Contract analysis

I. Purpose of This Memorandum This memorandum has been prepared by Calderwood & Harkness LLP, in its capacity as fund counsel to Driftwood Capital Management LLC ("DCM" or the "General Partner") and Driftwood Absolute Return Fund Ltd. ("DARF" or the "Fund"), at the request of DCM, to brief the Investor Advisory Committee (the "IAC") in advance of its meeting scheduled for July 29, 2024. The purpose of this memorandum

II. Executive Summary The following is a summary of the key facts, events, and proposals that are the subject of this memorandum. Each item is discussed in greater detail in the sections that follow. Key Person Event. Marcus J. Whitmore, Founder, Chief Investment Officer, and sole designated "Key Person" under Section 8.04(a) of the A&R LPA, suffered a severe hemorrhagic stroke on June 3, 2024. Mr. Whitmore has been

III. Background on the Fund A. Fund Overview The following sets forth certain summary information regarding the Fund: Full Legal Name: Driftwood Absolute Return Fund Ltd. Entity Type: Exempted limited partnership registered in the Cayman Islands under the Exempted Limited Partnership Act (As Revised). Cayman Registration No. ELP-87234. The limited partnership agreement of the Fund is governed by the laws of the State

IV. The Key Person Event A. Factual Background Marcus J. Whitmore is the Founder and Chief Investment Officer of Driftwood Capital Management LLC and has served in that capacity since the Fund's inception on March 15, 2017. Mr. Whitmore brings twenty-eight years of investment management experience to the Fund. Prior to founding DCM, Mr. Whitmore served as a Managing Director at Veltrano Asset Partners LLC from 2004 t

Section 8.04(b) of the A&R LPA provides that a Key Person Event is deemed to have occurred if the Key Person is "unable to devote substantially all of his professional time to the affairs of the Partnership for a period of seven (7) consecutive calendar days," absent prior written notice to the limited partners that the Key Person anticipates such an absence. The provision is self-executing: no action by the General

V. IAC Composition and Capital Commitments The IAC consists of five members, established pursuant to Section 9.02 of the A&R LPA. The IAC was constituted at the time of the Fund's initial closing and has served in an advisory capacity to the General Partner on matters involving potential conflicts of interest, related party transactions, valuation disputes, and other matters referred to it under the A&R LPA. The curr

VI. Proposed Successor Key Persons The General Partner has proposed the designation of two individuals as joint Successor Key Persons under the A&R LPA, as amended by the proposed First Amendment. The qualifications and background of each proposed Successor Key Person are summarized below. Detailed biographies of each individual are provided in Attachment C to this memorandum. A. Elaine R. Sato — Proposed Successor K

VII. Proposed First Amendment to the A&R LPA — Summary of Key Terms The following is a summary of the key terms and provisions of the proposed First Amendment to the A&R LPA, as set forth in the draft circulated to all limited partners on July 15, 2024. A complete copy of the draft First Amendment is included as Attachment B to this memorandum. This summary is qualified in its entirety by reference to the full text o

VIII. LP Consent Solicitation — Status and Timeline The following table sets forth the key dates and events in connection with the Key Person Event and the LP consent solicitation: If ≥ 66⅔% LP consent is obtained by August 23, 2024: The First Amendment would become effective promptly upon satisfaction of the consent condition. The anticipated effective date is within three (3) business days of the date on which the

IX. Role of the IAC in the Proposed Governance Framework A. Independent Investment Committee Member Designation As described in Section VII.C above, the proposed First Amendment would empower the IAC to designate one independent member to the three-member Investment Committee. This independent member would serve alongside Ms. Sato (as Chair) and Mr. Huang, and the Investment Committee would exercise oversight authori

X. Delaware Law Considerations The A&R LPA is governed by the laws of the State of Delaware, as specified in Section 15.08 thereof. The following is a summary of certain Delaware law considerations relevant to the proposed First Amendment and the LP consent solicitation. This summary is not exhaustive and is provided for informational purposes only. Fiduciary Duties. Under the Delaware Revised Uniform Limited Partner

XI. Discussion Items for the IAC Meeting The following items are proposed for discussion at the IAC meeting scheduled for July 29, 2024. The IAC Chair, Diana Cortland, will determine the order and allocation of time for each agenda item:

1. Successor Key Person Proposal. Review and discussion of the proposed designation of Elaine R. Sato and Jonathan K. Huang as joint Successor Key Persons, including their qualifications, experience, capital commitments, and the rationale for a joint designation.

2. Investment Committee Structure and Independent Member Designation. Review of the proposed three-member Investment Committee and the IAC's role in designating the independent member. Identification of potential candidates for the independent member position and discussion of the process and criteria for selection, including qualifications, independence requirements, term of service, compensation, and removal rights

3. Carried Interest Reallocation and Whitmore Vesting Schedule. Review of the proposed reallocation of the General Partner's carried interest among Mr. Whitmore, Ms. Sato, and Mr. Huang, and discussion of the modified vesting schedule for Mr. Whitmore's accrued but unvested carried interest, including the immediate vesting of 50% and the 36-month ratable vesting of the remaining 50%.

4. Reduced Follow-on Investment Cap. Discussion of the proposed reduction of the follow-on investment cap during any future Key Person Event from $28.7 million (1.0% of AUM) to $14.35 million (0.5% of AUM), including the implications for portfolio management and capital protection. 5. 180-Day Replacement Period Mechanics. Discussion of the proposed two-tiered Key Person Event framework, including the 180-day Replacem

6. Timeline and Urgency Considerations. Review of the critical deadlines, including the LP Consent Deadline of August 23, 2024 and the Cure Period expiration of September 8, 2024, and discussion of the consequences of failure to obtain the required 66⅔% LP consent within the applicable timeframe.

7. Report from IAC Counsel. Report from Wexford Crane & Albright LLP (Helen M. Calloway and David Pineda) on their independent review of the draft First Amendment, including any comments, recommendations, or requested modifications.

8. Additional Concerns. Any additional IAC member concerns, questions, or requested modifications to the proposed First Amendment, including any matters not otherwise addressed in this memorandum.

XII. Conclusion and Recommended Actions Calderwood & Harkness LLP recommends that the IAC take the following actions in connection with the matters described in this memorandum:

1. Review and Discuss. Review and discuss the Successor Key Person Proposal and the draft First Amendment in full at the July 29, 2024 IAC meeting, with particular attention to the governance enhancements, carried interest reallocation, and the IAC's new authority to designate an independent member of the Investment Committee.

2. Coordinate with IAC Counsel. Coordinate with Wexford Crane & Albright LLP to finalize any requested revisions or comments to the draft First Amendment in a timely manner, in light of the LP Consent Deadline of August 23, 2024. Any comments or requested modifications should be communicated to Calderwood & Harkness LLP as promptly as practicable so that the General Partner may evaluate and, if appropriate, incorpora

3. Independent Member Candidate Identification. Begin the process of identifying and evaluating potential candidates for the independent Investment Committee member position. The IAC may wish to establish a subcommittee for this purpose or to engage an executive search firm to assist in identifying qualified candidates.

4. Individual Consent Decisions. Each IAC member should individually consider and, after consultation with its own legal counsel and WCA, submit its LP Written Consent (the form of which is attached as Attachment D) by the LP Consent Deadline of August 23, 2024. The Fund is well-positioned notwithstanding the occurrence of the Key Person Event. As of May 31, 2024, the Fund has generated a year-to-date net return of +

XIII. Attachments / Enclosures The following documents are enclosed with this memorandum and are incorporated herein by reference: Attachment A: Copy of Section 8.04 (Key Person) of the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fund Ltd., dated March 15, 2017. Attachment B: Draft First Amendment to the Amended & Restated Limited Partnership Agreement of Driftwood Absolute Return Fu