix (Chair)

• Carmen Vasquez

• Randall Morse

RE: Analysis of Schedule 13D Filings by Pinnacle Harbor Capital Partners, LP — Preliminary Filing (November 10, 2022) and Amendment No. 1 (January 6, 2023)

MATTER NO.: 1033-00003

This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

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I. EXECUTIVE SUMMARY

Calderwood & Harkness LLP has prepared this memorandum at the request of Patricia Nakamura, General Counsel and Corporate Secretary of Redstone Gaming Corp. ("RGC" or the "Company," Nasdaq: RGC, CIK: 0001847625, EIN: 82-4031976), and the Special Committee of the Board of Directors of RGC (the "Special Committee"), to provide a comprehensive analysis of the two Schedule 13D filings made by Pinnacle Harbor Capital Partners, LP ("Pinnacle Harbor" or "PHCP") with the United States Securities and Exchange Commission (the "SEC") in connection with Pinnacle Harbor's acquisition of shares of common stock of RGC. This memorandum is intended to inform the Special Committee's evaluation of Pinnacle Harbor's activist campaign and to support the Company's defensive strategy.

The two filings analyzed herein are: (1) the preliminary Schedule 13D filed with the SEC on November 10, 2022; and (2) Amendment No. 1 to Schedule 13D filed with the SEC on January 6, 2023. Both filings were made on behalf of Pinnacle Harbor Capital Partners, LP, its general partner Pinnacle Harbor Capital Management, LLC ("PHCM"), and Viktor S. Kessler, the Managing Partner and Chief Investment Officer of PHCM.

Summary Conclusion. Based on our review, the filings appear to be substantially compliant with the disclosure requirements of Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rules 13d-1 through 13d-7 promulgated thereunder. However, several areas warrant continued scrutiny, including: (a) the timeliness of the initial filing relative to the date on which Pinnacle Harbor crossed the 5% beneficial ownership threshold; (b) the adequacy of Pinnacle Harbor's analysis and disclosure regarding potential group formation with other RGC shareholders; (c) the completeness of the purpose disclosures in Item 4 of the Schedule 13D, particularly with respect to Pinnacle Harbor's communications with other shareholders; and (d) the interplay between the 13D disclosures and Pinnacle Harbor's obligations under Section 14(a) of the Exchange Act and the proxy solicitation rules thereunder, especially as they relate to Pinnacle Harbor's widely disseminated public open letter dated November 30, 2022.

Key Disclosed Facts. According to the filings, Pinnacle Harbor beneficially owns 7,119,600 shares of RGC common stock, par value $0.01 per share, representing approximately 6.8% of the 104,700,000 shares of common stock outstanding as of the most recent practicable date. Pinnacle Harbor's weighted-average purchase price per share ("WAPPS") is $26.42, yielding a total cost basis of approximately $188,099,832 (approximately $188.1 million). All shares were acquired in open-market transactions during the period from June 2022 through November 2022.

Practical Significance. The Schedule 13D filings, and in particular Amendment No. 1, signaling Pinnacle Harbor's activist intentions with respect to the Company. Pinnacle Harbor has articulated three principal demands: (i) the appointment of two nominees — Dr. Sandra Trevelyan and Hugh Desmond Grayson — to the RGC Board of Directors; (ii) a formal strategic review of the Company's interactive gaming division; and (iii) a return of $300 million in capital to shareholders through a special dividend or accelerated share buyback program. The escalation from the initial 13D's equivocal language regarding potential board nominations to the affirmative statement of nomination intent in Amendment No. 1 confirms that Pinnacle Harbor is prepared to pursue a proxy contest at the Company's 2023 annual meeting of stockholders if its demands are not addressed through private engagement.

This memorandum sets forth the detailed factual background, applicable legal framework, item-by-item analysis of each filing, an assessment of group formation risks, an evaluation of proxy solicitation rule compliance, derivative position and swap disclosure considerations, and our recommendations for next steps.

II. BACKGROUND AND CHRONOLOGY

A. Pinnacle Harbor's Share Accumulation

Pinnacle Harbor Capital Partners, LP is a Delaware limited partnership organized and operating under the laws of the State of Delaware. Its general partner is Pinnacle Harbor Capital Management, LLC, also a Delaware limited liability company. Pinnacle Harbor's principal office is located at 590 Madison Avenue, 34th Floor, New York, New York 10022.

Pinnacle Harbor was founded in 2014 and currently manages assets under management ("AUM") of approximately $4.2 billion. The firm pursues an event-driven and activist equity investment strategy, with a particular focus on mid-cap companies in the gaming, hospitality, and consumer-discretionary sectors. Pinnacle Harbor has been involved in several high-profile activist campaigns over the past five years, though its engagement with RGC represents its first significant activist position in the Nevada gaming sector.

The key individuals associated with Pinnacle Harbor for purposes of this analysis are as follows:

• Viktor S. Kessler, age 47, is the Managing Partner and Chief Investment Officer of Pinnacle Harbor Capital Management, LLC. Mr. Kessler is the controlling member of PHCM and, as such, is reported as a filing person on the Schedule 13D. Mr. Kessler is a United States citizen and resides in New York, New York.

• Nadia Johar, age 39, is the Head of Activism and a Portfolio Manager at Pinnacle Harbor. Ms. Johar is identified in the Schedule 13D as a covered person with biographical information disclosed pursuant to the Item 2 requirements. Ms. Johar is a United States citizen. Although Ms. Johar is not listed as a separate reporting person on the Schedule 13D filing, her role in directing the fund's activist strategy and her involvement in investment and voting decisions merit further consideration, as discussed in Section VI below.

Pinnacle Harbor's accumulation of RGC common stock took place during the period from approximately June 1, 2022 through November 2022. All shares were acquired through open-market transactions on the Nasdaq Stock Market. The key financial metrics of the accumulation are as follows:

• Total shares acquired: 7,119,600 shares of RGC common stock

• Weighted-average purchase price per share: $26.42

• Total cost basis: 7,119,600 shares × $26.42 = approximately $188,099,832 (approximately $188.1 million)

• Shares outstanding: 104,700,000 shares of RGC common stock (as confirmed by Continental Share Services, Inc., the Company's transfer agent, contact: Jason Velmoran)

• Ownership percentage: 7,119,600 / 104,700,000 = approximately 6.8%

The accumulation appears to have been conducted systematically over a period of approximately five months, consistent with the trading patterns typically employed by activist funds seeking to build a substantial position while minimizing market impact and price disruption. As discussed in greater detail in Section IV.H below, the precise date on which Pinnacle Harbor crossed the 5% beneficial ownership threshold — the event triggering the obligation to file a Schedule 13D — is a matter of critical importance to the timeliness analysis.

B. Timeline of Relevant Events

The following chronology sets forth the key events relevant to the analysis of Pinnacle Harbor's Schedule 13D filings and the broader activist campaign:

June 1, 2022: Pinnacle Harbor begins accumulating shares of RGC common stock through open-market purchases on the Nasdaq Stock Market. The closing price of RGC common stock on this date is $24.18 per share.

June 2022 – September 2022: Pinnacle Harbor continues to acquire shares during this period. Based on the total shares acquired (7,119,600) and the WAPPS of $26.42, the bulk of Pinnacle Harbor's purchases appear to have occurred during this period and into the early fall, though the exact purchase schedule is disclosed only in summary form in the transaction table appended to the Schedule 13D.

September 30, 2022: The closing price of RGC common stock is $27.55 per share, reflecting a gain of approximately 13.9% from June 1, 2022. This date also marks the end of the Company's fiscal third quarter.

October 28, 2022: Pinnacle Harbor sends a private demand letter to Diane K. Sheridan, Chair of the RGC Board of Directors. The letter requests the appointment of two Pinnacle Harbor nominees to the Board and a strategic review of the Company's interactive gaming division, and advocates for a $300 million capital return to shareholders. This letter is subsequently filed as an exhibit to the preliminary Schedule 13D.

November 10, 2022: Pinnacle Harbor files its preliminary Schedule 13D with the SEC via the EDGAR filing system. The closing price of RGC common stock on this date is $29.12 per share.

November 14, 2022: The RGC Board of Directors holds an emergency meeting to discuss the Pinnacle Harbor Schedule 13D filing and the implications of Pinnacle Harbor's activist campaign. At this meeting, the Board establishes the Special Committee, consisting of independent directors James Delacroix (Chair), Carmen Vasquez, and Randall Morse, to evaluate the Company's response to Pinnacle Harbor's demands and to oversee engagement with Pinnacle Harbor.

November 15, 2022: Calderwood & Harkness LLP is formally engaged by RGC, on behalf of the Special Committee, to provide legal advice in connection with the Pinnacle Harbor activist campaign. The engagement opens under Matter No. 1033-00003. On this date, the closing price of RGC common stock is $30.00 per share, yielding a mark-to-market position for Pinnacle Harbor of 7,119,600 × $30.00 = approximately $213,588,000 (approximately $213.6 million). Pinnacle Harbor's unrealized gain at this price level is approximately $213.6 million minus $188.1 million = approximately $25.5 million, representing an unrealized return of approximately 13.5% on its cost basis.

November 30, 2022: Pinnacle Harbor publishes and widely disseminates a public "open letter" addressed to the RGC Board of Directors. The letter demands the appointment of Dr. Sandra Trevelyan and Hugh Desmond Grayson to the Board and threatens to commence a proxy contest at the Company's 2023 annual meeting of stockholders if the Company fails to act on Pinnacle Harbor's demands. The closing price of RGC common stock on this date is $31.74 per share. The open letter is significant for purposes of the proxy solicitation rule analysis discussed in Section VII below.

December 8, 2022: Hargrove Sloane & Birch LLP, counsel to Pinnacle Harbor (lead partner: Jonathan "Jon" Birch III), sends a formal notice of intent to nominate directors for election at the 2023 annual meeting to Patricia Nakamura in her capacity as Corporate Secretary of RGC. The notice is sent pursuant to the advance-notice provisions set forth in Article II, Section 2.11 of the Company's Amended and Restated Bylaws (last amended September 12, 2021).

January 6, 2023: Pinnacle Harbor files Amendment No. 1 to Schedule 13D with the SEC, updating its purpose disclosures to reflect its stated intention to nominate directors and prepare a preliminary proxy statement. The closing price of RGC common stock on this date is $32.90 per share.

January 9, 2023: Pinnacle Harbor's formal nomination notice, originally sent on December 8, 2022, is formally received and acknowledged by RGC. The notice is timely, as it falls within the advance-notice window established by Article II, Section 2.11 of the Bylaws, which runs from December 12, 2022 through January 11, 2023, for the 2023 annual meeting.

Since the filing of Amendment No. 1, the parties have engaged in preliminary discussions regarding a potential settlement, culminating in the execution of a Cooperation and Standstill Agreement on March 10, 2023. However, the analysis in this memorandum is limited to the legal and factual issues arising from the two Schedule 13D filings and does not address the settlement process, which is the subject of a separate memorandum.

III. LEGAL FRAMEWORK: SECTION 13(d) OF THE EXCHANGE ACT

A. Statutory and Regulatory Overview

Section 13(d)(1) of the Exchange Act, codified at 15 U.S.C. § 78m(d)(1), provides that any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is registered pursuant to Section 12 of the Exchange Act, is directly or indirectly the beneficial owner of more than five percent of such class, shall, within ten days after such acquisition, send to the issuer of the security, file with the SEC, and transmit to each exchange where the security is traded, a statement on Schedule 13D containing certain information specified in the statute and the rules promulgated thereunder.

The Schedule 13D filing obligation is one of the most significant disclosure requirements applicable to activist investors. Congress enacted Section 13(d) in 1968 as part of the Williams Act amendments to the Exchange Act, with the dual purposes of (i) alerting the marketplace and existing shareholders to potential changes in corporate control, and (ii) providing issuers with advance notice of accumulations that may presage a tender offer, proxy contest, or other change-of-control transaction. The legislative history makes clear that Section 13(d) was intended to operate as a disclosure mechanism, not as a substantive prohibition on accumulations; however, the timeliness and completeness of Schedule 13D disclosures are subject to SEC enforcement and, in appropriate circumstances, to private litigation.

At the time of the Pinnacle Harbor filings analyzed in this memorandum, the SEC's proposed amendments to the Schedule 13D rules — published as part of a February 2022 rulemaking proposal — had not yet been adopted. Under the proposed amendments, the filing deadline would be shortened from ten calendar days to five business days, and the definition of "beneficial ownership" would be expanded to cover certain security-based swap positions. Because these amendments had not been finalized as of the dates of the filings at issue, the existing ten-calendar-day filing window under Rule 13d-1(a) applied. We note, however, that the proposed amendments, if adopted, could affect the timeliness analysis for future filings and should be monitored.

The key rules governing Schedule 13D filings are as follows:

Rule 13d-1(a): Sets forth the filing obligation, requiring that any person who becomes the beneficial owner of more than 5% of a class of equity securities registered under Section 12 must file a Schedule 13D with the SEC within ten calendar days of the date of the acquisition that causes the person to cross the 5% threshold. The rule distinguishes between Schedule 13D (required for persons who acquired the securities with a purpose or effect of changing or influencing the control of the issuer) and Schedule 13G (available to certain "passive" investors, institutional investors, and exempt investors who acquired and hold the securities in the ordinary course of business without a purpose or effect of changing or influencing control).

Rule 13d-2(a): Requires that a person who has filed a Schedule 13D must file an amendment thereto "promptly" upon any material change in the information set forth in the previously filed Schedule 13D. The SEC has interpreted "promptly" to mean as soon as reasonably practicable under the circumstances, and certainly no later than the point at which a reasonable investor would consider the changed information significant to an investment decision. A change in the purpose of the transaction (e.g., from passive investment to activist engagement, or from contemplating a proxy contest to committing to one) is among the most common triggers for an amendment obligation.

Schedule 13D Content Requirements: Schedule 13D requires disclosure across seven principal items:

• Item 1 — Security and Issuer: Identification of the class of equity securities and the issuer, including the issuer's principal executive offices.

• Item 2 — Identity and Background: Identification of the reporting person(s) and disclosure of background information, including principal business or employment, principal office address, citizenship or jurisdiction of organization, and any criminal convictions or SEC/CFTC enforcement proceedings within the prior five years.

• Item 3 — Source and Amount of Funds or Other Consideration: Disclosure of the source and amount of funds or other consideration used in making the purchases of the subject securities.

• Item 4 — Purpose of Transaction: A description of the purpose or purposes of the acquisition and any plans or proposals the reporting persons may have with respect to the issuer, including plans relating to extraordinary corporate transactions, changes in the board of directors or management, material changes in the present capitalization or dividend policy, or any other significant change in the issuer's business or corporate structure.

• Item 5 — Interest in Securities of the Issuer: Disclosure of the aggregate number and percentage of shares beneficially owned, the number of shares over which the reporting person has sole or shared voting or dispositive power, and a summary of transactions in the subject securities during the past sixty days.

• Item 6 — Contracts, Arrangements, Understandings, or Relationships: Disclosure of any contracts, arrangements, understandings, or relationships (legal or otherwise) among the reporting persons, or between the reporting persons and any other person, with respect to any securities of the issuer, including transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies.

• Item 7 — Material to Be Filed as Exhibits: Copies of all written agreements, contracts, arrangements, understandings, or similar arrangements referred to in Items 3 through 6.

B. Beneficial Ownership Definition

The concept of "beneficial ownership" is central to the Section 13(d) framework. Rule 13d-3, promulgated under the Exchange Act, provides the operative definition:

Rule 13d-3(a) provides that a person is deemed to be the "beneficial owner" of a security if such person, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares (i) voting power, which includes the power to vote, or to direct the voting of, such security; and/or (ii) investment power, which includes the power to dispose, or to direct the disposition of, such security.

Rule 13d-3(d)(1) further provides that a person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant, or right, through the conversion of a security, pursuant to the power to revoke a trust, discretionary account, or similar arrangement, or pursuant to the automatic termination of a trust, discretionary account, or similar arrangement. This provision is relevant to the analysis of whether Pinnacle Harbor holds any derivative positions — such as call options, warrants, or convertible securities — that would be deemed to confer beneficial ownership of RGC shares.

For purposes of the Pinnacle Harbor filings, the beneficial ownership analysis is relatively straightforward: Pinnacle Harbor Capital Partners, LP holds the shares directly in its fund; Pinnacle Harbor Capital Management, LLC, as the general partner, exercises voting and investment power over the shares on behalf of the fund; and Viktor S. Kessler, as the controlling member of PHCM, may be deemed to share such power. All three are properly identified as reporting persons. The more nuanced question — whether Pinnacle Harbor holds any cash-settled equity swaps, total return swaps, or other derivative instruments that provide economic exposure to RGC shares without conferring voting or dispositive power — is addressed in Section VIII below.

C. Group Formation Under Section 13(d)(3)

Section 13(d)(3) of the Exchange Act and Rule 13d-5 promulgated thereunder provide that when two or more persons agree to act together for the purpose of acquiring, holding, voting, or disposing of equity securities of an issuer, the group so formed shall be deemed to be a "person" for purposes of Section 13(d). As a consequence, the beneficial ownership of all members of the group is aggregated for purposes of determining whether the group beneficially owns more than 5% of the outstanding shares of the class.

The formation of a "group" under Section 13(d)(3) can occur through formal agreements or informal understandings. Courts have held that explicit written agreements are not required; rather, a group may be deemed to exist based on circumstantial evidence indicating a meeting of the minds among the participants. See, e.g., Morales v. Quintel Entertainment, Inc., 249 F.3d 115, 124 (2d Cir. 2001) (group formation may be established by circumstantial evidence of "concerted activity"); Ostrander & Co., 286 F.3d 613, 617 (2d Cir. 2002). However, courts have also recognized limits on the group formation doctrine, holding that mere parallel conduct, without an agreement to act together, is insufficient to establish a group. See Cowin v. Bresler, 741 F.2d 410, 427 (D.C. Cir. 1984).

The significance of group formation for this matter is twofold. First, if Pinnacle Harbor has entered into any agreement, formal or informal, with other RGC shareholders to coordinate the acquisition, voting, or disposition of RGC shares, the resulting group would be required to file a Schedule 13D (or amend the existing filing) disclosing the group's aggregate beneficial ownership. Second, if the group's aggregate ownership exceeds 10%, the group members could become subject to the short-swing profit disgorgement provisions of Section 16(b) of the Exchange Act, which require insiders and 10% beneficial owners to disgorge profits from purchases and sales (or sales and purchases) of the issuer's securities occurring within a six-month period. These issues are analyzed in detail in Section VI below.

D. Relationship to Section 14(a) Proxy Solicitation Rules

Where a Schedule 13D filer discloses an intent to solicit proxies or engage in a proxy contest, the interplay between the Section 13(d) disclosure obligations and the Section 14(a) proxy solicitation rules becomes directly relevant. Section 14(a) of the Exchange Act and the rules promulgated thereunder regulate the solicitation of proxies from the holders of securities registered under Section 12.

Several specific rules are pertinent to the Pinnacle Harbor filings:

Rule 14a-1(l): Defines "solicitation" broadly to include, among other things, any communication to security holders under circumstances reasonably calculated to result in the procurement, withholding, or revocation of a proxy. This definition extends to public statements, press releases, open letters, media interviews, and other communications directed at shareholders in connection with a contested election or other corporate governance matter.

Rule 14a-12: Permits solicitations to be made before the filing of a definitive proxy statement with the SEC, provided that (i) the communication is filed with the SEC under cover of Schedule 14A no later than the date of first use, (ii) certain required legends are included in the communication, and (iii) the soliciting person undertakes to file a definitive proxy statement when required. This rule serves as a "safe harbor" for pre-filing communications, including the type of open letter published by Pinnacle Harbor on November 30, 2022.

Rule 14a-2(b): Provides certain exemptions from the proxy solicitation filing requirements for specific types of communications, including communications by persons who do not seek proxy authority and who do not furnish or otherwise request, or act on behalf of a person who furnishes or requests, a form of revocation, abstention, consent, or authorization.

The application of these rules to Pinnacle Harbor's communications, including its public open letter and any shareholder outreach activities, is discussed in Section VII below. Of particular note, Pinnacle Harbor prepared but did not file a preliminary proxy statement; a draft was sent to its outside counsel, Hargrove Sloane & Birch LLP, on February 9, 2023, but was never submitted to the SEC. The implications of this fact are now largely academic in light of the subsequent settlement, but the analysis remains relevant to the Special Committee's assessment of Pinnacle Harbor's compliance posture.

IV. ANALYSIS OF PRELIMINARY SCHEDULE 13D (FILED NOVEMBER 10, 2022)

The preliminary Schedule 13D filed by Pinnacle Harbor on November 10, 2022, consists of the completed Schedule 13D form, a cover page, and several exhibits. We address each item of the filing below.

A. Item 1 — Security and Issuer

Item 1 of the Schedule 13D identifies the issuer as Redstone Gaming Corp., a corporation organized under the laws of the State of Delaware. The class of equity securities to which the filing relates is identified as the common stock, par value $0.01 per share. The principal executive offices of the Company are listed at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, Nevada 89123. The Nasdaq ticker symbol is correctly identified as "RGC."

Assessment: Item 1 is compliant. The identification of the issuer, the class of securities, and the principal executive offices is accurate and consistent with the Company's public filings with the SEC and the records maintained by the Nasdaq Stock Market.

B. Item 2 — Identity and Background

Item 2 identifies the following as reporting persons filing jointly:

1. Pinnacle Harbor Capital Partners, LP (EIN: 47-3928154), a Delaware limited partnership, with its principal office at 590 Madison Avenue, 34th Floor, New York, New York 10022. The filing states that the principal business of the partnership is investment management, with a focus on event-driven and activist equity strategies in the gaming, hospitality, and consumer-discretionary sectors.

2. Pinnacle Harbor Capital Management, LLC, a Delaware limited liability company, serving as the general partner of Pinnacle Harbor Capital Partners, LP. The principal office is the same as that of the fund. The filing identifies PHCM as the entity that exercises voting and investment power over the shares of RGC common stock held by the fund.

3. Viktor S. Kessler, age 47, a United States citizen, identified as the Managing Partner and Chief Investment Officer of PHCM and the controlling member thereof. Mr. Kessler's business address is the same as the fund's principal office.

In addition, the filing identifies Nadia Johar, age 39, a United States citizen, as the Head of Activism and a Portfolio Manager at Pinnacle Harbor. Ms. Johar is listed as a "covered person" with background information disclosed, including her educational background (B.A., Columbia University; J.D., Georgetown University Law Center) and prior employment history (Associate, Crane & Ames LLP; Vice President, Activism and Special Situations, Corvus Capital Partners). However, Ms. Johar does not appear as a separate filing person on the Schedule 13D.

The filing discloses that none of the reporting persons or covered individuals has been convicted of any criminal offense during the five years preceding the filing date (excluding traffic violations or similar minor offenses), and none has been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction that resulted in a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws.

Assessment: Item 2 appears compliant. The background information provided for each reporting person and covered individual meets the requirements of Schedule 13D, Instruction C. However, we note the following area for further inquiry:

Additional Controlling Persons. The filing identifies Mr. Kessler as the controlling member of PHCM and lists Ms. Johar as a covered person but not a filing person. It is not entirely clear from the filing whether PHCM has any additional principals, partners, or investment committee members who exercise or share voting or investment power over the RGC shares. If, for example, Pinnacle Harbor's investment decisions are made by a formal investment committee rather than solely by Mr. Kessler, the other committee members may need to be identified as additional filing persons or, at minimum, as covered persons with background disclosures. We recommend that this question be explored further in connection with any discovery or information requests in the event of litigation.

C. Item 3 — Source and Amount of Funds

Item 3 of the Schedule 13D discloses that the shares of RGC common stock were acquired using the working capital of Pinnacle Harbor Capital Partners, LP. The total cost basis is stated as approximately $188.1 million, based on 7,119,600 shares acquired at a weighted-average purchase price of $26.42 per share. The filing does not indicate that any margin borrowing, bank financing, or other external financing was used to fund the share purchases.

Assessment: The Item 3 disclosure appears adequate and is consistent with the standard disclosure made by activist hedge funds that acquire shares using existing fund capital. The characterization of the funding source as "working capital" is well-established SEC disclosure practice for investment partnerships.

Follow-Up Consideration: While the filing does not indicate external financing, it is worth considering whether the fund's prime brokerage arrangements create any pledge or encumbrance on the RGC shares that should have been disclosed. Hedge funds typically hold their portfolio securities in prime brokerage accounts, and the prime brokerage agreement may grant the prime broker a security interest in the account assets. While such arrangements are generally not considered to create beneficial ownership issues or to require separate disclosure under Item 3, they could be relevant to the Item 6 analysis if the prime brokerage agreement contains provisions that affect the voting or disposition of the shares (e.g., a right to liquidate positions upon margin call). This is a relatively technical point but may be worth exploring if the Company seeks to challenge the completeness of the filing.

D. Item 4 — Purpose of Transaction

Item 4 is the most substantively significant item in the Schedule 13D, as it sets forth Pinnacle Harbor's stated reasons for acquiring the shares and its plans or proposals with respect to the Company. The initial 13D's Item 4 disclosure states, in substance, that Pinnacle Harbor acquired shares of RGC common stock because it believes the shares are undervalued and that changes to the composition of the Board of Directors and the Company's strategic direction would enhance shareholder value.

The filing identifies the following specific purposes:

(1) Board Representation. Pinnacle Harbor states that it is seeking the appointment of two nominees to the RGC Board of Directors: Dr. Sandra Trevelyan (age 55, former Chief Operating Officer of Meridian Interactive Holdings, Inc.) and Hugh Desmond Grayson (age 61, former Chief Financial Officer of Atlas Leisure Group, Inc.). The filing provides brief biographical information about each nominee, including their professional backgrounds and qualifications.

(2) Strategic Review of the Interactive Gaming Division. Pinnacle Harbor states that it is requesting a formal strategic review of the Company's interactive gaming division, which generated revenue of approximately $412 million in fiscal year 2021, representing approximately 14.4% of the Company's total revenue of approximately $2.87 billion. The filing indicates that Pinnacle Harbor believes the interactive gaming division is underperforming relative to its peers and that the Company should evaluate strategic alternatives for the division, including a potential sale, spin-off, or other separation transaction.

(3) Capital Return Program. Pinnacle Harbor states that it is requesting that the Company return $300 million to shareholders through a special dividend or an accelerated share buyback program, which Pinnacle Harbor believes would be accretive to remaining shareholders and would represent a more efficient use of the Company's excess capital.

The filing also references the private demand letter sent by Pinnacle Harbor to Board Chair Diane K. Sheridan on October 28, 2022, a copy of which is filed as an exhibit. The filing states that Pinnacle Harbor "may seek to engage in discussions with management, the Board of Directors, other shareholders, and third parties regarding its views on the Company and the matters described herein," and reserves the right to acquire additional shares or dispose of existing shares at any time, subject to market conditions and other factors.

Assessment: The Item 4 disclosure is detailed and identifies Pinnacle Harbor's three principal demands with reasonable specificity. This level of disclosure is consistent with industry practice for activist 13D filings. However, several aspects of the disclosure warrant scrutiny:

Shareholder Communications. The filing references potential "discussions" with "other shareholders," but does not clearly disclose whether Pinnacle Harbor has already engaged in any such discussions as of the filing date. If Pinnacle Harbor had communicated with other RGC shareholders prior to November 10, 2022, regarding the acquisition, voting, or disposition of RGC shares, such communications could implicate the group formation analysis under Section 13(d)(3) and should have been disclosed in Item 4 and/or Item 6. The absence of such disclosure may simply reflect the absence of such communications, but it could also reflect an omission. This is a key area for further investigation.

Equivocal Language Regarding Proxy Contest. The initial 13D uses permissive, non-committal language — "may seek to nominate directors" — rather than stating a definitive intent to commence a proxy contest. While this is typical of preliminary 13D filings (as activist investors frequently prefer to preserve optionality and negotiate privately before escalating), the equivocal language may be contrasted with Pinnacle Harbor's subsequent actions: the public open letter of November 30, 2022, which explicitly threatened a proxy contest, was issued only twenty days after the initial 13D filing. If Pinnacle Harbor had already formed a definitive intent to pursue a proxy contest at the time of the initial filing but characterized its intentions in equivocal terms, this could constitute a material misrepresentation or omission in Item 4. However, proving that Pinnacle Harbor had reached a definitive intent by November 10 would likely require access to internal communications, which may be obtainable only through discovery.

Absence of Rule 14a-12 Reference. The initial 13D does not reference the Rule 14a-12 safe harbor for pre-filing proxy solicitations. This is not a deficiency in the 13D itself (Rule 14a-12 is a proxy solicitation rule, not a 13D requirement), but the absence of any reference to the proxy solicitation rules is noteworthy given that Pinnacle Harbor's subsequent public open letter may have constituted a solicitation requiring compliance with Rule 14a-12. This issue is addressed in Section VII below.

E. Item 5 — Interest in Securities of the Issuer

Item 5 discloses the following information regarding Pinnacle Harbor's beneficial ownership of RGC common stock:

• Shares beneficially owned: 7,119,600 shares of common stock

• Percentage of class: 6.8% of the 104,700,000 shares of common stock outstanding, as reported in the Company's most recent periodic filing with the SEC and as confirmed by the records of Continental Share Services, Inc., the Company's transfer agent

• Voting and dispositive power: Pinnacle Harbor Capital Management, LLC, as the general partner of Pinnacle Harbor Capital Partners, LP, has sole voting and dispositive power over all 7,119,600 reported shares. Viktor S. Kessler, as the controlling member of PHCM, may be deemed to share beneficial ownership of the reported shares.

• Derivative positions: No derivative positions are disclosed. The filing does not report any swaps, options, warrants, conversion rights, or other derivative instruments referencing RGC common stock.

• Transactions in the past 60 days: The filing includes a summary table of open-market purchases conducted during the 60-day period preceding the filing date, with dates, number of shares, and prices disclosed.

Assessment: The Item 5 disclosure appears consistent with the shares outstanding as confirmed by Continental Share Services, Inc. (Jason Velmoran). The ownership percentage calculation of 6.8% (7,119,600 / 104,700,000) is mathematically correct. However, we note the following points for further investigation:

Derivative Positions. The filing does not disclose any cash-settled equity swaps, total return swaps, or other derivative instruments referencing RGC common stock. As discussed in Section VIII below, such instruments — even if they do not confer voting or dispositive power and therefore do not constitute "beneficial ownership" under Rule 13d-3 — may need to be disclosed under Item 6 as "contracts, arrangements, understandings, or relationships" with respect to the issuer's securities. The absence of any derivative disclosure in the filing is not necessarily a deficiency, as Pinnacle Harbor may not hold any such instruments; however, this should be verified through market intelligence.

Cross-Check of WAPPS. The weighted-average purchase price of $26.42 per share should be cross-checked against publicly available trading data for RGC common stock during the June through November 2022 accumulation period. During this period, RGC's stock price ranged from $24.18 (June 1, 2022) to $29.12 (November 10, 2022). A weighted-average purchase price of $26.42 is plausible given this price range, particularly if the bulk of purchases occurred during the earlier months of the accumulation period when the stock price was trading in the mid-to-high $20s range. We recommend that Calloway Pinnacle Trust Bank (Thomas Ashford) be engaged to perform a more detailed analysis using publicly available volume-weighted average price ("VWAP") data.

F. Item 6 — Contracts, Arrangements, Understandings

Item 6 of the Schedule 13D discloses no contracts, arrangements, understandings, or relationships among the reporting persons, or between the reporting persons and any other person, with respect to the securities of the issuer, other than the following:

(a) The retention of Hargrove Sloane & Birch LLP as legal counsel to Pinnacle Harbor in connection with the activist campaign, with Jonathan "Jon" Birch III identified as the lead partner; and

(b) The engagement of Garrison Proxy Advisors, LLC as proxy solicitor, with Alicia Trent identified as the contact person.

Assessment: The Item 6 disclosure is relatively sparse, which is not unusual for an initial 13D filing at this stage of an activist campaign. However, we note the following areas of concern:

Garrison Proxy Advisors Fee Arrangements. The filing discloses the engagement of Garrison Proxy Advisors but does not describe the terms of the engagement, including any fee arrangements. If Garrison's compensation includes success-based fees tied to the outcome of a proxy contest (e.g., bonuses contingent on Pinnacle Harbor winning one or more board seats), such arrangements could be considered "contracts, arrangements, understandings, or relationships" with respect to the issuer's securities that should be disclosed more fully under Item 6. While it is common practice for proxy solicitors to receive both fixed fees and success-based compensation, the failure to disclose the nature of these arrangements could be a technical deficiency.

Joint Filing Agreement. The filing references a joint filing agreement among the three reporting persons (Pinnacle Harbor Capital Partners, LP; Pinnacle Harbor Capital Management, LLC; and Viktor S. Kessler), which is filed as an exhibit. We should confirm that the agreement covers all necessary reporting persons and is properly executed.

G. Item 7 — Exhibits

The following exhibits are filed with the preliminary Schedule 13D:

(a) Joint filing agreement among Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, and Viktor S. Kessler, executed pursuant to Rule 13d-1(k)(1)(iii);

(b) Copy of the private letter dated October 28, 2022, from Pinnacle Harbor to Diane K. Sheridan, Chair of the RGC Board of Directors; and

Assessment: We should confirm that all required exhibits are attached to the filing and that the joint filing agreement covers all necessary reporting persons. In addition, if any written agreements exist between Pinnacle Harbor and its nominees (Dr. Trevelyan and Mr. Grayson) regarding their nomination, compensation, or service on the Board, such agreements should be filed as exhibits. The absence of any such exhibit in the filing may indicate that no written agreements exist, or it may indicate an omission.

H. Timeliness of the Initial Filing

The timeliness of the initial Schedule 13D filing is among the most significant issues identified in our analysis. Under current Rule 13d-1(a), a Schedule 13D must be filed with the SEC within ten calendar days of the date on which the reporting person first acquires beneficial ownership of more than 5% of the outstanding shares of the relevant class.

The relevant facts are as follows:

• Pinnacle Harbor began accumulating shares on approximately June 1, 2022.

• The 5% threshold for RGC is 5% × 104,700,000 = 5,235,000 shares.

• Pinnacle Harbor ultimately acquired 7,119,600 shares at a WAPPS of $26.42.

• The Schedule 13D was filed on November 10, 2022.

Based on these facts, Pinnacle Harbor crossed the 5% threshold at the point during the accumulation period when it acquired its 5,235,001st share. Given that Pinnacle Harbor acquired a total of 7,119,600 shares over approximately five months (June through November 2022), and assuming a roughly steady rate of accumulation, it is likely that Pinnacle Harbor crossed the 5% threshold well before November 10, 2022 — potentially as early as September or October 2022. If, for example, Pinnacle Harbor crossed 5% on September 15, 2022, a filing would have been due by September 25, 2022, making the November 10 filing approximately six to seven weeks late.

The transaction table appended to the filing should contain the specific dates and quantities of individual purchases, which would permit a precise determination of the crossing date. However, the level of aggregation in the transaction table — which groups purchases by date range rather than reporting each individual trade — may make it difficult to pinpoint the exact crossing date without access to more granular trading records.

Practical Implications. A late filing of a Schedule 13D is a violation of Section 13(d) of the Exchange Act and Rule 13d-1(a). The SEC has brought enforcement actions against activist investors for egregiously late filings, resulting in civil monetary penalties. See, e.g., In the Matter of Third Point LLC, SEC Admin. Proc. File No. 3-16313 (2016) ($500,000 civil penalty for late 13D filings); In the Matter of Greenlight Capital, Inc., SEC Admin. Proc. File No. 3-17475 (2016) (cease-and-desist order and penalty for failure to timely file beneficial ownership reports). However, in practice, many activist funds file at or near the outer boundary of the ten-day window, and the SEC has not consistently pursued enforcement for moderate filing delays absent aggravating circumstances (such as trading during the late-filing period, affirmative concealment, or a pattern of non-compliance).

From RGC's perspective, the potential late filing does not, standing alone, provide a basis for injunctive relief that would delay or prevent a proxy contest. The federal courts have generally declined to grant injunctive relief based solely on a late 13D filing, absent a showing of irreparable harm. See Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975) (declining to order divestiture for a Section 13(d) violation absent a showing of irreparable harm). However, the late filing may have strategic value in several respects:

(i) It can be raised in public communications with shareholders and proxy advisory firms as evidence of Pinnacle Harbor's cavalier approach to regulatory compliance;

(ii) It can be cited in any litigation to challenge the credibility or good faith of Pinnacle Harbor's disclosures more broadly;

(iii) It may be referred to the SEC Division of Enforcement as a basis for a potential enforcement inquiry, which — even if it does not result in formal action — could create distraction and reputational risk for Pinnacle Harbor during a contested election.

Recommendation: We recommend that Calloway Pinnacle Trust Bank (Thomas Ashford) be engaged to analyze publicly available trading data — including volume and price data for RGC common stock during the June through November 2022 period — to estimate the most likely date on which Pinnacle Harbor crossed the 5% threshold and to quantify the potential extent of any late-filing period. This analysis will be critical to determining the strength of the late-filing argument and its utility as a defensive tool.

V. ANALYSIS OF AMENDMENT NO. 1 TO SCHEDULE 13D (FILED JANUARY 6, 2023)

A. Nature of the Amendment

Amendment No. 1 to the Schedule 13D was filed with the SEC on January 6, 2023, pursuant to Rule 13d-2(a), which requires the filing of an amendment "promptly" upon any material change in the information set forth in the previously filed Schedule 13D. The principal purpose of the amendment is to update Item 4 (Purpose of Transaction) to reflect Pinnacle Harbor's stated intention to nominate directors for election at the Company's 2023 annual meeting of stockholders and to potentially commence a proxy solicitation.

The filing of an amendment is consistent with the obligation under Rule 13d-2(a), as the shift from the preliminary 13D's equivocal language regarding potential director nominations ("may seek to nominate directors") to the affirmative statement of nomination intent in Amendment No. 1 represents a material change in the purpose of the transaction. The timing of the amendment — approximately two months after the initial filing — is not inherently problematic, though the question of whether the amendment should have been filed earlier (e.g., on or shortly after November 30, 2022, when Pinnacle Harbor publicly announced its intention to pursue a proxy contest in its open letter) is discussed below.

B. Updated Item 4 — Purpose of Transaction

Amendment No. 1 updates the Item 4 disclosure in several significant respects:

(1) Affirmative Statement of Nomination Intent. Pinnacle Harbor now states affirmatively that it intends to nominate Dr. Sandra Trevelyan and Hugh Desmond Grayson for election to the RGC Board of Directors at the Company's 2023 annual meeting of stockholders. This represents a material escalation from the initial 13D's language, which stated only that Pinnacle Harbor "may seek to nominate directors."

(2) Reference to the Public Open Letter. The amendment references the public open letter dated November 30, 2022, in which Pinnacle Harbor demanded the appointment of Dr. Trevelyan and Mr. Grayson and threatened to commence a proxy contest if its demands were not met.

(3) Formal Nomination Notice. The amendment references the formal notice of intent to nominate directors sent by Hargrove Sloane & Birch LLP (Jonathan Birch III) to Patricia Nakamura, as Corporate Secretary of RGC, on December 8, 2022, pursuant to Article II, Section 2.11 of the Company's Amended and Restated Bylaws. The nomination notice was received and acknowledged by RGC on January 9, 2023, within the advance-notice window established by the Bylaws (December 12, 2022 through January 11, 2023).

(4) Proxy Statement Preparation. The amendment states that Pinnacle Harbor is "preparing to file" a preliminary proxy statement with the SEC in connection with a potential proxy solicitation in support of its nominees, but notes that no such filing has been made as of January 6, 2023.

(5) Continuation of Prior Demands. The amendment continues to advocate for the strategic review of the interactive gaming division and the $300 million capital return to shareholders, consistent with the initial 13D disclosure.

Assessment: The updated Item 4 disclosure accurately reflects the material changes in Pinnacle Harbor's stated purposes between the initial 13D (November 10, 2022) and Amendment No. 1 (January 6, 2023). The escalation from "may seek to nominate" to "intends to nominate" is properly identified as a material change triggering the amendment obligation. However, we note the following analytical points:

Timeliness of the Amendment. Although Rule 13d-2(a) requires amendments to be filed "promptly" upon a material change, the rule does not define a specific time period. The material change here — Pinnacle Harbor's definitive commitment to pursue a proxy contest — arguably occurred on November 30, 2022, when Pinnacle Harbor published its open letter, or at the latest on December 8, 2022, when it sent the formal nomination notice. The amendment was not filed until January 6, 2023, approximately five to six weeks later. While this delay may not rise to the level of a filing violation (particularly given the holiday period), it is worth noting as part of the overall pattern of Pinnacle Harbor's approach to filing timeliness.

Section 14(a) Considerations. The reference in Amendment No. 1 to Pinnacle Harbor's preparation of a preliminary proxy statement raises important considerations under Section 14(a) and the proxy solicitation rules. Any communications by Pinnacle Harbor with other shareholders in connection with the planned solicitation — whether through direct outreach, public statements, media interviews, or other channels — must comply with Rule 14a-12 (the safe harbor for pre-filing solicitations) or one of the exemptions set forth in Rule 14a-2(b). This issue is discussed in detail in Section VII below.

Public Open Letter as a Solicitation. Pinnacle Harbor's public open letter of November 30, 2022 — issued between the date of the initial 13D and the filing of Amendment No. 1 — may itself constitute a "solicitation" within the meaning of Rule 14a-1(l)(1)(iii). If so, Pinnacle Harbor would have been required to file the open letter with the SEC under Rule 14a-12 or, at a minimum, reference it in the Schedule 13D as a material communication regarding the purpose of the transaction. The amendment does reference the open letter, but the reference appears only in the updated filing; the open letter was not separately filed with the SEC under Rule 14a-12 on or before its date of first use (November 30, 2022). This potential compliance deficiency is addressed in Section VII.A below.

C. Updated Item 5 — Interest in Securities

Amendment No. 1 reports no change in Pinnacle Harbor's beneficial ownership of RGC common stock. The number of shares beneficially owned remains 7,119,600 (6.8% of the 104,700,000 shares outstanding). No additional acquisitions or dispositions are disclosed.

Assessment: The static position is notable and confirms that Pinnacle Harbor has not increased its stake during the period between the initial 13D and Amendment No. 1. This is consistent with typical activist behavior in the period following a 13D filing, as additional open-market purchases would attract heightened market attention and could increase the cost of accumulation. The absence of any dispositions suggests continued confidence in the investment thesis and a commitment to the activist campaign.

D. Updated Item 6 — Contracts, Arrangements, Understandings

Amendment No. 1 updates Item 6 to reference the following additional items:

(a) The formal nomination notice sent by Hargrove Sloane & Birch LLP on December 8, 2022, and received by RGC on January 9, 2023; and

(b) The continued retention of Garrison Proxy Advisors, LLC as proxy solicitor.

Assessment: The updated Item 6 disclosure is adequate with respect to the items identified. However, we recommend confirming whether any compensation arrangements exist between Pinnacle Harbor and its nominees, Dr. Trevelyan and Mr. Grayson. Such arrangements could include:

• Board seat-contingent compensation or success fees payable to the nominees upon their election to the Board;

• Expense reimbursement agreements covering the nominees' costs in connection with the proxy contest;

• Indemnification agreements protecting the nominees against liabilities arising from their nomination or service;

• Agreements regarding the nominees' future service on the Board, including committee assignments, term commitments, or information-sharing arrangements with Pinnacle Harbor.

Any such arrangements would constitute "contracts, arrangements, understandings, or relationships" with respect to the issuer's securities and would need to be disclosed under Item 6. The failure to disclose material nominee arrangements could be a significant compliance deficiency, both under Schedule 13D and under Schedule 14A in connection with any eventual proxy statement.

E. Exhibits. Amendment No. 1 updates the exhibits to include:

(a) The public open letter dated November 30, 2022; and

(b) The formal notice of intent to nominate directors dated December 8, 2022.

Assessment: The inclusion of these documents as exhibits is appropriate. We should verify that: (i) the version of the nomination notice filed as an exhibit to the Schedule 13D is identical to the version delivered to RGC; and (ii) all exhibits are complete and properly filed on EDGAR. Any inconsistency between the filed exhibit and the notice received by RGC could indicate a filing error or, in a more concerning scenario, a deliberate discrepancy.

VI. GROUP FORMATION ANALYSIS

A. Identified Reporting Persons

As discussed above, the Schedule 13D identifies three reporting persons filing jointly: Pinnacle Harbor Capital Partners, LP; Pinnacle Harbor Capital Management, LLC; and Viktor S. Kessler. This is a standard group configuration for an activist hedge fund filing, consisting of the fund vehicle, the general partner that exercises voting and investment authority, and the controlling individual who directs the general partner's activities.

Nadia Johar is identified in the filing as a covered person with background disclosures, but she does not appear as a separate reporting person. Given her role as Head of Activism and Portfolio Manager, Ms. Johar likely plays a significant role in shaping the fund's investment strategy and activist campaigns, including the RGC engagement. If Ms. Johar exercises or shares voting or investment power over the RGC shares — whether through her membership on an investment committee, her authority to make trading decisions, or otherwise — she may be deemed to be a beneficial owner and should be included as a filing person. The filing's treatment of Ms. Johar as a covered person rather than a filing person suggests that PHCM has taken the position that only Mr. Kessler, as the controlling member, exercises voting and investment power. This position is plausible but should be tested if the Company decides to challenge the completeness of the filing.

B. Potential Undisclosed Group Members

A central question in the defense of an activist campaign is whether the activist fund has entered into any agreement or understanding with other shareholders that would constitute a "group" under Section 13(d)(3) and Rule 13d-5. The formation of an undisclosed group would have several significant consequences: (i) the group would be required to file a Schedule 13D (or amend the existing filing) disclosing its aggregate beneficial ownership; (ii) the failure to file would constitute a separate violation of Section 13(d); and (iii) if the group's aggregate ownership exceeded 10%, the group members could become subject to the Section 16(b) short-swing profit disgorgement provisions.

Based on our review of publicly available information and discussions with the Company's advisors, we have identified the following shareholders as potential candidates for group formation analysis:

Ridgeway Asset Management, LP (Franklin Osei, Portfolio Manager): Ridgeway is a long-only value fund based in Boston, Massachusetts, and is reported to hold approximately 8,585,400 shares of RGC common stock, representing approximately 8.2% of the shares outstanding. Ridgeway is the Company's largest institutional shareholder other than passive index fund holders. If Ridgeway has entered into any agreement or understanding with Pinnacle Harbor — whether formally or informally — to coordinate the voting of shares, support Pinnacle Harbor's nominees, or otherwise act in concert with respect to RGC securities, a group would be deemed to exist. The group's aggregate beneficial ownership would be 8.2% + 6.8% = 15.0%, well above the 10% threshold that would trigger Section 16(b) short-swing profit liability and enhanced scrutiny. There is no evidence to date that such an arrangement exists, but Ridgeway's large position and value-oriented investment approach make it a natural ally for Pinnacle Harbor's activist thesis, and the possibility of outreach warrants continued monitoring.

Stillwater Capital Advisors, LLC (Margaret "Meg" Liu, Head of Governance): Stillwater is a growth-oriented investment adviser based in Chicago, Illinois, reported to hold approximately 5,653,800 shares of RGC common stock, representing approximately 5.4% of the shares outstanding. Stillwater has its own Schedule 13G filing on record and has not disclosed any activist intent. However, if Pinnacle Harbor has engaged in discussions with Stillwater regarding support for its nominees or its strategic proposals, a group could be argued. The aggregation of Pinnacle Harbor's 6.8% and Stillwater's 5.4% would result in combined ownership of 12.2%.

Canfield Municipal Employees' Retirement System (David Proulx, Chief Investment Officer): The Canfield MERS is a public pension plan based in Canfield, Ohio, reported to hold approximately 2,198,700 shares of RGC common stock, representing approximately 2.1% of the shares outstanding. While a public pension plan is unlikely to enter into a formal group arrangement with an activist hedge fund, informal communications regarding voting intentions could theoretically give rise to a group formation argument under certain circumstances. This risk is lower than wit

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
January 15, 2023
MEMORANDUM
FROM: Douglas Fairchild, Engagement Partner, and Claire Dempsey, Lead Associate, Calderwood & Harkness LLP
TO: Patricia "Trish" Nakamura, General Counsel & Corporate Secretary, Redstone Gaming Corp. Special Committee of the Board of Directors of Redstone Gaming Corp.:
• James "Jim" Delacroix (Chair)
• Carmen Vasquez
• Randall Morse
RE: Analysis of Schedule 13D Filings by Pinnacle Harbor Capital Partners, LP — Preliminary Filing (November 10, 2022) and Amendment No. 1 (January 6, 2023)
MATTER NO.: 1033-00003
This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP has prepared this memorandum at the request of Patricia Nakamura, General Counsel and Corporate Secretary of Redstone Gaming Corp. ("RGC" or the "Company," Nasdaq: RGC, CIK: 0001847625, EIN: 82-4031976), and the Special Committee of the Board of Directors of RGC (the "Special Committee"), to provide a comprehensive analysis of the two Schedule 13D filings made by Pinnacle Harbor Capital Partners, LP ("Pinnacle Harbor" or "PHCP") with the United States Securities and Exchange Commission (the "SEC") in connection with Pinnacle Harbor's acquisition of shares of common stock of RGC. This memorandum is intended to inform the Special Committee's evaluation of Pinnacle Harbor's activist campaign and to support the Company's defensive strategy.
The two filings analyzed herein are: (1) the preliminary Schedule 13D filed with the SEC on November 10, 2022; and (2) Amendment No. 1 to Schedule 13D filed with the SEC on January 6, 2023. Both filings were made on behalf of Pinnacle Harbor Capital Partners, LP, its general partner Pinnacle Harbor Capital Management, LLC ("PHCM"), and Viktor S. Kessler, the Managing Partner and Chief Investment Officer of PHCM.
Summary Conclusion. Based on our review, the filings appear to be substantially compliant with the disclosure requirements of Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rules 13d-1 through 13d-7 promulgated thereunder. However, several areas warrant continued scrutiny, including: (a) the timeliness of the initial filing relative to the date on which Pinnacle Harbor crossed the 5% beneficial ownership threshold; (b) the adequacy of Pinnacle Harbor's analysis and disclosure regarding potential group formation with other RGC shareholders; (c) the completeness of the purpose disclosures in Item 4 of the Schedule 13D, particularly with respect to Pinnacle Harbor's communications with other shareholders; and (d) the interplay between the 13D disclosures and Pinnacle Harbor's obligations under Section 14(a) of the Exchange Act and the proxy solicitation rules thereunder, especially as they relate to Pinnacle Harbor's widely disseminated public open letter dated November 30, 2022.
Key Disclosed Facts. According to the filings, Pinnacle Harbor beneficially owns 7,119,600 shares of RGC common stock, par value $0.01 per share, representing approximately 6.8% of the 104,700,000 shares of common stock outstanding as of the most recent practicable date. Pinnacle Harbor's weighted-average purchase price per share ("WAPPS") is $26.42, yielding a total cost basis of approximately $188,099,832 (approximately $188.1 million). All shares were acquired in open-market transactions during the period from June 2022 through November 2022.
Practical Significance. The Schedule 13D filings, and in particular Amendment No. 1, signaling Pinnacle Harbor's activist intentions with respect to the Company. Pinnacle Harbor has articulated three principal demands: (i) the appointment of two nominees — Dr. Sandra Trevelyan and Hugh Desmond Grayson — to the RGC Board of Directors; (ii) a formal strategic review of the Company's interactive gaming division; and (iii) a return of $300 million in capital to shareholders through a special dividend or accelerated share buyback program. The escalation from the initial 13D's equivocal language regarding potential board nominations to the affirmative statement of nomination intent in Amendment No. 1 confirms that Pinnacle Harbor is prepared to pursue a proxy contest at the Company's 2023 annual meeting of stockholders if its demands are not addressed through private engagement.
This memorandum sets forth the detailed factual background, applicable legal framework, item-by-item analysis of each filing, an assessment of group formation risks, an evaluation of proxy solicitation rule compliance, derivative position and swap disclosure considerations, and our recommendations for next steps.
II. BACKGROUND AND CHRONOLOGY
A. Pinnacle Harbor's Share Accumulation
Pinnacle Harbor Capital Partners, LP is a Delaware limited partnership organized and operating under the laws of the State of Delaware. Its general partner is Pinnacle Harbor Capital Management, LLC, also a Delaware limited liability company. Pinnacle Harbor's principal office is located at 590 Madison Avenue, 34th Floor, New York, New York 10022.
Pinnacle Harbor was founded in 2014 and currently manages assets under management ("AUM") of approximately $4.2 billion. The firm pursues an event-driven and activist equity investment strategy, with a particular focus on mid-cap companies in the gaming, hospitality, and consumer-discretionary sectors. Pinnacle Harbor has been involved in several high-profile activist campaigns over the past five years, though its engagement with RGC represents its first significant activist position in the Nevada gaming sector.
The key individuals associated with Pinnacle Harbor for purposes of this analysis are as follows:
• Viktor S. Kessler, age 47, is the Managing Partner and Chief Investment Officer of Pinnacle Harbor Capital Management, LLC. Mr. Kessler is the controlling member of PHCM and, as such, is reported as a filing person on the Schedule 13D. Mr. Kessler is a United States citizen and resides in New York, New York.
• Nadia Johar, age 39, is the Head of Activism and a Portfolio Manager at Pinnacle Harbor. Ms. Johar is identified in the Schedule 13D as a covered person with biographical information disclosed pursuant to the Item 2 requirements. Ms. Johar is a United States citizen. Although Ms. Johar is not listed as a separate reporting person on the Schedule 13D filing, her role in directing the fund's activist strategy and her involvement in investment and voting decisions merit further consideration, as discussed in Section VI below.
Pinnacle Harbor's accumulation of RGC common stock took place during the period from approximately June 1, 2022 through November 2022. All shares were acquired through open-market transactions on the Nasdaq Stock Market. The key financial metrics of the accumulation are as follows:
• Total shares acquired: 7,119,600 shares of RGC common stock
• Weighted-average purchase price per share: $26.42
• Total cost basis: 7,119,600 shares × $26.42 = approximately $188,099,832 (approximately $188.1 million)
• Shares outstanding: 104,700,000 shares of RGC common stock (as confirmed by Continental Share Services, Inc., the Company's transfer agent, contact: Jason Velmoran)
• Ownership percentage: 7,119,600 / 104,700,000 = approximately 6.8%
The accumulation appears to have been conducted systematically over a period of approximately five months, consistent with the trading patterns typically employed by activist funds seeking to build a substantial position while minimizing market impact and price disruption. As discussed in greater detail in Section IV.H below, the precise date on which Pinnacle Harbor crossed the 5% beneficial ownership threshold — the event triggering the obligation to file a Schedule 13D — is a matter of critical importance to the timeliness analysis.
B. Timeline of Relevant Events
The following chronology sets forth the key events relevant to the analysis of Pinnacle Harbor's Schedule 13D filings and the broader activist campaign:
June 1, 2022: Pinnacle Harbor begins accumulating shares of RGC common stock through open-market purchases on the Nasdaq Stock Market. The closing price of RGC common stock on this date is $24.18 per share.
June 2022 – September 2022: Pinnacle Harbor continues to acquire shares during this period. Based on the total shares acquired (7,119,600) and the WAPPS of $26.42, the bulk of Pinnacle Harbor's purchases appear to have occurred during this period and into the early fall, though the exact purchase schedule is disclosed only in summary form in the transaction table appended to the Schedule 13D.
September 30, 2022: The closing price of RGC common stock is $27.55 per share, reflecting a gain of approximately 13.9% from June 1, 2022. This date also marks the end of the Company's fiscal third quarter.
October 28, 2022: Pinnacle Harbor sends a private demand letter to Diane K. Sheridan, Chair of the RGC Board of Directors. The letter requests the appointment of two Pinnacle Harbor nominees to the Board and a strategic review of the Company's interactive gaming division, and advocates for a $300 million capital return to shareholders. This letter is subsequently filed as an exhibit to the preliminary Schedule 13D.
November 10, 2022: Pinnacle Harbor files its preliminary Schedule 13D with the SEC via the EDGAR filing system. The closing price of RGC common stock on this date is $29.12 per share.
November 14, 2022: The RGC Board of Directors holds an emergency meeting to discuss the Pinnacle Harbor Schedule 13D filing and the implications of Pinnacle Harbor's activist campaign. At this meeting, the Board establishes the Special Committee, consisting of independent directors James Delacroix (Chair), Carmen Vasquez, and Randall Morse, to evaluate the Company's response to Pinnacle Harbor's demands and to oversee engagement with Pinnacle Harbor.
November 15, 2022: Calderwood & Harkness LLP is formally engaged by RGC, on behalf of the Special Committee, to provide legal advice in connection with the Pinnacle Harbor activist campaign. The engagement opens under Matter No. 1033-00003. On this date, the closing price of RGC common stock is $30.00 per share, yielding a mark-to-market position for Pinnacle Harbor of 7,119,600 × $30.00 = approximately $213,588,000 (approximately $213.6 million). Pinnacle Harbor's unrealized gain at this price level is approximately $213.6 million minus $188.1 million = approximately $25.5 million, representing an unrealized return of approximately 13.5% on its cost basis.
November 30, 2022: Pinnacle Harbor publishes and widely disseminates a public "open letter" addressed to the RGC Board of Directors. The letter demands the appointment of Dr. Sandra Trevelyan and Hugh Desmond Grayson to the Board and threatens to commence a proxy contest at the Company's 2023 annual meeting of stockholders if the Company fails to act on Pinnacle Harbor's demands. The closing price of RGC common stock on this date is $31.74 per share. The open letter is significant for purposes of the proxy solicitation rule analysis discussed in Section VII below.
December 8, 2022: Hargrove Sloane & Birch LLP, counsel to Pinnacle Harbor (lead partner: Jonathan "Jon" Birch III), sends a formal notice of intent to nominate directors for election at the 2023 annual meeting to Patricia Nakamura in her capacity as Corporate Secretary of RGC. The notice is sent pursuant to the advance-notice provisions set forth in Article II, Section 2.11 of the Company's Amended and Restated Bylaws (last amended September 12, 2021).
January 6, 2023: Pinnacle Harbor files Amendment No. 1 to Schedule 13D with the SEC, updating its purpose disclosures to reflect its stated intention to nominate directors and prepare a preliminary proxy statement. The closing price of RGC common stock on this date is $32.90 per share.
January 9, 2023: Pinnacle Harbor's formal nomination notice, originally sent on December 8, 2022, is formally received and acknowledged by RGC. The notice is timely, as it falls within the advance-notice window established by Article II, Section 2.11 of the Bylaws, which runs from December 12, 2022 through January 11, 2023, for the 2023 annual meeting.
Since the filing of Amendment No. 1, the parties have engaged in preliminary discussions regarding a potential settlement, culminating in the execution of a Cooperation and Standstill Agreement on March 10, 2023. However, the analysis in this memorandum is limited to the legal and factual issues arising from the two Schedule 13D filings and does not address the settlement process, which is the subject of a separate memorandum.
III. LEGAL FRAMEWORK: SECTION 13(d) OF THE EXCHANGE ACT
A. Statutory and Regulatory Overview
Section 13(d)(1) of the Exchange Act, codified at 15 U.S.C. § 78m(d)(1), provides that any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is registered pursuant to Section 12 of the Exchange Act, is directly or indirectly the beneficial owner of more than five percent of such class, shall, within ten days after such acquisition, send to the issuer of the security, file with the SEC, and transmit to each exchange where the security is traded, a statement on Schedule 13D containing certain information specified in the statute and the rules promulgated thereunder.
The Schedule 13D filing obligation is one of the most significant disclosure requirements applicable to activist investors. Congress enacted Section 13(d) in 1968 as part of the Williams Act amendments to the Exchange Act, with the dual purposes of (i) alerting the marketplace and existing shareholders to potential changes in corporate control, and (ii) providing issuers with advance notice of accumulations that may presage a tender offer, proxy contest, or other change-of-control transaction. The legislative history makes clear that Section 13(d) was intended to operate as a disclosure mechanism, not as a substantive prohibition on accumulations; however, the timeliness and completeness of Schedule 13D disclosures are subject to SEC enforcement and, in appropriate circumstances, to private litigation.
At the time of the Pinnacle Harbor filings analyzed in this memorandum, the SEC's proposed amendments to the Schedule 13D rules — published as part of a February 2022 rulemaking proposal — had not yet been adopted. Under the proposed amendments, the filing deadline would be shortened from ten calendar days to five business days, and the definition of "beneficial ownership" would be expanded to cover certain security-based swap positions. Because these amendments had not been finalized as of the dates of the filings at issue, the existing ten-calendar-day filing window under Rule 13d-1(a) applied. We note, however, that the proposed amendments, if adopted, could affect the timeliness analysis for future filings and should be monitored.
The key rules governing Schedule 13D filings are as follows:
Rule 13d-1(a): Sets forth the filing obligation, requiring that any person who becomes the beneficial owner of more than 5% of a class of equity securities registered under Section 12 must file a Schedule 13D with the SEC within ten calendar days of the date of the acquisition that causes the person to cross the 5% threshold. The rule distinguishes between Schedule 13D (required for persons who acquired the securities with a purpose or effect of changing or influencing the control of the issuer) and Schedule 13G (available to certain "passive" investors, institutional investors, and exempt investors who acquired and hold the securities in the ordinary course of business without a purpose or effect of changing or influencing control).
Rule 13d-2(a): Requires that a person who has filed a Schedule 13D must file an amendment thereto "promptly" upon any material change in the information set forth in the previously filed Schedule 13D. The SEC has interpreted "promptly" to mean as soon as reasonably practicable under the circumstances, and certainly no later than the point at which a reasonable investor would consider the changed information significant to an investment decision. A change in the purpose of the transaction (e.g., from passive investment to activist engagement, or from contemplating a proxy contest to committing to one) is among the most common triggers for an amendment obligation.
Schedule 13D Content Requirements: Schedule 13D requires disclosure across seven principal items:
• Item 1 — Security and Issuer: Identification of the class of equity securities and the issuer, including the issuer's principal executive offices.
• Item 2 — Identity and Background: Identification of the reporting person(s) and disclosure of background information, including principal business or employment, principal office address, citizenship or jurisdiction of organization, and any criminal convictions or SEC/CFTC enforcement proceedings within the prior five years.
• Item 3 — Source and Amount of Funds or Other Consideration: Disclosure of the source and amount of funds or other consideration used in making the purchases of the subject securities.
• Item 4 — Purpose of Transaction: A description of the purpose or purposes of the acquisition and any plans or proposals the reporting persons may have with respect to the issuer, including plans relating to extraordinary corporate transactions, changes in the board of directors or management, material changes in the present capitalization or dividend policy, or any other significant change in the issuer's business or corporate structure.
• Item 5 — Interest in Securities of the Issuer: Disclosure of the aggregate number and percentage of shares beneficially owned, the number of shares over which the reporting person has sole or shared voting or dispositive power, and a summary of transactions in the subject securities during the past sixty days.
• Item 6 — Contracts, Arrangements, Understandings, or Relationships: Disclosure of any contracts, arrangements, understandings, or relationships (legal or otherwise) among the reporting persons, or between the reporting persons and any other person, with respect to any securities of the issuer, including transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies.
• Item 7 — Material to Be Filed as Exhibits: Copies of all written agreements, contracts, arrangements, understandings, or similar arrangements referred to in Items 3 through 6.
B. Beneficial Ownership Definition
The concept of "beneficial ownership" is central to the Section 13(d) framework. Rule 13d-3, promulgated under the Exchange Act, provides the operative definition:
Rule 13d-3(a) provides that a person is deemed to be the "beneficial owner" of a security if such person, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares (i) voting power, which includes the power to vote, or to direct the voting of, such security; and/or (ii) investment power, which includes the power to dispose, or to direct the disposition of, such security.
Rule 13d-3(d)(1) further provides that a person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant, or right, through the conversion of a security, pursuant to the power to revoke a trust, discretionary account, or similar arrangement, or pursuant to the automatic termination of a trust, discretionary account, or similar arrangement. This provision is relevant to the analysis of whether Pinnacle Harbor holds any derivative positions — such as call options, warrants, or convertible securities — that would be deemed to confer beneficial ownership of RGC shares.
For purposes of the Pinnacle Harbor filings, the beneficial ownership analysis is relatively straightforward: Pinnacle Harbor Capital Partners, LP holds the shares directly in its fund; Pinnacle Harbor Capital Management, LLC, as the general partner, exercises voting and investment power over the shares on behalf of the fund; and Viktor S. Kessler, as the controlling member of PHCM, may be deemed to share such power. All three are properly identified as reporting persons. The more nuanced question — whether Pinnacle Harbor holds any cash-settled equity swaps, total return swaps, or other derivative instruments that provide economic exposure to RGC shares without conferring voting or dispositive power — is addressed in Section VIII below.
C. Group Formation Under Section 13(d)(3)
Section 13(d)(3) of the Exchange Act and Rule 13d-5 promulgated thereunder provide that when two or more persons agree to act together for the purpose of acquiring, holding, voting, or disposing of equity securities of an issuer, the group so formed shall be deemed to be a "person" for purposes of Section 13(d). As a consequence, the beneficial ownership of all members of the group is aggregated for purposes of determining whether the group beneficially owns more than 5% of the outstanding shares of the class.
The formation of a "group" under Section 13(d)(3) can occur through formal agreements or informal understandings. Courts have held that explicit written agreements are not required; rather, a group may be deemed to exist based on circumstantial evidence indicating a meeting of the minds among the participants. See, e.g., Morales v. Quintel Entertainment, Inc., 249 F.3d 115, 124 (2d Cir. 2001) (group formation may be established by circumstantial evidence of "concerted activity"); Ostrander & Co., 286 F.3d 613, 617 (2d Cir. 2002). However, courts have also recognized limits on the group formation doctrine, holding that mere parallel conduct, without an agreement to act together, is insufficient to establish a group. See Cowin v. Bresler, 741 F.2d 410, 427 (D.C. Cir. 1984).
The significance of group formation for this matter is twofold. First, if Pinnacle Harbor has entered into any agreement, formal or informal, with other RGC shareholders to coordinate the acquisition, voting, or disposition of RGC shares, the resulting group would be required to file a Schedule 13D (or amend the existing filing) disclosing the group's aggregate beneficial ownership. Second, if the group's aggregate ownership exceeds 10%, the group members could become subject to the short-swing profit disgorgement provisions of Section 16(b) of the Exchange Act, which require insiders and 10% beneficial owners to disgorge profits from purchases and sales (or sales and purchases) of the issuer's securities occurring within a six-month period. These issues are analyzed in detail in Section VI below.
D. Relationship to Section 14(a) Proxy Solicitation Rules
Where a Schedule 13D filer discloses an intent to solicit proxies or engage in a proxy contest, the interplay between the Section 13(d) disclosure obligations and the Section 14(a) proxy solicitation rules becomes directly relevant. Section 14(a) of the Exchange Act and the rules promulgated thereunder regulate the solicitation of proxies from the holders of securities registered under Section 12.
Several specific rules are pertinent to the Pinnacle Harbor filings:
Rule 14a-1(l): Defines "solicitation" broadly to include, among other things, any communication to security holders under circumstances reasonably calculated to result in the procurement, withholding, or revocation of a proxy. This definition extends to public statements, press releases, open letters, media interviews, and other communications directed at shareholders in connection with a contested election or other corporate governance matter.
Rule 14a-12: Permits solicitations to be made before the filing of a definitive proxy statement with the SEC, provided that (i) the communication is filed with the SEC under cover of Schedule 14A no later than the date of first use, (ii) certain required legends are included in the communication, and (iii) the soliciting person undertakes to file a definitive proxy statement when required. This rule serves as a "safe harbor" for pre-filing communications, including the type of open letter published by Pinnacle Harbor on November 30, 2022.
Rule 14a-2(b): Provides certain exemptions from the proxy solicitation filing requirements for specific types of communications, including communications by persons who do not seek proxy authority and who do not furnish or otherwise request, or act on behalf of a person who furnishes or requests, a form of revocation, abstention, consent, or authorization.
The application of these rules to Pinnacle Harbor's communications, including its public open letter and any shareholder outreach activities, is discussed in Section VII below. Of particular note, Pinnacle Harbor prepared but did not file a preliminary proxy statement; a draft was sent to its outside counsel, Hargrove Sloane & Birch LLP, on February 9, 2023, but was never submitted to the SEC. The implications of this fact are now largely academic in light of the subsequent settlement, but the analysis remains relevant to the Special Committee's assessment of Pinnacle Harbor's compliance posture.
IV. ANALYSIS OF PRELIMINARY SCHEDULE 13D (FILED NOVEMBER 10, 2022)
The preliminary Schedule 13D filed by Pinnacle Harbor on November 10, 2022, consists of the completed Schedule 13D form, a cover page, and several exhibits. We address each item of the filing below.
A. Item 1 — Security and Issuer
Item 1 of the Schedule 13D identifies the issuer as Redstone Gaming Corp., a corporation organized under the laws of the State of Delaware. The class of equity securities to which the filing relates is identified as the common stock, par value $0.01 per share. The principal executive offices of the Company are listed at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, Nevada 89123. The Nasdaq ticker symbol is correctly identified as "RGC."
Assessment: Item 1 is compliant. The identification of the issuer, the class of securities, and the principal executive offices is accurate and consistent with the Company's public filings with the SEC and the records maintained by the Nasdaq Stock Market.
B. Item 2 — Identity and Background
Item 2 identifies the following as reporting persons filing jointly:
1. Pinnacle Harbor Capital Partners, LP (EIN: 47-3928154), a Delaware limited partnership, with its principal office at 590 Madison Avenue, 34th Floor, New York, New York 10022. The filing states that the principal business of the partnership is investment management, with a focus on event-driven and activist equity strategies in the gaming, hospitality, and consumer-discretionary sectors.
2. Pinnacle Harbor Capital Management, LLC, a Delaware limited liability company, serving as the general partner of Pinnacle Harbor Capital Partners, LP. The principal office is the same as that of the fund. The filing identifies PHCM as the entity that exercises voting and investment power over the shares of RGC common stock held by the fund.
3. Viktor S. Kessler, age 47, a United States citizen, identified as the Managing Partner and Chief Investment Officer of PHCM and the controlling member thereof. Mr. Kessler's business address is the same as the fund's principal office.
In addition, the filing identifies Nadia Johar, age 39, a United States citizen, as the Head of Activism and a Portfolio Manager at Pinnacle Harbor. Ms. Johar is listed as a "covered person" with background information disclosed, including her educational background (B.A., Columbia University; J.D., Georgetown University Law Center) and prior employment history (Associate, Crane & Ames LLP; Vice President, Activism and Special Situations, Corvus Capital Partners). However, Ms. Johar does not appear as a separate filing person on the Schedule 13D.
The filing discloses that none of the reporting persons or covered individuals has been convicted of any criminal offense during the five years preceding the filing date (excluding traffic violations or similar minor offenses), and none has been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction that resulted in a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws.
Assessment: Item 2 appears compliant. The background information provided for each reporting person and covered individual meets the requirements of Schedule 13D, Instruction C. However, we note the following area for further inquiry:
Additional Controlling Persons. The filing identifies Mr. Kessler as the controlling member of PHCM and lists Ms. Johar as a covered person but not a filing person. It is not entirely clear from the filing whether PHCM has any additional principals, partners, or investment committee members who exercise or share voting or investment power over the RGC shares. If, for example, Pinnacle Harbor's investment decisions are made by a formal investment committee rather than solely by Mr. Kessler, the other committee members may need to be identified as additional filing persons or, at minimum, as covered persons with background disclosures. We recommend that this question be explored further in connection with any discovery or information requests in the event of litigation.
C. Item 3 — Source and Amount of Funds
Item 3 of the Schedule 13D discloses that the shares of RGC common stock were acquired using the working capital of Pinnacle Harbor Capital Partners, LP. The total cost basis is stated as approximately $188.1 million, based on 7,119,600 shares acquired at a weighted-average purchase price of $26.42 per share. The filing does not indicate that any margin borrowing, bank financing, or other external financing was used to fund the share purchases.
Assessment: The Item 3 disclosure appears adequate and is consistent with the standard disclosure made by activist hedge funds that acquire shares using existing fund capital. The characterization of the funding source as "working capital" is well-established SEC disclosure practice for investment partnerships.
Follow-Up Consideration: While the filing does not indicate external financing, it is worth considering whether the fund's prime brokerage arrangements create any pledge or encumbrance on the RGC shares that should have been disclosed. Hedge funds typically hold their portfolio securities in prime brokerage accounts, and the prime brokerage agreement may grant the prime broker a security interest in the account assets. While such arrangements are generally not considered to create beneficial ownership issues or to require separate disclosure under Item 3, they could be relevant to the Item 6 analysis if the prime brokerage agreement contains provisions that affect the voting or disposition of the shares (e.g., a right to liquidate positions upon margin call). This is a relatively technical point but may be worth exploring if the Company seeks to challenge the completeness of the filing.
D. Item 4 — Purpose of Transaction
Item 4 is the most substantively significant item in the Schedule 13D, as it sets forth Pinnacle Harbor's stated reasons for acquiring the shares and its plans or proposals with respect to the Company. The initial 13D's Item 4 disclosure states, in substance, that Pinnacle Harbor acquired shares of RGC common stock because it believes the shares are undervalued and that changes to the composition of the Board of Directors and the Company's strategic direction would enhance shareholder value.
The filing identifies the following specific purposes:
(1) Board Representation. Pinnacle Harbor states that it is seeking the appointment of two nominees to the RGC Board of Directors: Dr. Sandra Trevelyan (age 55, former Chief Operating Officer of Meridian Interactive Holdings, Inc.) and Hugh Desmond Grayson (age 61, former Chief Financial Officer of Atlas Leisure Group, Inc.). The filing provides brief biographical information about each nominee, including their professional backgrounds and qualifications.
(2) Strategic Review of the Interactive Gaming Division. Pinnacle Harbor states that it is requesting a formal strategic review of the Company's interactive gaming division, which generated revenue of approximately $412 million in fiscal year 2021, representing approximately 14.4% of the Company's total revenue of approximately $2.87 billion. The filing indicates that Pinnacle Harbor believes the interactive gaming division is underperforming relative to its peers and that the Company should evaluate strategic alternatives for the division, including a potential sale, spin-off, or other separation transaction.
(3) Capital Return Program. Pinnacle Harbor states that it is requesting that the Company return $300 million to shareholders through a special dividend or an accelerated share buyback program, which Pinnacle Harbor believes would be accretive to remaining shareholders and would represent a more efficient use of the Company's excess capital.
The filing also references the private demand letter sent by Pinnacle Harbor to Board Chair Diane K. Sheridan on October 28, 2022, a copy of which is filed as an exhibit. The filing states that Pinnacle Harbor "may seek to engage in discussions with management, the Board of Directors, other shareholders, and third parties regarding its views on the Company and the matters described herein," and reserves the right to acquire additional shares or dispose of existing shares at any time, subject to market conditions and other factors.
Assessment: The Item 4 disclosure is detailed and identifies Pinnacle Harbor's three principal demands with reasonable specificity. This level of disclosure is consistent with industry practice for activist 13D filings. However, several aspects of the disclosure warrant scrutiny:
Shareholder Communications. The filing references potential "discussions" with "other shareholders," but does not clearly disclose whether Pinnacle Harbor has already engaged in any such discussions as of the filing date. If Pinnacle Harbor had communicated with other RGC shareholders prior to November 10, 2022, regarding the acquisition, voting, or disposition of RGC shares, such communications could implicate the group formation analysis under Section 13(d)(3) and should have been disclosed in Item 4 and/or Item 6. The absence of such disclosure may simply reflect the absence of such communications, but it could also reflect an omission. This is a key area for further investigation.
Equivocal Language Regarding Proxy Contest. The initial 13D uses permissive, non-committal language — "may seek to nominate directors" — rather than stating a definitive intent to commence a proxy contest. While this is typical of preliminary 13D filings (as activist investors frequently prefer to preserve optionality and negotiate privately before escalating), the equivocal language may be contrasted with Pinnacle Harbor's subsequent actions: the public open letter of November 30, 2022, which explicitly threatened a proxy contest, was issued only twenty days after the initial 13D filing. If Pinnacle Harbor had already formed a definitive intent to pursue a proxy contest at the time of the initial filing but characterized its intentions in equivocal terms, this could constitute a material misrepresentation or omission in Item 4. However, proving that Pinnacle Harbor had reached a definitive intent by November 10 would likely require access to internal communications, which may be obtainable only through discovery.
Absence of Rule 14a-12 Reference. The initial 13D does not reference the Rule 14a-12 safe harbor for pre-filing proxy solicitations. This is not a deficiency in the 13D itself (Rule 14a-12 is a proxy solicitation rule, not a 13D requirement), but the absence of any reference to the proxy solicitation rules is noteworthy given that Pinnacle Harbor's subsequent public open letter may have constituted a solicitation requiring compliance with Rule 14a-12. This issue is addressed in Section VII below.
E. Item 5 — Interest in Securities of the Issuer
Item 5 discloses the following information regarding Pinnacle Harbor's beneficial ownership of RGC common stock:
• Shares beneficially owned: 7,119,600 shares of common stock
• Percentage of class: 6.8% of the 104,700,000 shares of common stock outstanding, as reported in the Company's most recent periodic filing with the SEC and as confirmed by the records of Continental Share Services, Inc., the Company's transfer agent
• Voting and dispositive power: Pinnacle Harbor Capital Management, LLC, as the general partner of Pinnacle Harbor Capital Partners, LP, has sole voting and dispositive power over all 7,119,600 reported shares. Viktor S. Kessler, as the controlling member of PHCM, may be deemed to share beneficial ownership of the reported shares.
• Derivative positions: No derivative positions are disclosed. The filing does not report any swaps, options, warrants, conversion rights, or other derivative instruments referencing RGC common stock.
• Transactions in the past 60 days: The filing includes a summary table of open-market purchases conducted during the 60-day period preceding the filing date, with dates, number of shares, and prices disclosed.
Assessment: The Item 5 disclosure appears consistent with the shares outstanding as confirmed by Continental Share Services, Inc. (Jason Velmoran). The ownership percentage calculation of 6.8% (7,119,600 / 104,700,000) is mathematically correct. However, we note the following points for further investigation:
Derivative Positions. The filing does not disclose any cash-settled equity swaps, total return swaps, or other derivative instruments referencing RGC common stock. As discussed in Section VIII below, such instruments — even if they do not confer voting or dispositive power and therefore do not constitute "beneficial ownership" under Rule 13d-3 — may need to be disclosed under Item 6 as "contracts, arrangements, understandings, or relationships" with respect to the issuer's securities. The absence of any derivative disclosure in the filing is not necessarily a deficiency, as Pinnacle Harbor may not hold any such instruments; however, this should be verified through market intelligence.
Cross-Check of WAPPS. The weighted-average purchase price of $26.42 per share should be cross-checked against publicly available trading data for RGC common stock during the June through November 2022 accumulation period. During this period, RGC's stock price ranged from $24.18 (June 1, 2022) to $29.12 (November 10, 2022). A weighted-average purchase price of $26.42 is plausible given this price range, particularly if the bulk of purchases occurred during the earlier months of the accumulation period when the stock price was trading in the mid-to-high $20s range. We recommend that Calloway Pinnacle Trust Bank (Thomas Ashford) be engaged to perform a more detailed analysis using publicly available volume-weighted average price ("VWAP") data.
F. Item 6 — Contracts, Arrangements, Understandings
Item 6 of the Schedule 13D discloses no contracts, arrangements, understandings, or relationships among the reporting persons, or between the reporting persons and any other person, with respect to the securities of the issuer, other than the following:
(a) The retention of Hargrove Sloane & Birch LLP as legal counsel to Pinnacle Harbor in connection with the activist campaign, with Jonathan "Jon" Birch III identified as the lead partner; and
(b) The engagement of Garrison Proxy Advisors, LLC as proxy solicitor, with Alicia Trent identified as the contact person.
Assessment: The Item 6 disclosure is relatively sparse, which is not unusual for an initial 13D filing at this stage of an activist campaign. However, we note the following areas of concern:
Garrison Proxy Advisors Fee Arrangements. The filing discloses the engagement of Garrison Proxy Advisors but does not describe the terms of the engagement, including any fee arrangements. If Garrison's compensation includes success-based fees tied to the outcome of a proxy contest (e.g., bonuses contingent on Pinnacle Harbor winning one or more board seats), such arrangements could be considered "contracts, arrangements, understandings, or relationships" with respect to the issuer's securities that should be disclosed more fully under Item 6. While it is common practice for proxy solicitors to receive both fixed fees and success-based compensation, the failure to disclose the nature of these arrangements could be a technical deficiency.
Joint Filing Agreement. The filing references a joint filing agreement among the three reporting persons (Pinnacle Harbor Capital Partners, LP; Pinnacle Harbor Capital Management, LLC; and Viktor S. Kessler), which is filed as an exhibit. We should confirm that the agreement covers all necessary reporting persons and is properly executed.
G. Item 7 — Exhibits
The following exhibits are filed with the preliminary Schedule 13D:
(a) Joint filing agreement among Pinnacle Harbor Capital Partners, LP, Pinnacle Harbor Capital Management, LLC, and Viktor S. Kessler, executed pursuant to Rule 13d-1(k)(1)(iii);
(b) Copy of the private letter dated October 28, 2022, from Pinnacle Harbor to Diane K. Sheridan, Chair of the RGC Board of Directors; and
(c) Power of attorney, if applicable.
Assessment: We should confirm that all required exhibits are attached to the filing and that the joint filing agreement covers all necessary reporting persons. In addition, if any written agreements exist between Pinnacle Harbor and its nominees (Dr. Trevelyan and Mr. Grayson) regarding their nomination, compensation, or service on the Board, such agreements should be filed as exhibits. The absence of any such exhibit in the filing may indicate that no written agreements exist, or it may indicate an omission.
H. Timeliness of the Initial Filing
The timeliness of the initial Schedule 13D filing is among the most significant issues identified in our analysis. Under current Rule 13d-1(a), a Schedule 13D must be filed with the SEC within ten calendar days of the date on which the reporting person first acquires beneficial ownership of more than 5% of the outstanding shares of the relevant class.
The relevant facts are as follows:
• Pinnacle Harbor began accumulating shares on approximately June 1, 2022.
• The 5% threshold for RGC is 5% × 104,700,000 = 5,235,000 shares.
• Pinnacle Harbor ultimately acquired 7,119,600 shares at a WAPPS of $26.42.
• The Schedule 13D was filed on November 10, 2022.
Based on these facts, Pinnacle Harbor crossed the 5% threshold at the point during the accumulation period when it acquired its 5,235,001st share. Given that Pinnacle Harbor acquired a total of 7,119,600 shares over approximately five months (June through November 2022), and assuming a roughly steady rate of accumulation, it is likely that Pinnacle Harbor crossed the 5% threshold well before November 10, 2022 — potentially as early as September or October 2022. If, for example, Pinnacle Harbor crossed 5% on September 15, 2022, a filing would have been due by September 25, 2022, making the November 10 filing approximately six to seven weeks late.
The transaction table appended to the filing should contain the specific dates and quantities of individual purchases, which would permit a precise determination of the crossing date. However, the level of aggregation in the transaction table — which groups purchases by date range rather than reporting each individual trade — may make it difficult to pinpoint the exact crossing date without access to more granular trading records.
Practical Implications. A late filing of a Schedule 13D is a violation of Section 13(d) of the Exchange Act and Rule 13d-1(a). The SEC has brought enforcement actions against activist investors for egregiously late filings, resulting in civil monetary penalties. See, e.g., In the Matter of Third Point LLC, SEC Admin. Proc. File No. 3-16313 (2016) ($500,000 civil penalty for late 13D filings); In the Matter of Greenlight Capital, Inc., SEC Admin. Proc. File No. 3-17475 (2016) (cease-and-desist order and penalty for failure to timely file beneficial ownership reports). However, in practice, many activist funds file at or near the outer boundary of the ten-day window, and the SEC has not consistently pursued enforcement for moderate filing delays absent aggravating circumstances (such as trading during the late-filing period, affirmative concealment, or a pattern of non-compliance).
From RGC's perspective, the potential late filing does not, standing alone, provide a basis for injunctive relief that would delay or prevent a proxy contest. The federal courts have generally declined to grant injunctive relief based solely on a late 13D filing, absent a showing of irreparable harm. See Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975) (declining to order divestiture for a Section 13(d) violation absent a showing of irreparable harm). However, the late filing may have strategic value in several respects:
(i) It can be raised in public communications with shareholders and proxy advisory firms as evidence of Pinnacle Harbor's cavalier approach to regulatory compliance;
(ii) It can be cited in any litigation to challenge the credibility or good faith of Pinnacle Harbor's disclosures more broadly;
(iii) It may be referred to the SEC Division of Enforcement as a basis for a potential enforcement inquiry, which — even if it does not result in formal action — could create distraction and reputational risk for Pinnacle Harbor during a contested election.
Recommendation: We recommend that Calloway Pinnacle Trust Bank (Thomas Ashford) be engaged to analyze publicly available trading data — including volume and price data for RGC common stock during the June through November 2022 period — to estimate the most likely date on which Pinnacle Harbor crossed the 5% threshold and to quantify the potential extent of any late-filing period. This analysis will be critical to determining the strength of the late-filing argument and its utility as a defensive tool.
V. ANALYSIS OF AMENDMENT NO. 1 TO SCHEDULE 13D (FILED JANUARY 6, 2023)
A. Nature of the Amendment
Amendment No. 1 to the Schedule 13D was filed with the SEC on January 6, 2023, pursuant to Rule 13d-2(a), which requires the filing of an amendment "promptly" upon any material change in the information set forth in the previously filed Schedule 13D. The principal purpose of the amendment is to update Item 4 (Purpose of Transaction) to reflect Pinnacle Harbor's stated intention to nominate directors for election at the Company's 2023 annual meeting of stockholders and to potentially commence a proxy solicitation.
The filing of an amendment is consistent with the obligation under Rule 13d-2(a), as the shift from the preliminary 13D's equivocal language regarding potential director nominations ("may seek to nominate directors") to the affirmative statement of nomination intent in Amendment No. 1 represents a material change in the purpose of the transaction. The timing of the amendment — approximately two months after the initial filing — is not inherently problematic, though the question of whether the amendment should have been filed earlier (e.g., on or shortly after November 30, 2022, when Pinnacle Harbor publicly announced its intention to pursue a proxy contest in its open letter) is discussed below.
B. Updated Item 4 — Purpose of Transaction
Amendment No. 1 updates the Item 4 disclosure in several significant respects:
(1) Affirmative Statement of Nomination Intent. Pinnacle Harbor now states affirmatively that it intends to nominate Dr. Sandra Trevelyan and Hugh Desmond Grayson for election to the RGC Board of Directors at the Company's 2023 annual meeting of stockholders. This represents a material escalation from the initial 13D's language, which stated only that Pinnacle Harbor "may seek to nominate directors."
(2) Reference to the Public Open Letter. The amendment references the public open letter dated November 30, 2022, in which Pinnacle Harbor demanded the appointment of Dr. Trevelyan and Mr. Grayson and threatened to commence a proxy contest if its demands were not met.
(3) Formal Nomination Notice. The amendment references the formal notice of intent to nominate directors sent by Hargrove Sloane & Birch LLP (Jonathan Birch III) to Patricia Nakamura, as Corporate Secretary of RGC, on December 8, 2022, pursuant to Article II, Section 2.11 of the Company's Amended and Restated Bylaws. The nomination notice was received and acknowledged by RGC on January 9, 2023, within the advance-notice window established by the Bylaws (December 12, 2022 through January 11, 2023).
(4) Proxy Statement Preparation. The amendment states that Pinnacle Harbor is "preparing to file" a preliminary proxy statement with the SEC in connection with a potential proxy solicitation in support of its nominees, but notes that no such filing has been made as of January 6, 2023.
(5) Continuation of Prior Demands. The amendment continues to advocate for the strategic review of the interactive gaming division and the $300 million capital return to shareholders, consistent with the initial 13D disclosure.
Assessment: The updated Item 4 disclosure accurately reflects the material changes in Pinnacle Harbor's stated purposes between the initial 13D (November 10, 2022) and Amendment No. 1 (January 6, 2023). The escalation from "may seek to nominate" to "intends to nominate" is properly identified as a material change triggering the amendment obligation. However, we note the following analytical points:
Timeliness of the Amendment. Although Rule 13d-2(a) requires amendments to be filed "promptly" upon a material change, the rule does not define a specific time period. The material change here — Pinnacle Harbor's definitive commitment to pursue a proxy contest — arguably occurred on November 30, 2022, when Pinnacle Harbor published its open letter, or at the latest on December 8, 2022, when it sent the formal nomination notice. The amendment was not filed until January 6, 2023, approximately five to six weeks later. While this delay may not rise to the level of a filing violation (particularly given the holiday period), it is worth noting as part of the overall pattern of Pinnacle Harbor's approach to filing timeliness.
Section 14(a) Considerations. The reference in Amendment No. 1 to Pinnacle Harbor's preparation of a preliminary proxy statement raises important considerations under Section 14(a) and the proxy solicitation rules. Any communications by Pinnacle Harbor with other shareholders in connection with the planned solicitation — whether through direct outreach, public statements, media interviews, or other channels — must comply with Rule 14a-12 (the safe harbor for pre-filing solicitations) or one of the exemptions set forth in Rule 14a-2(b). This issue is discussed in detail in Section VII below.
Public Open Letter as a Solicitation. Pinnacle Harbor's public open letter of November 30, 2022 — issued between the date of the initial 13D and the filing of Amendment No. 1 — may itself constitute a "solicitation" within the meaning of Rule 14a-1(l)(1)(iii). If so, Pinnacle Harbor would have been required to file the open letter with the SEC under Rule 14a-12 or, at a minimum, reference it in the Schedule 13D as a material communication regarding the purpose of the transaction. The amendment does reference the open letter, but the reference appears only in the updated filing; the open letter was not separately filed with the SEC under Rule 14a-12 on or before its date of first use (November 30, 2022). This potential compliance deficiency is addressed in Section VII.A below.
C. Updated Item 5 — Interest in Securities
Amendment No. 1 reports no change in Pinnacle Harbor's beneficial ownership of RGC common stock. The number of shares beneficially owned remains 7,119,600 (6.8% of the 104,700,000 shares outstanding). No additional acquisitions or dispositions are disclosed.
Assessment: The static position is notable and confirms that Pinnacle Harbor has not increased its stake during the period between the initial 13D and Amendment No. 1. This is consistent with typical activist behavior in the period following a 13D filing, as additional open-market purchases would attract heightened market attention and could increase the cost of accumulation. The absence of any dispositions suggests continued confidence in the investment thesis and a commitment to the activist campaign.
D. Updated Item 6 — Contracts, Arrangements, Understandings
Amendment No. 1 updates Item 6 to reference the following additional items:
(a) The formal nomination notice sent by Hargrove Sloane & Birch LLP on December 8, 2022, and received by RGC on January 9, 2023; and
(b) The continued retention of Garrison Proxy Advisors, LLC as proxy solicitor.
Assessment: The updated Item 6 disclosure is adequate with respect to the items identified. However, we recommend confirming whether any compensation arrangements exist between Pinnacle Harbor and its nominees, Dr. Trevelyan and Mr. Grayson. Such arrangements could include:
• Board seat-contingent compensation or success fees payable to the nominees upon their election to the Board;
• Expense reimbursement agreements covering the nominees' costs in connection with the proxy contest;
• Indemnification agreements protecting the nominees against liabilities arising from their nomination or service;
• Agreements regarding the nominees' future service on the Board, including committee assignments, term commitments, or information-sharing arrangements with Pinnacle Harbor.
Any such arrangements would constitute "contracts, arrangements, understandings, or relationships" with respect to the issuer's securities and would need to be disclosed under Item 6. The failure to disclose material nominee arrangements could be a significant compliance deficiency, both under Schedule 13D and under Schedule 14A in connection with any eventual proxy statement.
E. Exhibits. Amendment No. 1 updates the exhibits to include:
(a) The public open letter dated November 30, 2022; and
(b) The formal notice of intent to nominate directors dated December 8, 2022.
Assessment: The inclusion of these documents as exhibits is appropriate. We should verify that: (i) the version of the nomination notice filed as an exhibit to the Schedule 13D is identical to the version delivered to RGC; and (ii) all exhibits are complete and properly filed on EDGAR. Any inconsistency between the filed exhibit and the notice received by RGC could indicate a filing error or, in a more concerning scenario, a deliberate discrepancy.
VI. GROUP FORMATION ANALYSIS
A. Identified Reporting Persons
As discussed above, the Schedule 13D identifies three reporting persons filing jointly: Pinnacle Harbor Capital Partners, LP; Pinnacle Harbor Capital Management, LLC; and Viktor S. Kessler. This is a standard group configuration for an activist hedge fund filing, consisting of the fund vehicle, the general partner that exercises voting and investment authority, and the controlling individual who directs the general partner's activities.
Nadia Johar is identified in the filing as a covered person with background disclosures, but she does not appear as a separate reporting person. Given her role as Head of Activism and Portfolio Manager, Ms. Johar likely plays a significant role in shaping the fund's investment strategy and activist campaigns, including the RGC engagement. If Ms. Johar exercises or shares voting or investment power over the RGC shares — whether through her membership on an investment committee, her authority to make trading decisions, or otherwise — she may be deemed to be a beneficial owner and should be included as a filing person. The filing's treatment of Ms. Johar as a covered person rather than a filing person suggests that PHCM has taken the position that only Mr. Kessler, as the controlling member, exercises voting and investment power. This position is plausible but should be tested if the Company decides to challenge the completeness of the filing.
B. Potential Undisclosed Group Members
A central question in the defense of an activist campaign is whether the activist fund has entered into any agreement or understanding with other shareholders that would constitute a "group" under Section 13(d)(3) and Rule 13d-5. The formation of an undisclosed group would have several significant consequences: (i) the group would be required to file a Schedule 13D (or amend the existing filing) disclosing its aggregate beneficial ownership; (ii) the failure to file would constitute a separate violation of Section 13(d); and (iii) if the group's aggregate ownership exceeded 10%, the group members could become subject to the Section 16(b) short-swing profit disgorgement provisions.
Based on our review of publicly available information and discussions with the Company's advisors, we have identified the following shareholders as potential candidates for group formation analysis:
Ridgeway Asset Management, LP (Franklin Osei, Portfolio Manager): Ridgeway is a long-only value fund based in Boston, Massachusetts, and is reported to hold approximately 8,585,400 shares of RGC common stock, representing approximately 8.2% of the shares outstanding. Ridgeway is the Company's largest institutional shareholder other than passive index fund holders. If Ridgeway has entered into any agreement or understanding with Pinnacle Harbor — whether formally or informally — to coordinate the voting of shares, support Pinnacle Harbor's nominees, or otherwise act in concert with respect to RGC securities, a group would be deemed to exist. The group's aggregate beneficial ownership would be 8.2% + 6.8% = 15.0%, well above the 10% threshold that would trigger Section 16(b) short-swing profit liability and enhanced scrutiny. There is no evidence to date that such an arrangement exists, but Ridgeway's large position and value-oriented investment approach make it a natural ally for Pinnacle Harbor's activist thesis, and the possibility of outreach warrants continued monitoring.
Stillwater Capital Advisors, LLC (Margaret "Meg" Liu, Head of Governance): Stillwater is a growth-oriented investment adviser based in Chicago, Illinois, reported to hold approximately 5,653,800 shares of RGC common stock, representing approximately 5.4% of the shares outstanding. Stillwater has its own Schedule 13G filing on record and has not disclosed any activist intent. However, if Pinnacle Harbor has engaged in discussions with Stillwater regarding support for its nominees or its strategic proposals, a group could be argued. The aggregation of Pinnacle Harbor's 6.8% and Stillwater's 5.4% would result in combined ownership of 12.2%.
Canfield Municipal Employees' Retirement System (David Proulx, Chief Investment Officer): The Canfield MERS is a public pension plan based in Canfield, Ohio, reported to hold approximately 2,198,700 shares of RGC common stock, representing approximately 2.1% of the shares outstanding. While a public pension plan is unlikely to enter into a formal group arrangement with an activist hedge fund, informal communications regarding voting intentions could theoretically give rise to a group formation argument under certain circumstances. This risk is lower than wit

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 1033-00003

I. EXECUTIVE SUMMARY

II. BACKGROUND AND CHRONOLOGY

IV. ANALYSIS OF PRELIMINARY SCHEDULE 13D (FILED NOVEMBER 10, 2022)

V. ANALYSIS OF AMENDMENT NO. 1 TO SCHEDULE 13D (FILED JANUARY 6, 2023)

VI. GROUP FORMATION ANALYSIS

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