Contract analysis

I. Executive Summary This memorandum presents Calderwood & Harkness LLP's recommendations regarding a successor governance framework and carried interest reallocation for Driftwood Absolute Return Fund Ltd. ("DARF" or the "Fund"), a Cayman Islands exempted limited partnership (Cayman Registration No. ELP-87234) organized and operated pursuant to that certain Amended & Restated Limited Partnership Agreement, dated as

II. Background and Current Situation A. The Fund and Its Governance Structure Driftwood Absolute Return Fund Ltd. is a Cayman Islands exempted limited partnership registered under the Exempted Limited Partnership Act (as revised) of the Cayman Islands, bearing 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

Section 8.04(a) — Definition. Section 8.04(a) defines the "Key Person" as Marcus J. Whitmore, solely. No other individual is named as a Key Person or a backup Key Person, nor does the provision contemplate any automatic succession mechanism.

Section 8.04(b) — Trigger. Section 8.04(b) provides that a "Key Person Event" is triggered when the Key Person "is unable to devote substantially all of his professional time and attention to the affairs of the Fund and the General Partner for a period of seven (7) or more consecutive calendar days." The trigger is objective and does not require a formal determination by a physician or other third party; the passage

Section 8.04(c) — Consequences. Upon the triggering of a Key Person Event, Section 8.04(c) of the A&R LPA prescribes the following consequences, all of which are currently in effect: (i) Immediate Suspension of the Investment Period. The GP may not make any new portfolio investments on behalf of the Fund for the duration of the Key Person Event. (ii) Follow-On Investment Cap. Follow-on investments in existing portfol

III. Recommended Successor Key Person Designations A. Overview of Recommendation We recommend that DCM designate Elaine R. Sato and Jonathan K. Huang jointly as Successor Key Persons under a revised Section 8.04 of the A&R LPA. The joint designation is a deliberate structural choice that reflects the reality that no single individual within DCM — or, in our assessment, available externally within the relevant timefra

IV. Proposed Revised Key-Person Clause Mechanics A. Revised Section 8.04(a) — Redefinition of Key Person We recommend that Section 8.04(a) of the A&R LPA be amended to redefine "Key Person" to mean Elaine R. Sato and Jonathan K. Huang, jointly. The revised definition should provide that the Fund's Key Person requirement is satisfied so long as both Ms. Sato and Mr. Huang are actively devoting substantially all of the

V. Proposed Investment Committee Structure A. Establishment of Investment Committee (New Section 8.05) We recommend the establishment of a formal Investment Committee through the insertion of a new Section 8.05 in the A&R LPA. The current governance framework, which vests sole investment authority in the Key Person acting through the GP, does not contemplate any committee-based oversight of investment decisions. Whil

VI. Marcus J. Whitmore — Senior Advisor Designation A. Senior Advisor Role We recommend that Mr. Whitmore be designated as "Senior Advisor" to the Fund in connection with the LPA Amendment. The Senior Advisor designation serves a dual purpose: it preserves Mr. Whitmore's relationship with the Fund without creating any ambiguity regarding investment authority, and it provides a framework for Mr. Whitmore's continued a

VII. Carried Interest Reallocation A. Current Allocations Under the current framework, the Fund's incentive allocation structure provides for a GP-level incentive allocation of 20% of net new profits above the high-water mark ($142.67 per unit, set December 31, 2023), subject to a 6% annualized hurdle rate with full catch-up. This 20% incentive allocation is allocated among the GP's principals in accordance with the

VIII. Delaware Fiduciary Duty Considerations A. GP Fiduciary Duties Under Delaware Law As noted above, the A&R LPA is governed by the laws of the State of Delaware. Under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq. ("DRULPA"), the general partner of a Delaware limited partnership owes fiduciary duties to the limited partners, including the duties of care and loyalty, unless such