Contract analysis

I. Executive Summary Calderwood & Harkness LLP has been engaged by Driftwood Capital Management LLC ("DCM" or the "General Partner"), the general partner of Driftwood Absolute Return Fund Ltd. ("DARF" or the "Fund"), a Cayman Islands exempted limited partnership (Cayman Registration No. ELP-87234) governed by a Delaware-law Amended & Restated Limited Partnership Agreement dated March 15, 2017 (the "A&R LPA"), to advi

II. Background A. The Fund Driftwood Absolute Return Fund Ltd. ("DARF" or the "Fund") is a Cayman Islands exempted limited partnership registered at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, KY1-1104, Cayman Islands, under Cayman Registration No. ELP-87234. The Fund's registered agent in the Cayman Islands is Archipelago Corporate Services Ltd., P.O. Box 2681, George Town, Grand Ca

III. Section 8.04 Key-Person Clause — Detailed Analysis A. Definition of Key Person — Section 8.04(a)

Section 8.04(a) of the A&R LPA provides, in relevant part: "Key Person" shall mean Marcus J. Whitmore. The definition is name-specific, identifying Mr. Whitmore as the sole Key Person of the Fund. Notably, the provision does not include any other individual — whether by name or by reference to a title, role, or position — as a Key Person or co-Key Person. Nor does the definition include any provision for automatic su

1. Triggering Events Enumerated. Section 8.04(b) of the A&R LPA provides that a "Key Person Event" shall be deemed to have occurred upon the occurrence of any of the following events with respect to the Key Person: (i) death of the Key Person; (ii) permanent disability of the Key Person; (iii) departure of the Key Person from the General Partner (whether by resignation, termination, retirement, or otherwise); or (iv)

2. Application to Whitmore's Incapacitation. The factual predicate for a Key Person Event under Section 8.04(b)(iv) is straightforward and, in our view, unambiguous: • Mr. Whitmore's hemorrhagic stroke occurred on June 3, 2024. • Since June 3, 2024, Mr. Whitmore has been completely unable to devote any professional time to the affairs of the Fund. The "substantially all" standard set forth in sub-clause (iv) is there

3. Alternative Trigger Considerations. While the "inability to devote substantially all professional time" trigger under sub-clause (iv) is the primary and operative basis for the Key Person Event, we briefly address the potential applicability of sub-clause (ii) ("permanent disability") to the current facts. Permanent Disability. The A&R LPA does not define "permanent disability." In the absence of a contractual def

Section 8.04(c) of the A&R LPA establishes the consequences that flow from the occurrence of a Key Person Event and the mechanics by which the event may be cured. We address each consequence in turn.

1. Immediate Suspension of the Investment Period. Upon the occurrence of a Key Person Event, the Investment Period is immediately and automatically suspended. The suspension takes effect as of the date of the Key Person Event — June 10, 2024 — and remains in effect until either (a) a Successor Key Person is approved by the requisite LP majority and the Investment Period is restored by operation of the cure mechanics,

2. LP Notification Obligation. Section 8.04(c) requires the General Partner to notify all Limited Partners in writing within five (5) business days of the Key Person Event. The notification must disclose (i) the occurrence of the Key Person Event, (ii) the nature of the triggering event, and (iii) the consequent suspension of the Investment Period. The relevant deadline calculation is as follows: • Key Person Event d

3. Cure Period. A ninety (90) calendar day Cure Period commences on the date of the Key Person Event. The Cure Period provides a window during which the General Partner may propose one or more Successor Key Persons for LP approval and, if such approval is obtained, restore the Investment Period and resume normal fund operations. The Cure Period calculation is as follows: • Key Person Event date: June 10, 2024 • Cure

4. Successor Key Person Approval — LP Consent Threshold. The core of the cure mechanism is the LP consent requirement. Section 8.04(c) provides that any proposed Successor Key Person must be approved by Limited Partners holding at least sixty-six and two-thirds percent (66⅔%) of aggregate LP capital commitments, excluding the General Partner's co-investment. Calculation of Voting LP Commitments. The determination of

5. Failure to Cure — Wind-Down or Extension. If no Successor Key Person is approved by the requisite LP majority within the 90-calendar-day Cure Period (i.e., by September 8, 2024), Section 8.04(c) provides that Limited Partners holding a majority-in-interest may elect either: (i) to extend the Cure Period by up to ninety (90) additional calendar days (which would extend the deadline to approximately December 7, 2024

IV. LP Consent Solicitation — Procedural Considerations A. Form of Consent

Section 14.01 of the A&R LPA governs amendments to the partnership agreement and provides that any amendment or modification of the A&R LPA requires the written consent of the General Partner and the requisite percentage of Limited Partners specified for the particular action in question. For purposes of the Successor Key Person approval, the requisite LP percentage is 66⅔% of aggregate LP capital commitments (exclud

V. Delaware Law Considerations A. Governing Law

Section 16.01 of the A&R LPA provides that the agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflict-of-laws principles that would require the application of any other jurisdiction's laws. This choice-of-law provision is enforceable under both Delaware and New York law and controls the interpretation of the key-person provisions and all other t

VI. Risk Assessment — Failure to Cure A. Wind-Down Scenario In the event that no Successor Key Person is approved by the requisite LP majority within the 90-day Cure Period (or any extended period), and Limited Partners holding a majority-in-interest subsequently elect to wind down the Fund, the consequences would be severe and multifaceted. We summarize the principal risks below: Forced Liquidation of the Portfolio.

VII. Recommended Next Steps Based on our analysis, we recommend the following action plan, organized by phase and target date:

1. Immediate — By June 14, 2024. Prepare and deliver the formal LP notification of the Key Person Event to all forty-seven (47) Limited Partners and the five (5) IAC members. The notification should disclose the occurrence and nature of the Key Person Event, the consequent suspension of the Investment Period, and the commencement of the 90-day Cure Period. Target delivery by June 14, 2024, to provide a one-business-d

2. June 11–30, 2024. Develop the Successor Governance Framework, which should include the following elements: (a) Designation of Elaine R. Sato and Jonathan K. Huang as joint Successor Key Persons under Section 8.04 of the A&R LPA. (b) Establishment of a formal Investment Committee structure, with defined authority and decision-making protocols for investment decisions previously within Mr. Whitmore's sole purview. (