1033-00003 · Redstone Gaming Corp · Transaction Documents

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FRAMEWORK TERM SHEET

PROPOSED COOPERATION & STANDSTILL ARRANGEMENT

NON-BINDING

February 14, 2023

Parties:

The Company and the Investor Group are each referred to herein individually as a "Party" and collectively as the "Parties."

PREAMBLE AND RECITALS

This non-binding framework term sheet (this "Term Sheet") sets forth the principal terms of a proposed cooperation and standstill arrangement (the "Arrangement") between the Company and the Investor Group. The Parties intend for this Term Sheet to serve as a framework for the negotiation and execution of a definitive Cooperation and Standstill Agreement (the "Definitive Agreement") to be entered into between the Parties on the terms and subject to the conditions described herein.

WHEREAS, Pinnacle Harbor beneficially owns approximately 7,119,600 shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"), representing approximately 6.8% of the 104,700,000 shares of Common Stock currently outstanding, as reported in Pinnacle Harbor's Schedule 13D filed with the U.S. Securities and Exchange Commission (the "SEC") on November 10, 2022, as amended by Amendment No. 1 thereto filed on January 6, 2023;

WHEREAS, Pinnacle Harbor, through its counsel Hargrove Sloane & Birch LLP, submitted a nomination notice dated January 9, 2023 (the "Nomination Notice") pursuant to Article II, Section 2.11 of the Company's Amended and Restated Bylaws, as amended through the date hereof (the "Bylaws"), nominating Dr. Sandra Trevelyan and Hugh Desmond Grayson (together, the "Pinnacle Harbor Nominees") for election to the Board of Directors of the Company (the "Board") at the Company's 2023 Annual Meeting of Stockholders (the "2023 Annual Meeting");

WHEREAS, the Board's Special Committee (the "Special Committee"), composed of James "Jim" Delacroix (Chair), Carmen Vasquez, and Randall Morse, each of whom is an independent director of the Company, authorized the Company's engagement in discussions with the Investor Group regarding a potential cooperative resolution of the matters raised in the Nomination Notice, such authorization having been granted on January 20, 2023;

WHEREAS, the Parties have engaged in good-faith discussions regarding the terms of a potential cooperative arrangement on January 30, 2023 and February 14, 2023, and the Parties desire to memorialize a framework for the Definitive Agreement to be negotiated in good faith and executed as promptly as practicable; and

WHEREAS, this Term Sheet is not intended to be, and shall not constitute, a legally binding obligation of any Party, except with respect to the provisions set forth under "Section 13: Binding Provisions" below (relating to confidentiality and exclusivity), which shall be binding on each Party upon the exchange of signatures on this Term Sheet.

NOW, THEREFORE, the Parties set forth the following framework of proposed terms for the Arrangement:

SECTION 1: STANDSTILL PERIOD

1.1 Duration. The standstill period (the "Standstill Period") shall commence on the date of execution of the Definitive Agreement (the "Execution Date"), which is anticipated to be on or about March 10, 2023, and shall expire eighteen (18) months following the Execution Date (the anticipated expiration date being on or about September 10, 2024, assuming execution on March 10, 2023).

1.2 Standstill Restrictions. During the Standstill Period, the Investor Group shall not, and shall cause each of its controlled affiliates, principals, partners, members, officers, directors, employees, agents, and representatives not to, directly or indirectly, alone or in concert with any other person or entity:

(a) solicit proxies or written consents of stockholders, or become a "participant" in any "solicitation" of proxies or consents (as such terms are defined under Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), with respect to any matter presented to the stockholders of the Company at any annual or special meeting of stockholders or by written consent in lieu of a meeting, other than in accordance with the voting commitments set forth in Section 6 hereof;

(b) seek to call, or request the calling of, a special meeting of stockholders of the Company, whether pursuant to the Bylaws, applicable provisions of the Delaware General Corporation Law (the "DGCL"), or otherwise;

(c) submit, or cause to be submitted, any stockholder proposal for consideration at any annual or special meeting of stockholders of the Company, whether pursuant to Rule 14a-8 under the Exchange Act or otherwise;

(d) seek to place any director nominees on the Board, or seek to remove any director from the Board, other than as expressly contemplated by Section 3 of this Term Sheet;

(e) publicly propose, publicly announce, or publicly seek to effect, whether alone or in concert with others, any merger, consolidation, business combination, tender or exchange offer, recapitalization, restructuring, disposition, liquidation, dissolution, or other extraordinary corporate transaction involving the Company or any of its subsidiaries or material assets, or publicly encourage any third party to make any such proposal;

(f) form, join, encourage, influence, advise, or in any way participate in any "group" (within the meaning of Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated thereunder) with any other person or entity with respect to shares of Common Stock or any other voting securities of the Company, other than a group consisting solely of the members of the Investor Group as defined herein;

(g) deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with respect to the voting of such shares, other than the Definitive Agreement;

(h) take any action, alone or in concert with others, to change or influence the management, Board composition, governance, or policies of the Company, other than as expressly contemplated by this Term Sheet or the Definitive Agreement; or

(i) publicly request or publicly propose that the Company or the Board amend, waive, or modify any provision of the standstill restrictions set forth in this Section 1 or in the corresponding provisions of the Definitive Agreement, or make any public statement (including through filings with the SEC or communications with the press) that would reasonably be expected to require the Company to make a public announcement regarding any potential change in the Company's operations, management, strategy, or governance.

1.3 Permitted Activities. Notwithstanding the foregoing, nothing in this Section 1 shall prohibit the Investor Group from (i) voting shares of Common Stock beneficially owned by the Investor Group at any annual or special meeting of stockholders in accordance with Section 6 hereof, (ii) making filings with the SEC required by applicable law or regulation, including amendments to Schedule 13D, (iii) communicating privately with the Board or management of the Company on a confidential basis in a manner that does not require any public disclosure by any Party, or (iv) taking any action expressly contemplated by, and in compliance with, the terms of the Definitive Agreement.

SECTION 2: OWNERSHIP CAP

2.1 Maximum Beneficial Ownership. During the Standstill Period, the Investor Group shall not acquire, offer or agree to acquire, or encourage any other person to acquire, beneficial ownership (as defined under Rule 13d-3 promulgated under the Exchange Act) of shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, shares of Common Stock, that would result in the Investor Group beneficially owning, in the aggregate, in excess of 9.9% of the then-outstanding shares of Common Stock of the Company (the "Ownership Cap").

2.2 Current Ownership. As of the date hereof, the Investor Group beneficially owns 7,119,600 shares of Common Stock, representing approximately 6.8% of the 104,700,000 shares of Common Stock outstanding as of the most recent date reported in the Company's public filings with the SEC.

2.3 Calculation. The Ownership Cap of 9.9% shall be calculated based on the total number of shares of Common Stock outstanding as reported in the Company's most recently filed Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or proxy statement, as applicable, or any other public filing made by the Company with the SEC that discloses the number of shares of Common Stock outstanding.

2.4 Hedging and Derivative Transactions. The treatment of ordinary course hedging and derivative transactions that do not confer voting power over shares of Common Stock, including but not limited to total return swaps, contracts for differences, options, and similar instruments, shall be addressed in the Definitive Agreement. The Parties anticipate that economic-only positions that do not confer voting rights or dispositive power shall not count toward the Ownership Cap, subject to customary exceptions and limitations to be agreed upon.

2.5 Inadvertent Excess. In the event the Investor Group inadvertently acquires beneficial ownership of shares in excess of the Ownership Cap as a result of actions taken by the Company (including, without limitation, stock repurchases by the Company that reduce the number of outstanding shares), the Investor Group shall not be deemed to have violated the Ownership Cap, provided that the Investor Group takes commercially reasonable steps to reduce its beneficial ownership to at or below the Ownership Cap within ten (10) business days after becoming aware of such excess.

SECTION 3: MUTUAL DIRECTOR APPOINTMENT

3.1 Appointment of New Director. The Company agrees to appoint one (1) new independent director to the Board (the "New Director"), such New Director to be mutually agreed upon by the Company and Pinnacle Harbor in accordance with the selection process described below. The appointment of the New Director shall be effective no later than April 1, 2023.

3.2 Eligibility Criteria. The New Director shall not be any of the following:

(a) any nominee previously proposed by Pinnacle Harbor in connection with the Nomination Notice or otherwise, including specifically Dr. Sandra Trevelyan and Hugh Desmond Grayson;

(b) any current officer, director, or employee of the Company or any of its subsidiaries;

(c) any current officer, employee, partner, member, or affiliate of Pinnacle Harbor, PHCM, or any fund or account managed by Pinnacle Harbor or PHCM; or

(d) any person who has served in any of the capacities described in clauses (b) or (c) above within the twenty-four (24) months prior to the anticipated date of appointment.

3.3 Selection Process. The Company and Pinnacle Harbor shall each propose candidates for the New Director position. The final selection shall be made from a pool of up to three (3) candidates identified by a joint selection committee composed of one representative designated by the Company and one representative designated by Pinnacle Harbor. The Parties shall use good-faith efforts to reach agreement on the identity of the New Director no later than March 15, 2023, to facilitate appointment by April 1, 2023. In the event the Parties are unable to agree on the identity of the New Director by March 15, 2023, the Parties shall engage a mutually agreed-upon executive search firm to present additional candidates for consideration.

3.4 Independence and Regulatory Requirements. The New Director must satisfy all applicable independence requirements under the listing rules of The Nasdaq Stock Market LLC ("Nasdaq"), including Nasdaq Listing Rules 5605(a)(2) and 5605(c)(2), and the Company's Corporate Governance Guidelines. In addition, given the Company's operations in the regulated gaming industry, the New Director must be able to satisfy any applicable gaming regulatory licensing requirements in each jurisdiction in which the Company holds gaming licenses or conducts gaming operations, including without limitation the gaming regulatory requirements of the States of Nevada, New Jersey, Pennsylvania, and any other jurisdiction in which the Company operates. The New Director shall promptly submit all required applications and filings necessary to obtain any required gaming regulatory approvals.

3.5 Board Size. Following the appointment of the New Director, the Board shall consist of ten (10) directors. The current Board consists of nine (9) directors. The Board shall take all necessary corporate action to increase the size of the Board from nine (9) to ten (10) directors to accommodate the appointment of the New Director.

3.6 Committee Assignments. Committee assignments for the New Director shall be determined by the Board, upon the recommendation of the Nominating and Corporate Governance Committee of the Board (the "Governance Committee"), in its sole discretion, consistent with applicable Nasdaq listing rules, SEC regulations, and the Company's Corporate Governance Guidelines and committee charters.

3.7 Service Term and Re-nomination. The New Director shall serve on the Board from the date of appointment until the Company's 2025 Annual Meeting of Stockholders (anticipated to be held in May 2025). At such time, the New Director shall be eligible for re-nomination by the Governance Committee in the ordinary course, consistent with the Governance Committee's standard evaluation process for incumbent directors. Nothing in this Term Sheet or the Definitive Agreement shall obligate the Company or the Governance Committee to re-nominate the New Director for election at the 2025 Annual Meeting of Stockholders or any subsequent meeting.

3.8 Compensation and Indemnification. The New Director shall receive compensation consistent with the Company's standard non-employee director compensation program, as in effect from time to time, and shall be entitled to indemnification and advancement of expenses on the same terms as all other non-employee directors of the Company, including coverage under the Company's directors' and officers' liability insurance policies.

SECTION 4: WITHDRAWAL OF NOMINATIONS

4.1 Withdrawal. Concurrently with, or promptly following, the execution of the Definitive Agreement, Pinnacle Harbor shall irrevocably withdraw the Nomination Notice and all director nominations submitted to the Company in connection therewith, including specifically the nominations of Dr. Sandra Trevelyan and Hugh Desmond Grayson. Such withdrawal shall be made in writing to the Corporate Secretary of the Company in a form reasonably satisfactory to the Company.

4.2 No Further Nominations. During the Standstill Period, Pinnacle Harbor shall not nominate, or cause or encourage to be nominated, any person for election to the Board at any annual or special meeting of stockholders or by written consent in lieu of a meeting, other than as expressly contemplated by Section 3 of this Term Sheet.

4.3 Cooperation. Pinnacle Harbor shall cooperate with the Company to ensure the orderly withdrawal of the Pinnacle Harbor Nominees and shall take all actions reasonably requested by the Company to effectuate such withdrawal, including the execution of any documents or instruments reasonably necessary or appropriate.

SECTION 5: STRATEGIC REVIEW OF INTERACTIVE GAMING DIVISION

5.1 Commitment to Strategic Review. The Board agrees to conduct an internal review of the strategic alternatives available for the Company's interactive gaming division (the "Interactive Gaming Division"), which includes the Company's online casino, mobile sports betting, and iGaming platform operations (the "Strategic Review"). The Parties acknowledge that the Interactive Gaming Division generated approximately $412 million in revenue in the Company's fiscal year ended December 31, 2021 ("FY 2021"), representing approximately 14.4% of the Company's total FY 2021 revenue of approximately $2.87 billion.

5.2 Completion Deadline. The Strategic Review shall be completed within one hundred twenty (120) calendar days following the Execution Date (the "Strategic Review Deadline"). Assuming an Execution Date of March 10, 2023, the anticipated Strategic Review Deadline would be July 8, 2023. The Board may, in its sole discretion, extend the Strategic Review Deadline if it determines that additional time is necessary or advisable to complete the Strategic Review.

5.3 Scope. The scope of the Strategic Review may include, without limitation, evaluation of the following potential strategic alternatives for the Interactive Gaming Division:

(a) a potential sale of the Interactive Gaming Division, in whole or in part, to a strategic or financial acquiror;

(b) a potential spin-off or split-off of the Interactive Gaming Division to the Company's stockholders as a separate publicly traded entity;

(d) continued internal development and investment in the Interactive Gaming Division, including organic growth initiatives and potential bolt-on acquisitions;

(e) any combination of the foregoing alternatives; and

(f) any other alternative the Board deems appropriate to consider.

5.4 Board Discretion. The Board shall have sole and absolute discretion over the conduct, scope, conclusions, and any actions resulting from the Strategic Review. Nothing in this Term Sheet or the Definitive Agreement shall require the Board to pursue, recommend, or approve any particular strategic alternative or course of action with respect to the Interactive Gaming Division. The Board's obligations under this Section 5 are limited to conducting the Strategic Review in good faith within the timeframe set forth herein.

5.5 Financial Advisor. The Company's financial advisor, Calloway Pinnacle Trust Bank, may assist in the conduct of the Strategic Review at the Board's discretion. The Board reserves the right to engage additional financial advisors, consultants, or other professional advisors as it deems necessary or appropriate in connection with the Strategic Review.

5.6 Reporting. A summary report of the Strategic Review findings and conclusions shall be delivered to the full Board upon completion of the Strategic Review. There shall be no obligation on the part of the Company, the Board, the Special Committee, or any director, officer, or advisor of the Company to share the conclusions, findings, analyses, recommendations, or any related materials generated in connection with the Strategic Review with Pinnacle Harbor, any member of the Investor Group, or any third party, except to the extent required by applicable law or regulation.

SECTION 6: VOTING COMMITMENTS

6.1 Voting in Favor of Management Slate. During the Standstill Period, Pinnacle Harbor shall vote, or cause to be voted, all shares of Common Stock beneficially owned by the Investor Group at each annual meeting or special meeting of stockholders of the Company (including the 2023 Annual Meeting, which is anticipated to be held on or about May 18, 2023) in favor of the election of each of the Company's management-recommended slate of director nominees at such meeting.

6.2 Voting in Accordance with Board Recommendations. During the Standstill Period, Pinnacle Harbor shall vote, or cause to be voted, all shares of Common Stock beneficially owned by the Investor Group in accordance with the Board's recommendations on all other proposals submitted to a vote of the Company's stockholders at any annual or special meeting, including without limitation proposals relating to executive compensation ("say-on-pay"), ratification of the Company's independent registered public accounting firm, amendments to equity incentive plans, and any other matter on which the Board makes a recommendation. This voting commitment shall not apply to any proposal relating to an extraordinary transaction (including any merger, consolidation, sale of all or substantially all assets, or similar transaction) that the Board recommends in favor of and that would constitute a "change-of-control" as defined in the Definitive Agreement.

6.3 Attendance and Quorum. Pinnacle Harbor shall cause all shares of Common Stock beneficially owned by the Investor Group to be present, in person or by proxy, at each annual or special meeting of stockholders during the Standstill Period, so that such shares may be counted for purposes of determining the presence of a quorum at such meeting.

SECTION 7: MUTUAL NON-DISPARAGEMENT

7.1 Non-Disparagement Obligations. During the Standstill Period, each Party agrees not to, and shall cause its respective affiliates, officers, directors, employees, partners, members, agents, and representatives (including external communications professionals, media consultants, and proxy solicitors) not to, directly or indirectly, make or cause to be made any public statement, public announcement, or public communication (including through social media, press releases, interviews with journalists, analyst calls, investor presentations, or communications with proxy advisory firms) that constitutes or contains any statement that disparages, defames, impugns, or is reasonably likely to damage the reputation, business, or goodwill of the other Party or any of its current or former directors, officers, employees, or, in the case of Pinnacle Harbor, its portfolio companies.

7.2 Exceptions. Notwithstanding the foregoing, the non-disparagement obligations set forth in this Section 7 shall not apply to:

(a) statements made in the course of legally compelled testimony, whether by deposition, court proceeding, arbitration, or in response to a subpoena or other legal process;

(b) statements made in filings with the SEC, gaming regulatory authorities, or other governmental or regulatory bodies to the extent required by applicable law or regulation;

(c) statements made in good faith in confidential communications with a Party's own legal counsel, financial advisors, or other professional advisors who are bound by obligations of confidentiality; and

(d) statements made in connection with the enforcement of a Party's rights under the Definitive Agreement.

7.3 Survival. The non-disparagement obligations set forth in this Section 7 shall survive the termination or expiration of the Definitive Agreement for a period of twelve (12) months following such termination or expiration, as further provided in Section 10 below.

SECTION 8: EXPENSE REIMBURSEMENT

8.1 Reimbursement Obligation. The Company shall reimburse Pinnacle Harbor for its reasonable, documented, out-of-pocket legal fees and expenses actually incurred by Pinnacle Harbor in connection with its activist campaign relating to the Company and the negotiation and execution of the Definitive Agreement, subject to an aggregate reimbursement cap of Seven Hundred Fifty Thousand Dollars ($750,000) (the "Expense Cap").

8.2 Eligible Expenses. The following categories of fees and expenses shall be eligible for reimbursement under this Section 8:

(a) legal fees and expenses of Hargrove Sloane & Birch LLP incurred in connection with the preparation and submission of the Nomination Notice, related SEC filings (including the preparation and filing of Pinnacle Harbor's Schedule 13D and amendments thereto), communications with the Company and its counsel, and the negotiation, drafting, and execution of the Definitive Agreement;

(b) reasonable out-of-pocket costs and disbursements incurred by Pinnacle Harbor and Hargrove Sloane & Birch LLP in connection with the foregoing matters, including travel expenses, document production costs, and filing fees; and

8.3 Excluded Expenses. Advisory fees and expenses of Garrison Proxy Advisors, LLC or any other proxy solicitation or investor relations firm retained by Pinnacle Harbor shall not be eligible for reimbursement under this Section 8, unless the Parties otherwise agree in writing.

8.4 Payment. Reimbursement shall be made by the Company within thirty (30) calendar days following the execution of the Definitive Agreement, upon Pinnacle Harbor's submission to the Company of reasonably detailed invoices and supporting documentation evidencing the fees and expenses incurred. The Company shall have the right to review and, in good faith, dispute any invoiced amounts that it reasonably believes are not eligible for reimbursement under this Section 8. Any disputed amounts shall be resolved by the Parties in good faith.

SECTION 9: JOINT PUBLIC ANNOUNCEMENT

9.1 Joint Press Release. The Parties shall issue a mutually agreed joint press release (the "Joint Press Release") promptly following the execution of the Definitive Agreement, announcing the material terms of the Arrangement, including the appointment of the New Director, the withdrawal of Pinnacle Harbor's director nominations, and the agreement of the Parties to cooperate in the manner described herein. The form of the Joint Press Release shall be agreed upon by the Parties prior to the execution of the Definitive Agreement and shall be attached as an exhibit to the Definitive Agreement.

9.2 Restrictions on Public Statements. No Party shall issue any press release, public statement, or public communication regarding the Arrangement, the terms of the Definitive Agreement, or the negotiations leading thereto, without the prior written consent of the other Party, except as required by applicable law, regulation, or legal process (including, without limitation, SEC filing obligations under the Exchange Act and the rules and regulations promulgated thereunder).

9.3 SEC Filings. Pinnacle Harbor shall file an amended Schedule 13D (or an amendment to its existing Schedule 13D) with the SEC reflecting the terms of the Definitive Agreement and the withdrawal of its director nominations within the time period required by applicable SEC rules and regulations. Pinnacle Harbor shall provide the Company with a reasonable opportunity to review and comment on such filing prior to submission, and shall give due consideration to any comments provided by the Company or its counsel. The Company shall file a Current Report on Form 8-K or other appropriate filing with the SEC, as it deems necessary or advisable, to disclose the Arrangement, and shall provide Pinnacle Harbor with a reasonable opportunity to review and comment on such filing prior to submission.

SECTION 10: TERMINATION

10.1 Termination Events. The Definitive Agreement shall terminate upon the earliest to occur of the following events:

(a) the expiration of the Standstill Period (anticipated to be on or about September 10, 2024, assuming an Execution Date of March 10, 2023);

(b) a material breach by either Party of any of its obligations under the Definitive Agreement that remains uncured for fifteen (15) business days after written notice of such breach is delivered by the non-breaching Party to the breaching Party, specifying in reasonable detail the nature of the breach and the actions required to cure such breach;

(c) the occurrence of a "Change of Control" of the Company, as such term shall be defined in the Definitive Agreement (which definition is expected to include, among other things, (i) the acquisition by any person or group of beneficial ownership of more than 50% of the outstanding voting securities of the Company, (ii) the consummation of a merger, consolidation, or similar business combination transaction in which the Company's stockholders immediately prior to such transaction do not own a majority of the outstanding voting securities of the surviving or resulting entity, or (iii) the sale, transfer, or disposition of all or substantially all of the assets of the Company); or

(d) the beneficial ownership of Common Stock by the Investor Group falling below 3.5% of the total shares of Common Stock then outstanding, as determined in accordance with Rule 13d-3 under the Exchange Act.

10.2 Effect of Termination. Upon the termination or expiration of the Definitive Agreement, all rights and obligations of the Parties under the Definitive Agreement shall immediately cease and be of no further force or effect, except that (i) the confidentiality obligations set forth in the Definitive Agreement shall survive for a period of twenty-four (24) months following the date of termination, (ii) the non-disparagement obligations set forth in Section 7 shall survive for a period of twelve (12) months following the date of termination, (iii) the expense reimbursement provisions of Section 8 shall survive to the extent that any amounts remain outstanding and unpaid as of the date of termination, and (iv) the governing law and dispute resolution provisions of Section 11 shall survive indefinitely.

10.3 Remedies. The Parties acknowledge and agree that a breach of the standstill, ownership cap, voting commitment, or non-disparagement provisions of the Definitive Agreement may cause irreparable harm to the non-breaching Party, for which monetary damages alone would be an inadequate remedy. Accordingly, the Definitive Agreement shall provide that, in addition to any other remedies available at law or in equity, the non-breaching Party shall be entitled to seek specific performance and injunctive relief to enforce the terms of the Definitive Agreement without the necessity of posting a bond or other security.

SECTION 11: GOVERNING LAW AND DISPUTE RESOLUTION

11.1 Governing Law. The Definitive Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

11.2 Exclusive Jurisdiction. Each Party shall consent and submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have or declines to exercise subject matter jurisdiction over such action, suit, or proceeding, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware) for any action, suit, or proceeding arising out of or relating to the Definitive Agreement. Each Party shall agree to waive any objection to the laying of venue in any such court and any claim that any such action, suit, or proceeding has been brought in an inconvenient forum.

11.3 Waiver of Jury Trial. The Definitive Agreement shall include a mutual waiver by each Party of any right to trial by jury in any action, suit, or proceeding arising out of or relating to the Definitive Agreement.

SECTION 12: DEFINITIVE AGREEMENT

12.1 Good-Faith Negotiation. The Parties agree to negotiate in good faith a Definitive Agreement incorporating the terms and conditions set forth in this Term Sheet, together with such additional terms and provisions as may be customary for agreements of this nature and as may be mutually agreed upon by the Parties, including without limitation representations and warranties, additional covenants, conditions, indemnification provisions, and miscellaneous provisions.

12.2 Target Execution Date. The Parties shall use their commercially reasonable efforts to negotiate, finalize, and execute the Definitive Agreement on or about March 10, 2023. The Parties acknowledge that the target execution date is an aspirational goal and that the actual date of execution will depend on the progress of negotiations and the completion of customary due diligence and documentation.

12.3 Legal Counsel. The initial draft of the Definitive Agreement shall be prepared by Calderwood & Harkness LLP, outside counsel to the Company and the Special Committee, and shall be reviewed and commented upon by Hargrove Sloane & Birch LLP, counsel to Pinnacle Harbor. The Parties shall cooperate to exchange drafts and comments in a timely manner so as to facilitate execution on or about the target execution date.

12.4 Board and Committee Approvals. The execution of the Definitive Agreement by the Company shall be subject to the prior approval of the Special Committee and the full Board, in each case acting in their respective fiduciary capacities. Nothing in this Term Sheet shall be deemed to limit or restrict the ability of the Board or the Special Committee to exercise their fiduciary duties under applicable law.

SECTION 13: BINDING PROVISIONS

13.1 Non-Binding Nature. This Term Sheet is non-binding in its entirety, except as expressly provided in this Section 13. No provision of this Term Sheet (other than the provisions set forth in Sections 13.2 and 13.3 below) shall create, or be deemed to create, any legally binding obligation, liability, or commitment on the part of any Party. Neither Party shall have any claim against the other Party arising out of this Term Sheet (other than under Sections 13.2 and 13.3 below) in the event that the Definitive Agreement is not executed for any reason.

13.2 Confidentiality. Each Party shall, and shall cause its respective affiliates, officers, directors, employees, partners, members, agents, representatives, and advisors (including legal counsel, financial advisors, and other professional advisors) to, keep strictly confidential the existence and terms of this Term Sheet and all discussions, negotiations, and correspondence relating thereto, and shall not disclose the same to any person or entity, except:

(a) as required by applicable law, regulation, or legal process (including any order, judgment, or decree of a court or governmental authority of competent jurisdiction), provided that the disclosing Party shall, to the extent permitted by law, provide the other Party with prompt written notice of such required disclosure so that the other Party may seek a protective order or other appropriate remedy;

(b) as necessary to consult with such Party's legal counsel, financial advisors, accountants, and other professional advisors who have a need to know the information in connection with advising such Party with respect to the matters contemplated by this Term Sheet, provided that such advisors are informed of the confidential nature of such information and are bound by professional obligations of confidentiality or agree in writing to maintain the confidentiality of such information; or

This confidentiality obligation shall be binding upon each Party upon the exchange of signatures on this Term Sheet and shall remain in effect until the earliest of (i) the execution of the Definitive Agreement (at which time confidentiality obligations shall be governed by the terms of the Definitive Agreement), (ii) the date on which the Parties mutually agree in writing that the confidentiality obligations set forth herein are no longer in effect, or (iii) twelve (12) months from the date hereof.

13.3 Exclusivity. For a period of thirty (30) calendar days from the date hereof (the "Exclusivity Period"), the Parties shall negotiate exclusively with each other regarding the subject matter of this Term Sheet and the Arrangement contemplated hereby. During the Exclusivity Period:

(a) the Company shall not engage in discussions or negotiations with any other stockholder activist, investor, or third party regarding any alternative activist settlement, cooperation agreement, board-seat arrangement, or similar arrangement involving the Company; and

(b) Pinnacle Harbor shall not engage in discussions or negotiations with any other public company or its representatives regarding any activist campaign, cooperation agreement, board-seat arrangement, or similar arrangement involving the Company with any third party.

The Exclusivity Period shall terminate automatically upon the earlier of (i) the expiration of the thirty (30) day period, (ii) the execution of the Definitive Agreement, or (iii) the written agreement of both Parties to terminate the Exclusivity Period.

13.4 Binding Effect. The binding provisions set forth in Sections 13.2 and 13.3 shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision, and shall be subject to the exclusive jurisdiction provisions set forth in Section 11.2.

SIGNATURE PAGE

The Parties have caused their respective duly authorized representatives to execute this Framework Term Sheet as of the date first written above.

REDSTONE GAMING CORP.

By: ________

Name: Patricia "Trish" Nakamura

Title: General Counsel & Corporate Secretary

Date: ________

Address: 8700 Las Vegas Boulevard South

Suite 2200 Las Vegas, NV 89123

PINNACLE HARBOR CAPITAL PARTNERS, LP

By: Pinnacle Harbor Capital Management, LLC, its General Partner

PINNACLE HARBOR CAPITAL PARTNERS, LP

By: Pinnacle Harbor Capital Management, LLC, its General Partner

By: ________

Name: Viktor S. Kessler

Title: Managing Partner & Chief Investment Officer

Date: ________

Address: 590 Madison Avenue

34th Floor New York, NY 10022

ANTICIPATED EXHIBITS AND SCHEDULES TO THE DEFINITIVE AGREEMENT

The Parties acknowledge and agree that the Definitive Agreement may include the following exhibits and schedules, the forms and contents of which shall be negotiated and agreed upon by the Parties during the negotiation of the Definitive Agreement:

Exhibit A — Form of Joint Press Release

Exhibit B — New Director Candidate Pool and Selection Procedures, including the composition, process, and timeline for the joint selection committee contemplated by Section 3.3

Exhibit C — Form of Pinnacle Harbor's Amended Schedule 13D (reflecting the terms of the Definitive Agreement and the withdrawal of director nominations)

Schedule 1 — Definition of "Change of Control" for purposes of Section 10.1(c) of the Definitive Agreement

Schedule 2 — Definition of "Beneficial Ownership" and related terms, including any agreed-upon exceptions for hedging and derivative transactions as contemplated by Section 2.4

Schedule 3 — List of current members of the Investor Group

Schedule 4 — Description of the Interactive Gaming Division for purposes of the Strategic Review contemplated by Section 5

This Framework Term Sheet consists of eighteen (18) pages (including this page) and is delivered in two (2) counterpart originals, one to each Party. Signatures transmitted via electronic mail in portable document format (.pdf) or via facsimile shall be deemed original signatures for all purposes.

The Company:

Redstone Gaming Corp., a Delaware corporation ("RGC" or the "Company"), with its principal executive offices located at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, NV 89123.

The Investor Group:

Pinnacle Harbor Capital Partners, LP, a Delaware limited partnership ("Pinnacle Harbor" or "PHCP"), with its principal office located at 590 Madison Avenue, 34th Floor, New York, NY 10022, together with its general partner, Pinnacle Harbor Capital Management, LLC, a Delaware limited liability company ("PHCM"), and Viktor S. Kessler, Managing Partner and Chief Investment Officer of Pinnacle Harbor (collectively with PHCP and PHCM, the "Investor Group").

FRAMEWORK TERM SHEET
PROPOSED COOPERATION & STANDSTILL ARRANGEMENT
NON-BINDING
February 14, 2023
Parties:
The Company and the Investor Group are each referred to herein individually as a "Party" and collectively as the "Parties."
PREAMBLE AND RECITALS
This non-binding framework term sheet (this "Term Sheet") sets forth the principal terms of a proposed cooperation and standstill arrangement (the "Arrangement") between the Company and the Investor Group. The Parties intend for this Term Sheet to serve as a framework for the negotiation and execution of a definitive Cooperation and Standstill Agreement (the "Definitive Agreement") to be entered into between the Parties on the terms and subject to the conditions described herein.
WHEREAS, Pinnacle Harbor beneficially owns approximately 7,119,600 shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"), representing approximately 6.8% of the 104,700,000 shares of Common Stock currently outstanding, as reported in Pinnacle Harbor's Schedule 13D filed with the U.S. Securities and Exchange Commission (the "SEC") on November 10, 2022, as amended by Amendment No. 1 thereto filed on January 6, 2023;
WHEREAS, Pinnacle Harbor, through its counsel Hargrove Sloane & Birch LLP, submitted a nomination notice dated January 9, 2023 (the "Nomination Notice") pursuant to Article II, Section 2.11 of the Company's Amended and Restated Bylaws, as amended through the date hereof (the "Bylaws"), nominating Dr. Sandra Trevelyan and Hugh Desmond Grayson (together, the "Pinnacle Harbor Nominees") for election to the Board of Directors of the Company (the "Board") at the Company's 2023 Annual Meeting of Stockholders (the "2023 Annual Meeting");
WHEREAS, the Board's Special Committee (the "Special Committee"), composed of James "Jim" Delacroix (Chair), Carmen Vasquez, and Randall Morse, each of whom is an independent director of the Company, authorized the Company's engagement in discussions with the Investor Group regarding a potential cooperative resolution of the matters raised in the Nomination Notice, such authorization having been granted on January 20, 2023;
WHEREAS, the Parties have engaged in good-faith discussions regarding the terms of a potential cooperative arrangement on January 30, 2023 and February 14, 2023, and the Parties desire to memorialize a framework for the Definitive Agreement to be negotiated in good faith and executed as promptly as practicable; and
WHEREAS, this Term Sheet is not intended to be, and shall not constitute, a legally binding obligation of any Party, except with respect to the provisions set forth under "Section 13: Binding Provisions" below (relating to confidentiality and exclusivity), which shall be binding on each Party upon the exchange of signatures on this Term Sheet.
NOW, THEREFORE, the Parties set forth the following framework of proposed terms for the Arrangement:
SECTION 1: STANDSTILL PERIOD
1.1 Duration. The standstill period (the "Standstill Period") shall commence on the date of execution of the Definitive Agreement (the "Execution Date"), which is anticipated to be on or about March 10, 2023, and shall expire eighteen (18) months following the Execution Date (the anticipated expiration date being on or about September 10, 2024, assuming execution on March 10, 2023).
1.2 Standstill Restrictions. During the Standstill Period, the Investor Group shall not, and shall cause each of its controlled affiliates, principals, partners, members, officers, directors, employees, agents, and representatives not to, directly or indirectly, alone or in concert with any other person or entity:
(a) solicit proxies or written consents of stockholders, or become a "participant" in any "solicitation" of proxies or consents (as such terms are defined under Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), with respect to any matter presented to the stockholders of the Company at any annual or special meeting of stockholders or by written consent in lieu of a meeting, other than in accordance with the voting commitments set forth in Section 6 hereof;
(b) seek to call, or request the calling of, a special meeting of stockholders of the Company, whether pursuant to the Bylaws, applicable provisions of the Delaware General Corporation Law (the "DGCL"), or otherwise;
(c) submit, or cause to be submitted, any stockholder proposal for consideration at any annual or special meeting of stockholders of the Company, whether pursuant to Rule 14a-8 under the Exchange Act or otherwise;
(d) seek to place any director nominees on the Board, or seek to remove any director from the Board, other than as expressly contemplated by Section 3 of this Term Sheet;
(e) publicly propose, publicly announce, or publicly seek to effect, whether alone or in concert with others, any merger, consolidation, business combination, tender or exchange offer, recapitalization, restructuring, disposition, liquidation, dissolution, or other extraordinary corporate transaction involving the Company or any of its subsidiaries or material assets, or publicly encourage any third party to make any such proposal;
(f) form, join, encourage, influence, advise, or in any way participate in any "group" (within the meaning of Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated thereunder) with any other person or entity with respect to shares of Common Stock or any other voting securities of the Company, other than a group consisting solely of the members of the Investor Group as defined herein;
(g) deposit any shares of Common Stock in a voting trust or subject any shares of Common Stock to any arrangement or agreement with respect to the voting of such shares, other than the Definitive Agreement;
(h) take any action, alone or in concert with others, to change or influence the management, Board composition, governance, or policies of the Company, other than as expressly contemplated by this Term Sheet or the Definitive Agreement; or
(i) publicly request or publicly propose that the Company or the Board amend, waive, or modify any provision of the standstill restrictions set forth in this Section 1 or in the corresponding provisions of the Definitive Agreement, or make any public statement (including through filings with the SEC or communications with the press) that would reasonably be expected to require the Company to make a public announcement regarding any potential change in the Company's operations, management, strategy, or governance.
1.3 Permitted Activities. Notwithstanding the foregoing, nothing in this Section 1 shall prohibit the Investor Group from (i) voting shares of Common Stock beneficially owned by the Investor Group at any annual or special meeting of stockholders in accordance with Section 6 hereof, (ii) making filings with the SEC required by applicable law or regulation, including amendments to Schedule 13D, (iii) communicating privately with the Board or management of the Company on a confidential basis in a manner that does not require any public disclosure by any Party, or (iv) taking any action expressly contemplated by, and in compliance with, the terms of the Definitive Agreement.
SECTION 2: OWNERSHIP CAP
2.1 Maximum Beneficial Ownership. During the Standstill Period, the Investor Group shall not acquire, offer or agree to acquire, or encourage any other person to acquire, beneficial ownership (as defined under Rule 13d-3 promulgated under the Exchange Act) of shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, shares of Common Stock, that would result in the Investor Group beneficially owning, in the aggregate, in excess of 9.9% of the then-outstanding shares of Common Stock of the Company (the "Ownership Cap").
2.2 Current Ownership. As of the date hereof, the Investor Group beneficially owns 7,119,600 shares of Common Stock, representing approximately 6.8% of the 104,700,000 shares of Common Stock outstanding as of the most recent date reported in the Company's public filings with the SEC.
2.3 Calculation. The Ownership Cap of 9.9% shall be calculated based on the total number of shares of Common Stock outstanding as reported in the Company's most recently filed Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K, or proxy statement, as applicable, or any other public filing made by the Company with the SEC that discloses the number of shares of Common Stock outstanding.
2.4 Hedging and Derivative Transactions. The treatment of ordinary course hedging and derivative transactions that do not confer voting power over shares of Common Stock, including but not limited to total return swaps, contracts for differences, options, and similar instruments, shall be addressed in the Definitive Agreement. The Parties anticipate that economic-only positions that do not confer voting rights or dispositive power shall not count toward the Ownership Cap, subject to customary exceptions and limitations to be agreed upon.
2.5 Inadvertent Excess. In the event the Investor Group inadvertently acquires beneficial ownership of shares in excess of the Ownership Cap as a result of actions taken by the Company (including, without limitation, stock repurchases by the Company that reduce the number of outstanding shares), the Investor Group shall not be deemed to have violated the Ownership Cap, provided that the Investor Group takes commercially reasonable steps to reduce its beneficial ownership to at or below the Ownership Cap within ten (10) business days after becoming aware of such excess.
SECTION 3: MUTUAL DIRECTOR APPOINTMENT
3.1 Appointment of New Director. The Company agrees to appoint one (1) new independent director to the Board (the "New Director"), such New Director to be mutually agreed upon by the Company and Pinnacle Harbor in accordance with the selection process described below. The appointment of the New Director shall be effective no later than April 1, 2023.
3.2 Eligibility Criteria. The New Director shall not be any of the following:
(a) any nominee previously proposed by Pinnacle Harbor in connection with the Nomination Notice or otherwise, including specifically Dr. Sandra Trevelyan and Hugh Desmond Grayson;
(b) any current officer, director, or employee of the Company or any of its subsidiaries;
(c) any current officer, employee, partner, member, or affiliate of Pinnacle Harbor, PHCM, or any fund or account managed by Pinnacle Harbor or PHCM; or
(d) any person who has served in any of the capacities described in clauses (b) or (c) above within the twenty-four (24) months prior to the anticipated date of appointment.
3.3 Selection Process. The Company and Pinnacle Harbor shall each propose candidates for the New Director position. The final selection shall be made from a pool of up to three (3) candidates identified by a joint selection committee composed of one representative designated by the Company and one representative designated by Pinnacle Harbor. The Parties shall use good-faith efforts to reach agreement on the identity of the New Director no later than March 15, 2023, to facilitate appointment by April 1, 2023. In the event the Parties are unable to agree on the identity of the New Director by March 15, 2023, the Parties shall engage a mutually agreed-upon executive search firm to present additional candidates for consideration.
3.4 Independence and Regulatory Requirements. The New Director must satisfy all applicable independence requirements under the listing rules of The Nasdaq Stock Market LLC ("Nasdaq"), including Nasdaq Listing Rules 5605(a)(2) and 5605(c)(2), and the Company's Corporate Governance Guidelines. In addition, given the Company's operations in the regulated gaming industry, the New Director must be able to satisfy any applicable gaming regulatory licensing requirements in each jurisdiction in which the Company holds gaming licenses or conducts gaming operations, including without limitation the gaming regulatory requirements of the States of Nevada, New Jersey, Pennsylvania, and any other jurisdiction in which the Company operates. The New Director shall promptly submit all required applications and filings necessary to obtain any required gaming regulatory approvals.
3.5 Board Size. Following the appointment of the New Director, the Board shall consist of ten (10) directors. The current Board consists of nine (9) directors. The Board shall take all necessary corporate action to increase the size of the Board from nine (9) to ten (10) directors to accommodate the appointment of the New Director.
3.6 Committee Assignments. Committee assignments for the New Director shall be determined by the Board, upon the recommendation of the Nominating and Corporate Governance Committee of the Board (the "Governance Committee"), in its sole discretion, consistent with applicable Nasdaq listing rules, SEC regulations, and the Company's Corporate Governance Guidelines and committee charters.
3.7 Service Term and Re-nomination. The New Director shall serve on the Board from the date of appointment until the Company's 2025 Annual Meeting of Stockholders (anticipated to be held in May 2025). At such time, the New Director shall be eligible for re-nomination by the Governance Committee in the ordinary course, consistent with the Governance Committee's standard evaluation process for incumbent directors. Nothing in this Term Sheet or the Definitive Agreement shall obligate the Company or the Governance Committee to re-nominate the New Director for election at the 2025 Annual Meeting of Stockholders or any subsequent meeting.
3.8 Compensation and Indemnification. The New Director shall receive compensation consistent with the Company's standard non-employee director compensation program, as in effect from time to time, and shall be entitled to indemnification and advancement of expenses on the same terms as all other non-employee directors of the Company, including coverage under the Company's directors' and officers' liability insurance policies.
SECTION 4: WITHDRAWAL OF NOMINATIONS
4.1 Withdrawal. Concurrently with, or promptly following, the execution of the Definitive Agreement, Pinnacle Harbor shall irrevocably withdraw the Nomination Notice and all director nominations submitted to the Company in connection therewith, including specifically the nominations of Dr. Sandra Trevelyan and Hugh Desmond Grayson. Such withdrawal shall be made in writing to the Corporate Secretary of the Company in a form reasonably satisfactory to the Company.
4.2 No Further Nominations. During the Standstill Period, Pinnacle Harbor shall not nominate, or cause or encourage to be nominated, any person for election to the Board at any annual or special meeting of stockholders or by written consent in lieu of a meeting, other than as expressly contemplated by Section 3 of this Term Sheet.
4.3 Cooperation. Pinnacle Harbor shall cooperate with the Company to ensure the orderly withdrawal of the Pinnacle Harbor Nominees and shall take all actions reasonably requested by the Company to effectuate such withdrawal, including the execution of any documents or instruments reasonably necessary or appropriate.
SECTION 5: STRATEGIC REVIEW OF INTERACTIVE GAMING DIVISION
5.1 Commitment to Strategic Review. The Board agrees to conduct an internal review of the strategic alternatives available for the Company's interactive gaming division (the "Interactive Gaming Division"), which includes the Company's online casino, mobile sports betting, and iGaming platform operations (the "Strategic Review"). The Parties acknowledge that the Interactive Gaming Division generated approximately $412 million in revenue in the Company's fiscal year ended December 31, 2021 ("FY 2021"), representing approximately 14.4% of the Company's total FY 2021 revenue of approximately $2.87 billion.
5.2 Completion Deadline. The Strategic Review shall be completed within one hundred twenty (120) calendar days following the Execution Date (the "Strategic Review Deadline"). Assuming an Execution Date of March 10, 2023, the anticipated Strategic Review Deadline would be July 8, 2023. The Board may, in its sole discretion, extend the Strategic Review Deadline if it determines that additional time is necessary or advisable to complete the Strategic Review.
5.3 Scope. The scope of the Strategic Review may include, without limitation, evaluation of the following potential strategic alternatives for the Interactive Gaming Division:
(a) a potential sale of the Interactive Gaming Division, in whole or in part, to a strategic or financial acquiror;
(b) a potential spin-off or split-off of the Interactive Gaming Division to the Company's stockholders as a separate publicly traded entity;
(c) a potential joint venture, strategic partnership, or other collaborative arrangement with a third party;
(d) continued internal development and investment in the Interactive Gaming Division, including organic growth initiatives and potential bolt-on acquisitions;
(e) any combination of the foregoing alternatives; and
(f) any other alternative the Board deems appropriate to consider.
5.4 Board Discretion. The Board shall have sole and absolute discretion over the conduct, scope, conclusions, and any actions resulting from the Strategic Review. Nothing in this Term Sheet or the Definitive Agreement shall require the Board to pursue, recommend, or approve any particular strategic alternative or course of action with respect to the Interactive Gaming Division. The Board's obligations under this Section 5 are limited to conducting the Strategic Review in good faith within the timeframe set forth herein.
5.5 Financial Advisor. The Company's financial advisor, Calloway Pinnacle Trust Bank, may assist in the conduct of the Strategic Review at the Board's discretion. The Board reserves the right to engage additional financial advisors, consultants, or other professional advisors as it deems necessary or appropriate in connection with the Strategic Review.
5.6 Reporting. A summary report of the Strategic Review findings and conclusions shall be delivered to the full Board upon completion of the Strategic Review. There shall be no obligation on the part of the Company, the Board, the Special Committee, or any director, officer, or advisor of the Company to share the conclusions, findings, analyses, recommendations, or any related materials generated in connection with the Strategic Review with Pinnacle Harbor, any member of the Investor Group, or any third party, except to the extent required by applicable law or regulation.
SECTION 6: VOTING COMMITMENTS
6.1 Voting in Favor of Management Slate. During the Standstill Period, Pinnacle Harbor shall vote, or cause to be voted, all shares of Common Stock beneficially owned by the Investor Group at each annual meeting or special meeting of stockholders of the Company (including the 2023 Annual Meeting, which is anticipated to be held on or about May 18, 2023) in favor of the election of each of the Company's management-recommended slate of director nominees at such meeting.
6.2 Voting in Accordance with Board Recommendations. During the Standstill Period, Pinnacle Harbor shall vote, or cause to be voted, all shares of Common Stock beneficially owned by the Investor Group in accordance with the Board's recommendations on all other proposals submitted to a vote of the Company's stockholders at any annual or special meeting, including without limitation proposals relating to executive compensation ("say-on-pay"), ratification of the Company's independent registered public accounting firm, amendments to equity incentive plans, and any other matter on which the Board makes a recommendation. This voting commitment shall not apply to any proposal relating to an extraordinary transaction (including any merger, consolidation, sale of all or substantially all assets, or similar transaction) that the Board recommends in favor of and that would constitute a "change-of-control" as defined in the Definitive Agreement.
6.3 Attendance and Quorum. Pinnacle Harbor shall cause all shares of Common Stock beneficially owned by the Investor Group to be present, in person or by proxy, at each annual or special meeting of stockholders during the Standstill Period, so that such shares may be counted for purposes of determining the presence of a quorum at such meeting.
SECTION 7: MUTUAL NON-DISPARAGEMENT
7.1 Non-Disparagement Obligations. During the Standstill Period, each Party agrees not to, and shall cause its respective affiliates, officers, directors, employees, partners, members, agents, and representatives (including external communications professionals, media consultants, and proxy solicitors) not to, directly or indirectly, make or cause to be made any public statement, public announcement, or public communication (including through social media, press releases, interviews with journalists, analyst calls, investor presentations, or communications with proxy advisory firms) that constitutes or contains any statement that disparages, defames, impugns, or is reasonably likely to damage the reputation, business, or goodwill of the other Party or any of its current or former directors, officers, employees, or, in the case of Pinnacle Harbor, its portfolio companies.
7.2 Exceptions. Notwithstanding the foregoing, the non-disparagement obligations set forth in this Section 7 shall not apply to:
(a) statements made in the course of legally compelled testimony, whether by deposition, court proceeding, arbitration, or in response to a subpoena or other legal process;
(b) statements made in filings with the SEC, gaming regulatory authorities, or other governmental or regulatory bodies to the extent required by applicable law or regulation;
(c) statements made in good faith in confidential communications with a Party's own legal counsel, financial advisors, or other professional advisors who are bound by obligations of confidentiality; and
(d) statements made in connection with the enforcement of a Party's rights under the Definitive Agreement.
7.3 Survival. The non-disparagement obligations set forth in this Section 7 shall survive the termination or expiration of the Definitive Agreement for a period of twelve (12) months following such termination or expiration, as further provided in Section 10 below.
SECTION 8: EXPENSE REIMBURSEMENT
8.1 Reimbursement Obligation. The Company shall reimburse Pinnacle Harbor for its reasonable, documented, out-of-pocket legal fees and expenses actually incurred by Pinnacle Harbor in connection with its activist campaign relating to the Company and the negotiation and execution of the Definitive Agreement, subject to an aggregate reimbursement cap of Seven Hundred Fifty Thousand Dollars ($750,000) (the "Expense Cap").
8.2 Eligible Expenses. The following categories of fees and expenses shall be eligible for reimbursement under this Section 8:
(a) legal fees and expenses of Hargrove Sloane & Birch LLP incurred in connection with the preparation and submission of the Nomination Notice, related SEC filings (including the preparation and filing of Pinnacle Harbor's Schedule 13D and amendments thereto), communications with the Company and its counsel, and the negotiation, drafting, and execution of the Definitive Agreement;
(b) reasonable out-of-pocket costs and disbursements incurred by Pinnacle Harbor and Hargrove Sloane & Birch LLP in connection with the foregoing matters, including travel expenses, document production costs, and filing fees; and
(c) such other fees and expenses as may be mutually agreed by the Parties in writing.
8.3 Excluded Expenses. Advisory fees and expenses of Garrison Proxy Advisors, LLC or any other proxy solicitation or investor relations firm retained by Pinnacle Harbor shall not be eligible for reimbursement under this Section 8, unless the Parties otherwise agree in writing.
8.4 Payment. Reimbursement shall be made by the Company within thirty (30) calendar days following the execution of the Definitive Agreement, upon Pinnacle Harbor's submission to the Company of reasonably detailed invoices and supporting documentation evidencing the fees and expenses incurred. The Company shall have the right to review and, in good faith, dispute any invoiced amounts that it reasonably believes are not eligible for reimbursement under this Section 8. Any disputed amounts shall be resolved by the Parties in good faith.
SECTION 9: JOINT PUBLIC ANNOUNCEMENT
9.1 Joint Press Release. The Parties shall issue a mutually agreed joint press release (the "Joint Press Release") promptly following the execution of the Definitive Agreement, announcing the material terms of the Arrangement, including the appointment of the New Director, the withdrawal of Pinnacle Harbor's director nominations, and the agreement of the Parties to cooperate in the manner described herein. The form of the Joint Press Release shall be agreed upon by the Parties prior to the execution of the Definitive Agreement and shall be attached as an exhibit to the Definitive Agreement.
9.2 Restrictions on Public Statements. No Party shall issue any press release, public statement, or public communication regarding the Arrangement, the terms of the Definitive Agreement, or the negotiations leading thereto, without the prior written consent of the other Party, except as required by applicable law, regulation, or legal process (including, without limitation, SEC filing obligations under the Exchange Act and the rules and regulations promulgated thereunder).
9.3 SEC Filings. Pinnacle Harbor shall file an amended Schedule 13D (or an amendment to its existing Schedule 13D) with the SEC reflecting the terms of the Definitive Agreement and the withdrawal of its director nominations within the time period required by applicable SEC rules and regulations. Pinnacle Harbor shall provide the Company with a reasonable opportunity to review and comment on such filing prior to submission, and shall give due consideration to any comments provided by the Company or its counsel. The Company shall file a Current Report on Form 8-K or other appropriate filing with the SEC, as it deems necessary or advisable, to disclose the Arrangement, and shall provide Pinnacle Harbor with a reasonable opportunity to review and comment on such filing prior to submission.
SECTION 10: TERMINATION
10.1 Termination Events. The Definitive Agreement shall terminate upon the earliest to occur of the following events:
(a) the expiration of the Standstill Period (anticipated to be on or about September 10, 2024, assuming an Execution Date of March 10, 2023);
(b) a material breach by either Party of any of its obligations under the Definitive Agreement that remains uncured for fifteen (15) business days after written notice of such breach is delivered by the non-breaching Party to the breaching Party, specifying in reasonable detail the nature of the breach and the actions required to cure such breach;
(c) the occurrence of a "Change of Control" of the Company, as such term shall be defined in the Definitive Agreement (which definition is expected to include, among other things, (i) the acquisition by any person or group of beneficial ownership of more than 50% of the outstanding voting securities of the Company, (ii) the consummation of a merger, consolidation, or similar business combination transaction in which the Company's stockholders immediately prior to such transaction do not own a majority of the outstanding voting securities of the surviving or resulting entity, or (iii) the sale, transfer, or disposition of all or substantially all of the assets of the Company); or
(d) the beneficial ownership of Common Stock by the Investor Group falling below 3.5% of the total shares of Common Stock then outstanding, as determined in accordance with Rule 13d-3 under the Exchange Act.
10.2 Effect of Termination. Upon the termination or expiration of the Definitive Agreement, all rights and obligations of the Parties under the Definitive Agreement shall immediately cease and be of no further force or effect, except that (i) the confidentiality obligations set forth in the Definitive Agreement shall survive for a period of twenty-four (24) months following the date of termination, (ii) the non-disparagement obligations set forth in Section 7 shall survive for a period of twelve (12) months following the date of termination, (iii) the expense reimbursement provisions of Section 8 shall survive to the extent that any amounts remain outstanding and unpaid as of the date of termination, and (iv) the governing law and dispute resolution provisions of Section 11 shall survive indefinitely.
10.3 Remedies. The Parties acknowledge and agree that a breach of the standstill, ownership cap, voting commitment, or non-disparagement provisions of the Definitive Agreement may cause irreparable harm to the non-breaching Party, for which monetary damages alone would be an inadequate remedy. Accordingly, the Definitive Agreement shall provide that, in addition to any other remedies available at law or in equity, the non-breaching Party shall be entitled to seek specific performance and injunctive relief to enforce the terms of the Definitive Agreement without the necessity of posting a bond or other security.
SECTION 11: GOVERNING LAW AND DISPUTE RESOLUTION
11.1 Governing Law. The Definitive Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
11.2 Exclusive Jurisdiction. Each Party shall consent and submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have or declines to exercise subject matter jurisdiction over such action, suit, or proceeding, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware) for any action, suit, or proceeding arising out of or relating to the Definitive Agreement. Each Party shall agree to waive any objection to the laying of venue in any such court and any claim that any such action, suit, or proceeding has been brought in an inconvenient forum.
11.3 Waiver of Jury Trial. The Definitive Agreement shall include a mutual waiver by each Party of any right to trial by jury in any action, suit, or proceeding arising out of or relating to the Definitive Agreement.
SECTION 12: DEFINITIVE AGREEMENT
12.1 Good-Faith Negotiation. The Parties agree to negotiate in good faith a Definitive Agreement incorporating the terms and conditions set forth in this Term Sheet, together with such additional terms and provisions as may be customary for agreements of this nature and as may be mutually agreed upon by the Parties, including without limitation representations and warranties, additional covenants, conditions, indemnification provisions, and miscellaneous provisions.
12.2 Target Execution Date. The Parties shall use their commercially reasonable efforts to negotiate, finalize, and execute the Definitive Agreement on or about March 10, 2023. The Parties acknowledge that the target execution date is an aspirational goal and that the actual date of execution will depend on the progress of negotiations and the completion of customary due diligence and documentation.
12.3 Legal Counsel. The initial draft of the Definitive Agreement shall be prepared by Calderwood & Harkness LLP, outside counsel to the Company and the Special Committee, and shall be reviewed and commented upon by Hargrove Sloane & Birch LLP, counsel to Pinnacle Harbor. The Parties shall cooperate to exchange drafts and comments in a timely manner so as to facilitate execution on or about the target execution date.
12.4 Board and Committee Approvals. The execution of the Definitive Agreement by the Company shall be subject to the prior approval of the Special Committee and the full Board, in each case acting in their respective fiduciary capacities. Nothing in this Term Sheet shall be deemed to limit or restrict the ability of the Board or the Special Committee to exercise their fiduciary duties under applicable law.
SECTION 13: BINDING PROVISIONS
13.1 Non-Binding Nature. This Term Sheet is non-binding in its entirety, except as expressly provided in this Section 13. No provision of this Term Sheet (other than the provisions set forth in Sections 13.2 and 13.3 below) shall create, or be deemed to create, any legally binding obligation, liability, or commitment on the part of any Party. Neither Party shall have any claim against the other Party arising out of this Term Sheet (other than under Sections 13.2 and 13.3 below) in the event that the Definitive Agreement is not executed for any reason.
13.2 Confidentiality. Each Party shall, and shall cause its respective affiliates, officers, directors, employees, partners, members, agents, representatives, and advisors (including legal counsel, financial advisors, and other professional advisors) to, keep strictly confidential the existence and terms of this Term Sheet and all discussions, negotiations, and correspondence relating thereto, and shall not disclose the same to any person or entity, except:
(a) as required by applicable law, regulation, or legal process (including any order, judgment, or decree of a court or governmental authority of competent jurisdiction), provided that the disclosing Party shall, to the extent permitted by law, provide the other Party with prompt written notice of such required disclosure so that the other Party may seek a protective order or other appropriate remedy;
(b) as necessary to consult with such Party's legal counsel, financial advisors, accountants, and other professional advisors who have a need to know the information in connection with advising such Party with respect to the matters contemplated by this Term Sheet, provided that such advisors are informed of the confidential nature of such information and are bound by professional obligations of confidentiality or agree in writing to maintain the confidentiality of such information; or
(c) with the prior written consent of the other Party.
This confidentiality obligation shall be binding upon each Party upon the exchange of signatures on this Term Sheet and shall remain in effect until the earliest of (i) the execution of the Definitive Agreement (at which time confidentiality obligations shall be governed by the terms of the Definitive Agreement), (ii) the date on which the Parties mutually agree in writing that the confidentiality obligations set forth herein are no longer in effect, or (iii) twelve (12) months from the date hereof.
13.3 Exclusivity. For a period of thirty (30) calendar days from the date hereof (the "Exclusivity Period"), the Parties shall negotiate exclusively with each other regarding the subject matter of this Term Sheet and the Arrangement contemplated hereby. During the Exclusivity Period:
(a) the Company shall not engage in discussions or negotiations with any other stockholder activist, investor, or third party regarding any alternative activist settlement, cooperation agreement, board-seat arrangement, or similar arrangement involving the Company; and
(b) Pinnacle Harbor shall not engage in discussions or negotiations with any other public company or its representatives regarding any activist campaign, cooperation agreement, board-seat arrangement, or similar arrangement involving the Company with any third party.
The Exclusivity Period shall terminate automatically upon the earlier of (i) the expiration of the thirty (30) day period, (ii) the execution of the Definitive Agreement, or (iii) the written agreement of both Parties to terminate the Exclusivity Period.
13.4 Binding Effect. The binding provisions set forth in Sections 13.2 and 13.3 shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision, and shall be subject to the exclusive jurisdiction provisions set forth in Section 11.2.
SIGNATURE PAGE
The Parties have caused their respective duly authorized representatives to execute this Framework Term Sheet as of the date first written above.
REDSTONE GAMING CORP.
REDSTONE GAMING CORP.
By: ________
Name: Patricia "Trish" Nakamura
Title: General Counsel & Corporate Secretary
Date: ________
Address: 8700 Las Vegas Boulevard South
Suite 2200 Las Vegas, NV 89123
PINNACLE HARBOR CAPITAL PARTNERS, LP
By: Pinnacle Harbor Capital Management, LLC, its General Partner
PINNACLE HARBOR CAPITAL PARTNERS, LP
By: Pinnacle Harbor Capital Management, LLC, its General Partner
By: ________
Name: Viktor S. Kessler
Title: Managing Partner & Chief Investment Officer
Date: ________
Address: 590 Madison Avenue
34th Floor New York, NY 10022
ANTICIPATED EXHIBITS AND SCHEDULES TO THE DEFINITIVE AGREEMENT
The Parties acknowledge and agree that the Definitive Agreement may include the following exhibits and schedules, the forms and contents of which shall be negotiated and agreed upon by the Parties during the negotiation of the Definitive Agreement:
Exhibit A — Form of Joint Press Release
Exhibit B — New Director Candidate Pool and Selection Procedures, including the composition, process, and timeline for the joint selection committee contemplated by Section 3.3
Exhibit C — Form of Pinnacle Harbor's Amended Schedule 13D (reflecting the terms of the Definitive Agreement and the withdrawal of director nominations)
Schedule 1 — Definition of "Change of Control" for purposes of Section 10.1(c) of the Definitive Agreement
Schedule 2 — Definition of "Beneficial Ownership" and related terms, including any agreed-upon exceptions for hedging and derivative transactions as contemplated by Section 2.4
Schedule 3 — List of current members of the Investor Group
Schedule 4 — Description of the Interactive Gaming Division for purposes of the Strategic Review contemplated by Section 5
This Framework Term Sheet consists of eighteen (18) pages (including this page) and is delivered in two (2) counterpart originals, one to each Party. Signatures transmitted via electronic mail in portable document format (.pdf) or via facsimile shall be deemed original signatures for all purposes.
The Company: | Redstone Gaming Corp., a Delaware corporation ("RGC" or the "Company"), with its principal executive offices located at 8700 Las Vegas Boulevard South, Suite 2200, Las Vegas, NV 89123.
The Investor Group: | Pinnacle Harbor Capital Partners, LP, a Delaware limited partnership ("Pinnacle Harbor" or "PHCP"), with its principal office located at 590 Madison Avenue, 34th Floor, New York, NY 10022, together with its general partner, Pinnacle Harbor Capital Management, LLC, a Delaware limited liability company ("PHCM"), and Viktor S. Kessler, Managing Partner and Chief Investment Officer of Pinnacle Harbor (collectively with PHCP and PHCM, the "Investor Group").

FRAMEWORK TERM SHEET

PROPOSED COOPERATION & STANDSTILL ARRANGEMENT

NON-BINDING

PREAMBLE AND RECITALS

SECTION 1: STANDSTILL PERIOD

SECTION 2: OWNERSHIP CAP

SECTION 3: MUTUAL DIRECTOR APPOINTMENT

SECTION 4: WITHDRAWAL OF NOMINATIONS

SECTION 5: STRATEGIC REVIEW OF INTERACTIVE GAMING DIVISION

SECTION 6: VOTING COMMITMENTS

SECTION 7: MUTUAL NON-DISPARAGEMENT

SECTION 8: EXPENSE REIMBURSEMENT

SECTION 9: JOINT PUBLIC ANNOUNCEMENT

SECTION 10: TERMINATION

SECTION 11: GOVERNING LAW AND DISPUTE RESOLUTION

SECTION 12: DEFINITIVE AGREEMENT

SECTION 13: BINDING PROVISIONS

SIGNATURE PAGE

REDSTONE GAMING CORP.

REDSTONE GAMING CORP.

PINNACLE HARBOR CAPITAL PARTNERS, LP

PINNACLE HARBOR CAPITAL PARTNERS, LP

ANTICIPATED EXHIBITS AND SCHEDULES TO THE DEFINITIVE AGREEMENT

Record

Parties

Dates

Amounts