1024-00001 · Driftwood Absolute Return Fund Ltd · Engagement

engagement-letter-driftwood.docx DOCUMENT Finance & Banking

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CALDERWOOD & HARKNESS LLP Counselors at Law

599 Lexington Avenue New York, NY 10022 Telephone: (212) 455-3600 Facsimile: (212) 455-3601 www.calderwoodharkness.com

September 1, 2023

VIA EMAIL AND Sundial Data Systems

Marcus Ellison Co-Founder & Chief Investment Officer Priya Venkatesh Co-Founder & Chief Operating Officer Driftwood Capital Advisors LLC (as investment manager of Driftwood Absolute Return Fund Ltd.) 280 Park Avenue, 38th Floor New York, NY 10017

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION

Re: Engagement of Calderwood & Harkness LLP by Driftwood Absolute Return Fund Ltd. — DIP Financing of Cascabel Financial Holdings, Inc.

Dear Mr. Ellison and Ms. Venkatesh:

1. Introduction and Purpose

Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to confirm the terms upon which the Firm has been retained by Driftwood Absolute Return Fund Ltd. ("Driftwood" or the "Client"), a Cayman Islands exempted company with its registered office at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, KY1-1002, Cayman Islands, and its principal office at 280 Park Avenue, 38th Floor, New York, NY 10017. As we understand, Driftwood is managed by Driftwood Capital Advisors LLC, a Delaware limited liability company ("DCA"), which exercises investment discretion over Driftwood's portfolio and is authorized to enter into this engagement letter on behalf of the Client.

This engagement relates to the anticipated Chapter 11 bankruptcy case of Cascabel Financial Holdings, Inc. ("Cascabel" or "CFH"), a Delaware corporation with its principal office at 1200 Market Street, Suite 900, Wilmington, Delaware 19801. Based on our discussions with DCA and its advisors, Cascabel is expected to file a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") in the near term. We note that this engagement is being entered into on a pre-petition basis, in anticipation of such filing, so that the Firm may begin preparatory work, including the structuring, negotiation, and documentation of the proposed debtor-in-possession credit facility described herein, well in advance of the petition date.

The purpose of this letter is to set forth the terms of the Firm's engagement, including the scope of our representation, the fees and expenses to be charged, and the respective rights and obligations of the Firm and the Client in connection therewith. We ask that you review this letter carefully and contact us with any questions before signing.

2. Background

The following background information has been provided to the Firm by the Client and its representatives and forms the basis upon which the Firm has undertaken this engagement. The Firm has not independently verified the accuracy or completeness of this information and relies upon the Client to provide timely updates should any material facts change.

The Client. Driftwood is a credit-focused hedge fund with approximately $4.8 billion in assets under management as of September 2023. Driftwood specializes in distressed debt, special situations, and structured credit investments across the financial services, asset management, and banking sectors. DCA serves as the investment manager of Driftwood and exercises full investment discretion over Driftwood's portfolio.

Driftwood's Position in Cascabel's Capital Structure. Driftwood holds $32,000,000 in face value of Cascabel's $120,000,000 senior secured first lien term loan, representing approximately 26.67% of the total commitments under the first lien facility. Driftwood acquired this position on the secondary market through a series of transactions executed between March and July 2023, at an average purchase price of $0.68 per dollar of face value, resulting in an aggregate cost basis of approximately $21,760,000. The first lien term loan is governed by a Credit Agreement dated as of January 15, 2021, with a stated maturity date of January 15, 2026. The facility bears interest at a rate of the Secured Overnight Financing Rate ("SOFR") plus 425 basis points per annum. Velthorn National Bank, N.A. serves as administrative agent under the first lien credit agreement.

Other First Lien Lenders. In addition to Driftwood, the following institutions hold positions under the first lien term loan facility: Velthorn National Bank, N.A. (approximately $38,000,000 in face value), Pinnacle Credit Partners Fund II, LP (approximately $28,000,000 in face value), and Brindoval Institutional Lending, LLC (approximately $22,000,000 in face value). We understand that an ad hoc group of first lien lenders has been formed, with Hartwell & Crane LLP serving as counsel to such group.

Cascabel's Broader Capital Structure. In addition to the $120,000,000 first lien term loan, Cascabel has outstanding $45,000,000 in aggregate principal amount of 10.50% Senior Secured Second Lien Notes due 2027, with Zynvaro Trust Company serving as indenture trustee. We understand that the second lien notes are held primarily by Ashford Mezzanine Capital, LP and certain related funds. Cascabel also has outstanding $18,500,000 in aggregate principal amount of 8.00% unsecured notes due March 1, 2025. Cascabel's total pre-petition funded debt obligations therefore aggregate approximately $183,500,000.

Cascabel's Business Operations. Cascabel operates a mid-market financial services platform combining two principal business lines: (a) a registered investment advisory business conducted through Cascabel Asset Management LLC, a wholly owned subsidiary that manages approximately $1.2 billion in client assets under management; and (b) a state-chartered commercial bank subsidiary, Ridgeline Community Bank, which holds approximately $385 million in total deposits and is regulated by the Delaware Office of the State Bank Commissioner and the Federal Deposit Insurance Corporation (the "FDIC").

Source of Distress. We understand that Cascabel's financial distress stems from a confluence of factors, including: (i) concentrated commercial real estate loan losses at Ridgeline Community Bank, which have resulted in significant impairment charges and diminished capital adequacy ratios; (ii) a failed acquisition of a fintech lending platform in the fourth quarter of 2022, which resulted in substantial write-downs and integration costs; and (iii) a liquidity crisis triggered by significant depositor outflows at Ridgeline Community Bank during the first and second quarters of 2023, exacerbated by broader market concerns regarding the stability of regional and community banking institutions.

Financial Condition. As of the anticipated petition date, Cascabel is projected to have total assets of approximately $620,000,000 and total liabilities of approximately $710,000,000, reflecting a negative equity position of approximately $90,000,000.

Proposed DIP Facility. Driftwood intends to propose a $75,000,000 senior secured superpriority debtor-in-possession credit facility (the "DIP Facility") to provide Cascabel with the liquidity necessary to fund its operations during the Chapter 11 case and to preserve the going-concern value of its businesses. The DIP Facility is expected to include priming lien provisions and roll-up mechanics designed to convert Driftwood's $32,000,000 pre-petition first lien position into superpriority post-petition DIP obligations, with the balance of the DIP Facility (approximately $43,000,000) constituting new money commitments. The structuring of the DIP Facility, including the allocation between the new money tranche and the roll-up tranche, the interest rate, maturity, financial covenants, milestones, and other material terms, will be developed and refined during the course of this engagement.

3. Scope of Representation

C&H is engaged to represent Driftwood in its capacity as proposed debtor-in-possession lender in connection with the anticipated Chapter 11 case of Cascabel. The scope of the Firm's representation shall include, without limitation, the following:

(a) Structuring and Documenting the DIP Facility. Structuring, negotiating, and documenting the proposed $75,000,000 senior secured superpriority DIP credit facility, including the approximately $43,000,000 new money tranche and the approximately $32,000,000 roll-up tranche, and all related terms, conditions, covenants, representations, warranties, and events of default.

(b) Priming Lien and Roll-Up Advice. Advising on the legal requirements for obtaining priming lien authority under Section 364(d) of the Bankruptcy Code, including the standards for adequate protection and the cause requirement, as well as structuring and documenting the roll-up mechanics by which Driftwood's pre-petition first lien claims will be converted into superpriority post-petition DIP obligations.

(c) DIP Documentation. Preparing and/or reviewing the DIP term sheet, DIP credit agreement, security agreement, pledge agreement, intercreditor agreement (if applicable), and all ancillary loan documents necessary to implement the DIP Facility.

(d) Court Filings and Orders. Drafting or reviewing all motions for entry of interim and final orders authorizing the DIP Facility, including emergency motions for interim DIP financing, and preparing proposed forms of interim and final DIP orders for submission to the Bankruptcy Court.

(e) Adequate Protection. Negotiating adequate protection arrangements for pre-petition secured lenders whose liens may be primed by the DIP Facility, including the negotiation of adequate protection payments, replacement liens, superpriority claims, and other protective measures as may be appropriate under the circumstances.

(f) Contested Matters. Advising on, and if necessary litigating, contested matters related to the DIP financing, including objections that may be raised by pre-petition lenders (including the ad hoc group of first lien lenders, second lien noteholders, and the indenture trustee), any official committee of unsecured creditors appointed in the case, the United States Trustee, and other parties in interest.

(g) Ongoing Monitoring. Monitoring the Chapter 11 case on behalf of the Client, including reviewing the Debtor's compliance with the DIP budget, assessing compliance with case milestones established in the DIP credit agreement and DIP orders, evaluating potential events of default under the DIP credit agreement, and advising on remedies available to the DIP lender.

(h) Plan and Sale Process. Advising on the treatment of Driftwood's claims (including its DIP claims and any remaining pre-petition claims) under any Chapter 11 plan of reorganization, any Section 363 sale process, or any other restructuring transaction proposed during the case.

(i) DIP Payoff and Lien Release. Preparing DIP payoff documentation, lien release authorizations, UCC termination statements, and such other instruments as may be necessary to effectuate the repayment and termination of the DIP Facility upon the consummation of a plan of reorganization or other exit transaction.

(j) Coordination with Other Parties. Coordinating with counsel to the Debtor (Whitfield, Graves & Sato LLP, with Jonathan R. Whitfield serving as lead partner), the Debtor's financial advisor and chief restructuring officer (Alderpoint Advisory Partners LLC, with Terrence M. Kowalski serving as CRO), the Debtor's investment banker (Solstice Partners LLC, with David R. Chin serving as lead banker), counsel to the ad hoc group of first lien lenders (Hartwell & Crane LLP, with Monica L. Hartwell serving as lead partner), counsel to any official committee of unsecured creditors that may be appointed, and such other parties and their professional advisors as may be necessary or appropriate in connection with the representation.

(k) Related Services. Providing such other legal services as may be reasonably necessary or appropriate in connection with the foregoing matters and as may be agreed upon by the Firm and the Client from time to time.

Exclusions from Scope. The representation described herein does not extend to the following matters, and the Client should engage separate advisors with respect thereto:

(i) Tax Advice. The Firm will not provide tax advice in connection with this engagement. The Client should consult its own tax advisors regarding any tax implications of the DIP Facility, the treatment of Driftwood's claims in the Cascabel bankruptcy case, and related matters.

(ii) Bank Regulatory Matters. The Firm will not provide advice on regulatory matters relating to Ridgeline Community Bank, which we understand is expected to be ring-fenced from the Chapter 11 filing and will remain subject to the supervisory oversight of the Delaware Office of the State Bank Commissioner and the FDIC. Any regulatory proceedings or requirements relating to Ridgeline Community Bank are outside the scope of this engagement.

(iii) Unrelated Matters. The Firm's representation of the Client is limited to the DIP financing and the Cascabel bankruptcy case as described herein. Any matters unrelated to the foregoing are outside the scope of this engagement.

4. Engagement Team

The following attorneys and professionals will constitute the primary engagement team for this matter:

Colette Whitman — Partner, Bankruptcy & Restructuring Group. Ms. Whitman will serve as the Responsible Partner for this engagement and will have overall supervisory responsibility for the Firm's representation of the Client. Ms. Whitman will serve as the relationship partner and primary point of contact for the Client's senior leadership on strategic and material matters arising during the engagement.

Nathaniel Bower — Partner, Bankruptcy & Restructuring Group. Mr. Bower will serve as the Billing Partner for this engagement and will be responsible for billing administration, invoice preparation, and related financial matters. Mr. Bower will also serve as an additional partner resource on substantive legal matters and will be available to support Ms. Whitman as the needs of the representation require.

Amy Chesterton — Associate, Bankruptcy & Restructuring Group. Ms. Chesterton will serve as the day-to-day lead associate on the engagement and will be principally responsible for the preparation and negotiation of transactional documentation (including the DIP credit agreement and ancillary documents), the drafting of court filings and motions, and day-to-day communications and negotiations with Debtor's counsel and other parties.

Nathan Ikeda — Associate, Bankruptcy & Restructuring Group. Mr. Ikeda will provide additional associate-level support on the engagement, including legal research, drafting of memoranda and correspondence, due diligence review, and preparation of hearing materials.

Additional attorneys, paraprofessionals (including paralegals and legal assistants), and administrative support staff may be assigned to the matter from time to time as the needs of the representation require. The Firm will endeavor to staff the engagement efficiently and to avoid unnecessary duplication of effort.

The Firm maintains offices in New York, New York (599 Lexington Avenue, New York, NY 10022) and Wilmington, Delaware (1000 North King Street, Suite 300, Wilmington, DE 19801). Given that the anticipated Chapter 11 case is expected to be filed in the United States Bankruptcy Court for the District of Delaware, the engagement team will work from both offices as appropriate. Attorneys and staff from the Wilmington office may be utilized for court appearances, local filings, and other matters requiring a Delaware presence.

5. Fees and Billing Rates

C&H will charge for its services on an hourly basis at the Firm's standard billing rates, which are currently as follows:

The foregoing hourly rates are subject to periodic adjustment, which typically occurs annually and takes effect on January 1 of each year. The Firm will provide the Client with advance written notice of any rate changes prior to their effective date. Rate adjustments will apply to services rendered on and after the effective date and will not be applied retroactively to services already performed.

In addition to hourly fees, the Client will be responsible for reimbursement of all reasonable and documented out-of-pocket expenses and disbursements incurred by the Firm in connection with the representation. Such expenses include, but are not limited to, the following: court filing fees and related charges; process service fees; travel expenses (including airfare, ground transportation, hotel accommodations, and meals incurred in connection with travel to Wilmington, Delaware and other locations as required by the representation); overnight delivery and courier charges; photocopying and printing costs; electronic legal research and database charges (including Westmark Data Systems, PACER, and similar services); expert and consultant fees (if engaged with the Client's prior approval); document management and electronic discovery costs (if applicable); and local counsel fees and expenses (if the Firm determines that engagement of local counsel is necessary or advisable, with the Client's prior approval).

The Firm will render monthly invoices to the Client, with each invoice reflecting the time charges and disbursements incurred during the preceding calendar month. Each invoice will include a detailed description of the services performed, the name and billing rate of each timekeeper, the hours expended, and an itemization of disbursements. Payment of each invoice is due within thirty (30) days of the date of the invoice. Past-due amounts may be subject to a late payment charge at the rate of one percent (1.0%) per month, or the maximum rate permitted by applicable law, whichever is less.

6. Retainer

Concurrently with the execution of this engagement letter, the Client shall pay to the Firm a retainer in the amount of $500,000 (Five Hundred Thousand Dollars) (the "Retainer"). The Retainer shall be funded by Driftwood on a pre-petition basis and shall be transmitted by wire transfer in accordance with the instructions set forth in Enclosure 1 hereto.

The Retainer will be deposited into the Firm's attorney trust account (Interest on Lawyers' Trust Account or "IOLTA" account) maintained in accordance with the requirements of the New York Rules of Professional Conduct. The Retainer shall be held in trust and may be applied against fees and expenses incurred in connection with the engagement upon the Firm's rendering of an invoice to the Client. The Firm will provide the Client with an accounting of any application of the Retainer against invoiced amounts.

The Retainer is intended to secure payment of fees and expenses incurred during the pre-petition phase of the engagement and during the initial phase of the Chapter 11 case, prior to the entry of an interim or final DIP order providing for reimbursement of the Client's professional fees and expenses by the Debtors' estates as described in Section 7 below. During this initial period, the Firm may draw upon the Retainer to satisfy outstanding invoices.

To the extent that the Retainer is drawn down or exhausted, the Client shall not be required to replenish it, provided that the DIP Credit Agreement, as ultimately negotiated and approved by the Bankruptcy Court, includes the fee reimbursement provisions described in Section 7 below and such provisions are in full force and effect. In the event that the DIP Credit Agreement does not include such provisions, or if such provisions are modified or eliminated by the Bankruptcy Court, the Client and the Firm will discuss in good faith appropriate arrangements for the continued funding of the engagement, which may include replenishment of the Retainer.

Any unused portion of the Retainer shall be returned to the Client promptly upon the conclusion of the engagement, after application against any outstanding fees and expenses.

7. Fee Reimbursement from Debtors' Estates

The DIP Credit Agreement to be negotiated on behalf of the Client in connection with this engagement is expected to include a provision (anticipated as Section 11.04 or a comparable section thereof) requiring the Debtors (i.e., Cascabel and its debtor affiliates, if any) to reimburse, as an administrative expense of the Debtors' estates under Sections 503(b) and 507(a)(2) of the Bankruptcy Code, all reasonable and documented fees and expenses incurred by the DIP Lender's counsel (i.e., Calderwood & Harkness LLP) in connection with the negotiation, documentation, closing, administration, enforcement, and workout of the DIP Facility. Such reimbursement obligation is customary in debtor-in-possession financing transactions and is an expected component of the overall DIP package.

The Debtors' reimbursement obligation with respect to the Firm's fees and expenses will be secured by the DIP liens granted pursuant to Section 364 of the Bankruptcy Code and will be entitled to superpriority administrative expense claim status under Section 364(c)(1) of the Bankruptcy Code, pari passu with the DIP Lender's claims under the DIP Facility.

The Firm will seek to include customary provisions in the proposed interim and final DIP orders to be entered by the Bankruptcy Court confirming the Debtors' obligation to pay the Firm's reasonable fees and expenses as an administrative expense of the estates, without the necessity of filing formal fee applications under Section 330 of the Bankruptcy Code or obtaining further court approval, subject to (i) delivery of reasonably detailed invoices to the Debtors and the United States Trustee, (ii) a customary reasonableness review period (typically ten (10) business days), and (iii) the right of the Debtors, the United States Trustee, or any official committee to object to the reasonableness of such fees and expenses, with disputes to be resolved by the Bankruptcy Court.

Notwithstanding the foregoing, the Client acknowledges and agrees that the Client remains primarily liable for all fees and expenses incurred by the Firm in connection with this engagement. The estate reimbursement mechanism described in this Section 7 is intended as the primary source of payment for the Firm's invoices following entry of the DIP orders, but it does not relieve the Client of its ultimate payment obligation to the Firm. In the event that the Debtors' estates fail to reimburse the Firm's fees and expenses for any reason (including, without limitation, conversion of the Chapter 11 case to a case under Chapter 7, dismissal of the case, or the Bankruptcy Court's denial or reduction of the Firm's fees), the Client shall remain responsible for the payment of all outstanding amounts.

8. Estimated Fees

Based on the Firm's current understanding of the scope and anticipated duration of this engagement, and taking into account comparable DIP financing engagements in which the Firm has participated, the Firm estimates that total fees and expenses incurred in connection with this representation will be approximately $2,850,000 (inclusive of both professional fees and out-of-pocket expenses and disbursements). This estimate assumes an engagement duration of approximately five (5) to six (6) months, commencing with pre-petition structuring and documentation work and extending through plan confirmation, DIP repayment, and the effectuation of lien releases.

This estimate is provided solely for the Client's budgeting and planning purposes and does not constitute a cap, ceiling, or guarantee of total fees and expenses. Actual fees and expenses will depend upon a number of factors that cannot be precisely predicted at the outset of the engagement, including but not limited to: the complexity of the DIP financing terms and the extent of negotiations required with the Debtor and other parties; the nature and extent of any contested proceedings related to the DIP Facility (including objections from pre-petition lenders, the official committee of unsecured creditors, or the United States Trustee); the overall duration of the Chapter 11 case and any delays or complications that may arise; the scope and complexity of any plan of reorganization or Section 363 sale process; and any changes in the scope of the engagement as agreed upon by the Firm and the Client.

The Firm will endeavor to keep the Client informed on an ongoing basis regarding the status of fees incurred and will promptly discuss with the Client any anticipated significant deviations from the estimate set forth above. The Firm is committed to staffing the engagement efficiently and to delivering high-quality legal services in a cost-effective manner.

9. Conflicts of Interest

The Firm has conducted a thorough conflicts check in accordance with its standard policies and procedures and in compliance with the New York Rules of Professional Conduct. Based on the results of that review, the Firm has not identified any conflicts of interest that would preclude the Firm from undertaking this engagement on behalf of the Client.

Specifically, the Firm does not currently represent, and has not recently represented, Cascabel Financial Holdings, Inc., Cascabel Asset Management LLC, Ridgeline Community Bank, or any of their respective officers, directors, equity holders, or affiliates in any matter. The Firm does not currently represent any of the pre-petition first lien lenders under the first lien credit agreement, including Velthorn National Bank, N.A., Pinnacle Credit Partners Fund II, LP, or Brindoval Institutional Lending, LLC, in any matter related to the Cascabel bankruptcy case or the DIP financing. The Firm does not currently represent any holder of the second lien notes (including Ashford Mezzanine Capital, LP), the indenture trustee (Zynvaro Trust Company), or any creditor or party in interest known to be adverse to Driftwood in connection with this matter.

In the event that a conflict of interest arises during the course of this engagement, the Firm will promptly notify the Client and will take appropriate steps in accordance with applicable rules of professional conduct to address such conflict, which may include seeking the Client's informed consent to the continued representation (where permissible), implementing appropriate ethical screens, or, if necessary, withdrawing from the engagement in whole or in part.

The Client acknowledges that Calderwood & Harkness LLP is a large law firm with many attorneys and a broad and diverse client base. The Firm may currently represent, or may in the future undertake the representation of, other clients in matters unrelated to this engagement that may involve one or more of the parties to the Cascabel bankruptcy case, including entities in the financial services, banking, or asset management sectors. Such unrelated representations shall not constitute a conflict of interest for purposes of this engagement, and the Client consents to such unrelated representations, provided that they are not directly adverse to the Client in connection with the matters covered by this engagement letter.

10. Confidentiality and Privilege

All communications between the Client and the Firm in connection with this engagement are intended to be, and shall be treated as, subject to the attorney-client privilege and the work-product doctrine to the fullest extent permitted by applicable law. The Firm will maintain the confidentiality of all information provided by or on behalf of the Client in accordance with the applicable rules of professional conduct, including Rule 1.6 of the New York Rules of Professional Conduct, and will not disclose such information to any third party except as authorized by the Client or as required by law.

The Client acknowledges, however, that certain information relating to the DIP Facility and Driftwood's position in the Cascabel capital structure may need to be disclosed in connection with court filings, motions, declarations, exhibits, and orders in the bankruptcy case. Such disclosures may include, among other things, the terms of the DIP credit agreement, the identity and claims of the DIP lender, and the basis for the relief sought. The Client hereby authorizes the Firm to make such disclosures as are reasonably necessary in connection with the representation and the prosecution of the DIP Facility before the Bankruptcy Court, subject to appropriate redaction of competitively sensitive information where feasible and consistent with Bankruptcy Court requirements.

The Client further acknowledges that communications with third parties in connection with the bankruptcy case — including communications with Debtor's counsel (Whitfield, Graves & Sato LLP), the Debtor's financial advisor and CRO (Alderpoint Advisory Partners LLC), the Debtor's investment banker (Solstice Partners LLC), counsel to the ad hoc group of first lien lenders (Hartwell & Crane LLP), counsel to any official committee of unsecured creditors, and other parties in interest — may not be protected by the attorney-client privilege or work-product doctrine, and that such communications should be conducted with appropriate care regarding the potential waiver of privilege. The Firm will advise the Client as appropriate regarding the boundaries of privilege in the context of multi-party bankruptcy negotiations.

11. Termination

Either party may terminate this engagement at any time upon written notice to the other party. Termination by the Client shall be effective upon receipt of written notice by the Firm. Termination by the Firm shall be effective upon reasonable notice to the Client, subject to the considerations described below.

Upon termination of the engagement, regardless of the reason therefor, the Client shall remain liable for all fees and expenses incurred by the Firm through the effective date of termination, including any fees and expenses incurred in connection with the transition of the matter to successor counsel.

The Client acknowledges that, following the commencement of the Cascabel bankruptcy case, the Firm's withdrawal from the engagement may be subject to the approval of the Bankruptcy Court if the Firm has entered an appearance or been recognized as counsel of record in the case. In such circumstances, the Firm will comply with all applicable rules and orders of the Bankruptcy Court governing the withdrawal of counsel, and the effective date of termination may be deferred until such approval is obtained.

Upon termination, the Firm will take reasonable steps to protect the Client's interests, including providing a reasonable transition period, delivering to the Client (or its successor counsel) copies of all material documents and work product prepared by the Firm in connection with the engagement, and cooperating with successor counsel to ensure an orderly and efficient transition of the matter.

12. Limitation of Liability

The Firm's aggregate liability to the Client for any and all claims arising out of or relating to this engagement, whether based in contract, tort, negligence, breach of fiduciary duty, or otherwise, shall not exceed the total amount of fees actually paid by or on behalf of the Client to the Firm under this engagement letter. This limitation of liability applies to all claims and causes of action of every kind and nature, whether known or unknown, and regardless of the theory of liability.

In no event shall the Firm be liable to the Client for any consequential, incidental, indirect, special, exemplary, or punitive damages of any kind, including but not limited to lost profits, lost business opportunities, diminution in value, or reputational harm, regardless of whether such damages were foreseeable or whether the Firm was advised of the possibility of such damages.

The limitations set forth in this Section 12 shall survive the termination of this engagement and shall apply to the fullest extent permitted by applicable law.

13. Governing Law and Dispute Resolution

This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to any choice of law or conflict of laws principles that would result in the application of the laws of any other jurisdiction.

Any dispute, controversy, or claim arising out of or relating to this engagement letter, the Firm's services hereunder, or the breach, termination, or validity thereof, shall be resolved by binding arbitration administered by JAMS (or such other arbitral body as may be mutually agreed upon by the parties) in New York, New York, in accordance with the then-prevailing JAMS Comprehensive Arbitration Rules and Procedures. The arbitration shall be conducted before a single arbitrator selected by mutual agreement of the parties, or, failing such agreement, appointed by JAMS in accordance with its rules. The arbitrator shall have the authority to award any remedy that would be available in a court of competent jurisdiction, subject to the limitations on liability set forth in Section 12 of this engagement letter. The decision of the arbitrator shall be final and binding upon the parties and may be enforced in any court of competent jurisdiction. Each party shall bear its own costs and expenses in connection with the arbitration, unless the arbitrator determines otherwise.

14. Miscellaneous

This engagement letter constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, discussions, representations, understandings, and agreements, whether oral or written, between the parties relating to the Firm's engagement by the Client in connection with the matters described herein.

This engagement letter may not be amended, modified, supplemented, or waived except by a writing signed by both the Firm and the Client. No failure or delay by either party in exercising any right or remedy under this engagement letter shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude any further exercise thereof or the exercise of any other right or remedy.

This engagement letter may be executed in one or more counterparts (including by facsimile or electronic transmission in portable document format), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

If any provision of this engagement letter is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this engagement letter shall be construed as if such invalid, illegal, or unenforceable provision had never been included herein.

All notices required or permitted under this engagement letter shall be in writing and shall be deemed given when delivered personally, sent by email (with confirmation of receipt), or sent by nationally recognized overnight courier to the addresses set forth herein, or to such other address as either party may designate in writing.

15. Acceptance

We are grateful for the opportunity to represent Driftwood in connection with this significant and complex matter. We look forward to working closely with you, your colleagues at DCA, and your other advisors to achieve a successful outcome.

If the foregoing terms are acceptable, please indicate the Client's acceptance by countersigning this engagement letter in the space provided below and returning one fully executed copy to the Firm by no later than September 5, 2023. Concurrently therewith, please arrange for the wire transfer of the Retainer in the amount of $500,000 in accordance with the wire instructions set forth in Enclosure 1.

Please do not hesitate to contact Colette Whitman at (212) 455-3610 or cwhitman@calderwoodharkness.com, or Nathaniel Bower at (212) 455-3625 or nbower@calderwoodharkness.com, if you have any questions regarding this engagement letter or any other aspect of the representation.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Colette Whitman

Title: Partner

Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022

ACKNOWLEDGED AND ACCEPTED:

DRIFTWOOD CAPITAL ADVISORS LLC, as investment manager of and on behalf of DRIFTWOOD ABSOLUTE RETURN FUND LTD.

By: ________

Name: Marcus Ellison

Title: Co-Founder & Chief Investment Officer

Date: ________

Enclosures:

1. Wire transfer instructions for Retainer payment

2. Firm's standard billing policies and procedures

cc: Priya Venkatesh, Co-Founder & Chief Operating Officer, Driftwood Capital Advisors LLC cc: Nathaniel Bower, Partner, Calderwood & Harkness LLP

Professional Category	Hourly Rate
Partners	$1,650
Associates	$950
Paraprofessionals (Paralegals and Legal Assistants)	$425

CALDERWOOD & HARKNESS LLP Counselors at Law
599 Lexington Avenue New York, NY 10022 Telephone: (212) 455-3600 Facsimile: (212) 455-3601 www.calderwoodharkness.com
September 1, 2023
VIA EMAIL AND Sundial Data Systems
Marcus Ellison Co-Founder & Chief Investment Officer Priya Venkatesh Co-Founder & Chief Operating Officer Driftwood Capital Advisors LLC (as investment manager of Driftwood Absolute Return Fund Ltd.) 280 Park Avenue, 38th Floor New York, NY 10017
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION
Re: Engagement of Calderwood & Harkness LLP by Driftwood Absolute Return Fund Ltd. — DIP Financing of Cascabel Financial Holdings, Inc.
Dear Mr. Ellison and Ms. Venkatesh:
1. Introduction and Purpose
Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to confirm the terms upon which the Firm has been retained by Driftwood Absolute Return Fund Ltd. ("Driftwood" or the "Client"), a Cayman Islands exempted company with its registered office at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, KY1-1002, Cayman Islands, and its principal office at 280 Park Avenue, 38th Floor, New York, NY 10017. As we understand, Driftwood is managed by Driftwood Capital Advisors LLC, a Delaware limited liability company ("DCA"), which exercises investment discretion over Driftwood's portfolio and is authorized to enter into this engagement letter on behalf of the Client.
This engagement relates to the anticipated Chapter 11 bankruptcy case of Cascabel Financial Holdings, Inc. ("Cascabel" or "CFH"), a Delaware corporation with its principal office at 1200 Market Street, Suite 900, Wilmington, Delaware 19801. Based on our discussions with DCA and its advisors, Cascabel is expected to file a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") in the near term. We note that this engagement is being entered into on a pre-petition basis, in anticipation of such filing, so that the Firm may begin preparatory work, including the structuring, negotiation, and documentation of the proposed debtor-in-possession credit facility described herein, well in advance of the petition date.
The purpose of this letter is to set forth the terms of the Firm's engagement, including the scope of our representation, the fees and expenses to be charged, and the respective rights and obligations of the Firm and the Client in connection therewith. We ask that you review this letter carefully and contact us with any questions before signing.
2. Background
The following background information has been provided to the Firm by the Client and its representatives and forms the basis upon which the Firm has undertaken this engagement. The Firm has not independently verified the accuracy or completeness of this information and relies upon the Client to provide timely updates should any material facts change.
The Client. Driftwood is a credit-focused hedge fund with approximately $4.8 billion in assets under management as of September 2023. Driftwood specializes in distressed debt, special situations, and structured credit investments across the financial services, asset management, and banking sectors. DCA serves as the investment manager of Driftwood and exercises full investment discretion over Driftwood's portfolio.
Driftwood's Position in Cascabel's Capital Structure. Driftwood holds $32,000,000 in face value of Cascabel's $120,000,000 senior secured first lien term loan, representing approximately 26.67% of the total commitments under the first lien facility. Driftwood acquired this position on the secondary market through a series of transactions executed between March and July 2023, at an average purchase price of $0.68 per dollar of face value, resulting in an aggregate cost basis of approximately $21,760,000. The first lien term loan is governed by a Credit Agreement dated as of January 15, 2021, with a stated maturity date of January 15, 2026. The facility bears interest at a rate of the Secured Overnight Financing Rate ("SOFR") plus 425 basis points per annum. Velthorn National Bank, N.A. serves as administrative agent under the first lien credit agreement.
Other First Lien Lenders. In addition to Driftwood, the following institutions hold positions under the first lien term loan facility: Velthorn National Bank, N.A. (approximately $38,000,000 in face value), Pinnacle Credit Partners Fund II, LP (approximately $28,000,000 in face value), and Brindoval Institutional Lending, LLC (approximately $22,000,000 in face value). We understand that an ad hoc group of first lien lenders has been formed, with Hartwell & Crane LLP serving as counsel to such group.
Cascabel's Broader Capital Structure. In addition to the $120,000,000 first lien term loan, Cascabel has outstanding $45,000,000 in aggregate principal amount of 10.50% Senior Secured Second Lien Notes due 2027, with Zynvaro Trust Company serving as indenture trustee. We understand that the second lien notes are held primarily by Ashford Mezzanine Capital, LP and certain related funds. Cascabel also has outstanding $18,500,000 in aggregate principal amount of 8.00% unsecured notes due March 1, 2025. Cascabel's total pre-petition funded debt obligations therefore aggregate approximately $183,500,000.
Cascabel's Business Operations. Cascabel operates a mid-market financial services platform combining two principal business lines: (a) a registered investment advisory business conducted through Cascabel Asset Management LLC, a wholly owned subsidiary that manages approximately $1.2 billion in client assets under management; and (b) a state-chartered commercial bank subsidiary, Ridgeline Community Bank, which holds approximately $385 million in total deposits and is regulated by the Delaware Office of the State Bank Commissioner and the Federal Deposit Insurance Corporation (the "FDIC").
Source of Distress. We understand that Cascabel's financial distress stems from a confluence of factors, including: (i) concentrated commercial real estate loan losses at Ridgeline Community Bank, which have resulted in significant impairment charges and diminished capital adequacy ratios; (ii) a failed acquisition of a fintech lending platform in the fourth quarter of 2022, which resulted in substantial write-downs and integration costs; and (iii) a liquidity crisis triggered by significant depositor outflows at Ridgeline Community Bank during the first and second quarters of 2023, exacerbated by broader market concerns regarding the stability of regional and community banking institutions.
Financial Condition. As of the anticipated petition date, Cascabel is projected to have total assets of approximately $620,000,000 and total liabilities of approximately $710,000,000, reflecting a negative equity position of approximately $90,000,000.
Proposed DIP Facility. Driftwood intends to propose a $75,000,000 senior secured superpriority debtor-in-possession credit facility (the "DIP Facility") to provide Cascabel with the liquidity necessary to fund its operations during the Chapter 11 case and to preserve the going-concern value of its businesses. The DIP Facility is expected to include priming lien provisions and roll-up mechanics designed to convert Driftwood's $32,000,000 pre-petition first lien position into superpriority post-petition DIP obligations, with the balance of the DIP Facility (approximately $43,000,000) constituting new money commitments. The structuring of the DIP Facility, including the allocation between the new money tranche and the roll-up tranche, the interest rate, maturity, financial covenants, milestones, and other material terms, will be developed and refined during the course of this engagement.
3. Scope of Representation
C&H is engaged to represent Driftwood in its capacity as proposed debtor-in-possession lender in connection with the anticipated Chapter 11 case of Cascabel. The scope of the Firm's representation shall include, without limitation, the following:
(a) Structuring and Documenting the DIP Facility. Structuring, negotiating, and documenting the proposed $75,000,000 senior secured superpriority DIP credit facility, including the approximately $43,000,000 new money tranche and the approximately $32,000,000 roll-up tranche, and all related terms, conditions, covenants, representations, warranties, and events of default.
(b) Priming Lien and Roll-Up Advice. Advising on the legal requirements for obtaining priming lien authority under Section 364(d) of the Bankruptcy Code, including the standards for adequate protection and the cause requirement, as well as structuring and documenting the roll-up mechanics by which Driftwood's pre-petition first lien claims will be converted into superpriority post-petition DIP obligations.
(c) DIP Documentation. Preparing and/or reviewing the DIP term sheet, DIP credit agreement, security agreement, pledge agreement, intercreditor agreement (if applicable), and all ancillary loan documents necessary to implement the DIP Facility.
(d) Court Filings and Orders. Drafting or reviewing all motions for entry of interim and final orders authorizing the DIP Facility, including emergency motions for interim DIP financing, and preparing proposed forms of interim and final DIP orders for submission to the Bankruptcy Court.
(e) Adequate Protection. Negotiating adequate protection arrangements for pre-petition secured lenders whose liens may be primed by the DIP Facility, including the negotiation of adequate protection payments, replacement liens, superpriority claims, and other protective measures as may be appropriate under the circumstances.
(f) Contested Matters. Advising on, and if necessary litigating, contested matters related to the DIP financing, including objections that may be raised by pre-petition lenders (including the ad hoc group of first lien lenders, second lien noteholders, and the indenture trustee), any official committee of unsecured creditors appointed in the case, the United States Trustee, and other parties in interest.
(g) Ongoing Monitoring. Monitoring the Chapter 11 case on behalf of the Client, including reviewing the Debtor's compliance with the DIP budget, assessing compliance with case milestones established in the DIP credit agreement and DIP orders, evaluating potential events of default under the DIP credit agreement, and advising on remedies available to the DIP lender.
(h) Plan and Sale Process. Advising on the treatment of Driftwood's claims (including its DIP claims and any remaining pre-petition claims) under any Chapter 11 plan of reorganization, any Section 363 sale process, or any other restructuring transaction proposed during the case.
(i) DIP Payoff and Lien Release. Preparing DIP payoff documentation, lien release authorizations, UCC termination statements, and such other instruments as may be necessary to effectuate the repayment and termination of the DIP Facility upon the consummation of a plan of reorganization or other exit transaction.
(j) Coordination with Other Parties. Coordinating with counsel to the Debtor (Whitfield, Graves & Sato LLP, with Jonathan R. Whitfield serving as lead partner), the Debtor's financial advisor and chief restructuring officer (Alderpoint Advisory Partners LLC, with Terrence M. Kowalski serving as CRO), the Debtor's investment banker (Solstice Partners LLC, with David R. Chin serving as lead banker), counsel to the ad hoc group of first lien lenders (Hartwell & Crane LLP, with Monica L. Hartwell serving as lead partner), counsel to any official committee of unsecured creditors that may be appointed, and such other parties and their professional advisors as may be necessary or appropriate in connection with the representation.
(k) Related Services. Providing such other legal services as may be reasonably necessary or appropriate in connection with the foregoing matters and as may be agreed upon by the Firm and the Client from time to time.
Exclusions from Scope. The representation described herein does not extend to the following matters, and the Client should engage separate advisors with respect thereto:
(i) Tax Advice. The Firm will not provide tax advice in connection with this engagement. The Client should consult its own tax advisors regarding any tax implications of the DIP Facility, the treatment of Driftwood's claims in the Cascabel bankruptcy case, and related matters.
(ii) Bank Regulatory Matters. The Firm will not provide advice on regulatory matters relating to Ridgeline Community Bank, which we understand is expected to be ring-fenced from the Chapter 11 filing and will remain subject to the supervisory oversight of the Delaware Office of the State Bank Commissioner and the FDIC. Any regulatory proceedings or requirements relating to Ridgeline Community Bank are outside the scope of this engagement.
(iii) Unrelated Matters. The Firm's representation of the Client is limited to the DIP financing and the Cascabel bankruptcy case as described herein. Any matters unrelated to the foregoing are outside the scope of this engagement.
4. Engagement Team
The following attorneys and professionals will constitute the primary engagement team for this matter:
Colette Whitman — Partner, Bankruptcy & Restructuring Group. Ms. Whitman will serve as the Responsible Partner for this engagement and will have overall supervisory responsibility for the Firm's representation of the Client. Ms. Whitman will serve as the relationship partner and primary point of contact for the Client's senior leadership on strategic and material matters arising during the engagement.
Nathaniel Bower — Partner, Bankruptcy & Restructuring Group. Mr. Bower will serve as the Billing Partner for this engagement and will be responsible for billing administration, invoice preparation, and related financial matters. Mr. Bower will also serve as an additional partner resource on substantive legal matters and will be available to support Ms. Whitman as the needs of the representation require.
Amy Chesterton — Associate, Bankruptcy & Restructuring Group. Ms. Chesterton will serve as the day-to-day lead associate on the engagement and will be principally responsible for the preparation and negotiation of transactional documentation (including the DIP credit agreement and ancillary documents), the drafting of court filings and motions, and day-to-day communications and negotiations with Debtor's counsel and other parties.
Nathan Ikeda — Associate, Bankruptcy & Restructuring Group. Mr. Ikeda will provide additional associate-level support on the engagement, including legal research, drafting of memoranda and correspondence, due diligence review, and preparation of hearing materials.
Additional attorneys, paraprofessionals (including paralegals and legal assistants), and administrative support staff may be assigned to the matter from time to time as the needs of the representation require. The Firm will endeavor to staff the engagement efficiently and to avoid unnecessary duplication of effort.
The Firm maintains offices in New York, New York (599 Lexington Avenue, New York, NY 10022) and Wilmington, Delaware (1000 North King Street, Suite 300, Wilmington, DE 19801). Given that the anticipated Chapter 11 case is expected to be filed in the United States Bankruptcy Court for the District of Delaware, the engagement team will work from both offices as appropriate. Attorneys and staff from the Wilmington office may be utilized for court appearances, local filings, and other matters requiring a Delaware presence.
5. Fees and Billing Rates
C&H will charge for its services on an hourly basis at the Firm's standard billing rates, which are currently as follows:
The foregoing hourly rates are subject to periodic adjustment, which typically occurs annually and takes effect on January 1 of each year. The Firm will provide the Client with advance written notice of any rate changes prior to their effective date. Rate adjustments will apply to services rendered on and after the effective date and will not be applied retroactively to services already performed.
In addition to hourly fees, the Client will be responsible for reimbursement of all reasonable and documented out-of-pocket expenses and disbursements incurred by the Firm in connection with the representation. Such expenses include, but are not limited to, the following: court filing fees and related charges; process service fees; travel expenses (including airfare, ground transportation, hotel accommodations, and meals incurred in connection with travel to Wilmington, Delaware and other locations as required by the representation); overnight delivery and courier charges; photocopying and printing costs; electronic legal research and database charges (including Westmark Data Systems, PACER, and similar services); expert and consultant fees (if engaged with the Client's prior approval); document management and electronic discovery costs (if applicable); and local counsel fees and expenses (if the Firm determines that engagement of local counsel is necessary or advisable, with the Client's prior approval).
The Firm will render monthly invoices to the Client, with each invoice reflecting the time charges and disbursements incurred during the preceding calendar month. Each invoice will include a detailed description of the services performed, the name and billing rate of each timekeeper, the hours expended, and an itemization of disbursements. Payment of each invoice is due within thirty (30) days of the date of the invoice. Past-due amounts may be subject to a late payment charge at the rate of one percent (1.0%) per month, or the maximum rate permitted by applicable law, whichever is less.
6. Retainer
Concurrently with the execution of this engagement letter, the Client shall pay to the Firm a retainer in the amount of $500,000 (Five Hundred Thousand Dollars) (the "Retainer"). The Retainer shall be funded by Driftwood on a pre-petition basis and shall be transmitted by wire transfer in accordance with the instructions set forth in Enclosure 1 hereto.
The Retainer will be deposited into the Firm's attorney trust account (Interest on Lawyers' Trust Account or "IOLTA" account) maintained in accordance with the requirements of the New York Rules of Professional Conduct. The Retainer shall be held in trust and may be applied against fees and expenses incurred in connection with the engagement upon the Firm's rendering of an invoice to the Client. The Firm will provide the Client with an accounting of any application of the Retainer against invoiced amounts.
The Retainer is intended to secure payment of fees and expenses incurred during the pre-petition phase of the engagement and during the initial phase of the Chapter 11 case, prior to the entry of an interim or final DIP order providing for reimbursement of the Client's professional fees and expenses by the Debtors' estates as described in Section 7 below. During this initial period, the Firm may draw upon the Retainer to satisfy outstanding invoices.
To the extent that the Retainer is drawn down or exhausted, the Client shall not be required to replenish it, provided that the DIP Credit Agreement, as ultimately negotiated and approved by the Bankruptcy Court, includes the fee reimbursement provisions described in Section 7 below and such provisions are in full force and effect. In the event that the DIP Credit Agreement does not include such provisions, or if such provisions are modified or eliminated by the Bankruptcy Court, the Client and the Firm will discuss in good faith appropriate arrangements for the continued funding of the engagement, which may include replenishment of the Retainer.
Any unused portion of the Retainer shall be returned to the Client promptly upon the conclusion of the engagement, after application against any outstanding fees and expenses.
7. Fee Reimbursement from Debtors' Estates
The DIP Credit Agreement to be negotiated on behalf of the Client in connection with this engagement is expected to include a provision (anticipated as Section 11.04 or a comparable section thereof) requiring the Debtors (i.e., Cascabel and its debtor affiliates, if any) to reimburse, as an administrative expense of the Debtors' estates under Sections 503(b) and 507(a)(2) of the Bankruptcy Code, all reasonable and documented fees and expenses incurred by the DIP Lender's counsel (i.e., Calderwood & Harkness LLP) in connection with the negotiation, documentation, closing, administration, enforcement, and workout of the DIP Facility. Such reimbursement obligation is customary in debtor-in-possession financing transactions and is an expected component of the overall DIP package.
The Debtors' reimbursement obligation with respect to the Firm's fees and expenses will be secured by the DIP liens granted pursuant to Section 364 of the Bankruptcy Code and will be entitled to superpriority administrative expense claim status under Section 364(c)(1) of the Bankruptcy Code, pari passu with the DIP Lender's claims under the DIP Facility.
The Firm will seek to include customary provisions in the proposed interim and final DIP orders to be entered by the Bankruptcy Court confirming the Debtors' obligation to pay the Firm's reasonable fees and expenses as an administrative expense of the estates, without the necessity of filing formal fee applications under Section 330 of the Bankruptcy Code or obtaining further court approval, subject to (i) delivery of reasonably detailed invoices to the Debtors and the United States Trustee, (ii) a customary reasonableness review period (typically ten (10) business days), and (iii) the right of the Debtors, the United States Trustee, or any official committee to object to the reasonableness of such fees and expenses, with disputes to be resolved by the Bankruptcy Court.
Notwithstanding the foregoing, the Client acknowledges and agrees that the Client remains primarily liable for all fees and expenses incurred by the Firm in connection with this engagement. The estate reimbursement mechanism described in this Section 7 is intended as the primary source of payment for the Firm's invoices following entry of the DIP orders, but it does not relieve the Client of its ultimate payment obligation to the Firm. In the event that the Debtors' estates fail to reimburse the Firm's fees and expenses for any reason (including, without limitation, conversion of the Chapter 11 case to a case under Chapter 7, dismissal of the case, or the Bankruptcy Court's denial or reduction of the Firm's fees), the Client shall remain responsible for the payment of all outstanding amounts.
8. Estimated Fees
Based on the Firm's current understanding of the scope and anticipated duration of this engagement, and taking into account comparable DIP financing engagements in which the Firm has participated, the Firm estimates that total fees and expenses incurred in connection with this representation will be approximately $2,850,000 (inclusive of both professional fees and out-of-pocket expenses and disbursements). This estimate assumes an engagement duration of approximately five (5) to six (6) months, commencing with pre-petition structuring and documentation work and extending through plan confirmation, DIP repayment, and the effectuation of lien releases.
This estimate is provided solely for the Client's budgeting and planning purposes and does not constitute a cap, ceiling, or guarantee of total fees and expenses. Actual fees and expenses will depend upon a number of factors that cannot be precisely predicted at the outset of the engagement, including but not limited to: the complexity of the DIP financing terms and the extent of negotiations required with the Debtor and other parties; the nature and extent of any contested proceedings related to the DIP Facility (including objections from pre-petition lenders, the official committee of unsecured creditors, or the United States Trustee); the overall duration of the Chapter 11 case and any delays or complications that may arise; the scope and complexity of any plan of reorganization or Section 363 sale process; and any changes in the scope of the engagement as agreed upon by the Firm and the Client.
The Firm will endeavor to keep the Client informed on an ongoing basis regarding the status of fees incurred and will promptly discuss with the Client any anticipated significant deviations from the estimate set forth above. The Firm is committed to staffing the engagement efficiently and to delivering high-quality legal services in a cost-effective manner.
9. Conflicts of Interest
The Firm has conducted a thorough conflicts check in accordance with its standard policies and procedures and in compliance with the New York Rules of Professional Conduct. Based on the results of that review, the Firm has not identified any conflicts of interest that would preclude the Firm from undertaking this engagement on behalf of the Client.
Specifically, the Firm does not currently represent, and has not recently represented, Cascabel Financial Holdings, Inc., Cascabel Asset Management LLC, Ridgeline Community Bank, or any of their respective officers, directors, equity holders, or affiliates in any matter. The Firm does not currently represent any of the pre-petition first lien lenders under the first lien credit agreement, including Velthorn National Bank, N.A., Pinnacle Credit Partners Fund II, LP, or Brindoval Institutional Lending, LLC, in any matter related to the Cascabel bankruptcy case or the DIP financing. The Firm does not currently represent any holder of the second lien notes (including Ashford Mezzanine Capital, LP), the indenture trustee (Zynvaro Trust Company), or any creditor or party in interest known to be adverse to Driftwood in connection with this matter.
In the event that a conflict of interest arises during the course of this engagement, the Firm will promptly notify the Client and will take appropriate steps in accordance with applicable rules of professional conduct to address such conflict, which may include seeking the Client's informed consent to the continued representation (where permissible), implementing appropriate ethical screens, or, if necessary, withdrawing from the engagement in whole or in part.
The Client acknowledges that Calderwood & Harkness LLP is a large law firm with many attorneys and a broad and diverse client base. The Firm may currently represent, or may in the future undertake the representation of, other clients in matters unrelated to this engagement that may involve one or more of the parties to the Cascabel bankruptcy case, including entities in the financial services, banking, or asset management sectors. Such unrelated representations shall not constitute a conflict of interest for purposes of this engagement, and the Client consents to such unrelated representations, provided that they are not directly adverse to the Client in connection with the matters covered by this engagement letter.
10. Confidentiality and Privilege
All communications between the Client and the Firm in connection with this engagement are intended to be, and shall be treated as, subject to the attorney-client privilege and the work-product doctrine to the fullest extent permitted by applicable law. The Firm will maintain the confidentiality of all information provided by or on behalf of the Client in accordance with the applicable rules of professional conduct, including Rule 1.6 of the New York Rules of Professional Conduct, and will not disclose such information to any third party except as authorized by the Client or as required by law.
The Client acknowledges, however, that certain information relating to the DIP Facility and Driftwood's position in the Cascabel capital structure may need to be disclosed in connection with court filings, motions, declarations, exhibits, and orders in the bankruptcy case. Such disclosures may include, among other things, the terms of the DIP credit agreement, the identity and claims of the DIP lender, and the basis for the relief sought. The Client hereby authorizes the Firm to make such disclosures as are reasonably necessary in connection with the representation and the prosecution of the DIP Facility before the Bankruptcy Court, subject to appropriate redaction of competitively sensitive information where feasible and consistent with Bankruptcy Court requirements.
The Client further acknowledges that communications with third parties in connection with the bankruptcy case — including communications with Debtor's counsel (Whitfield, Graves & Sato LLP), the Debtor's financial advisor and CRO (Alderpoint Advisory Partners LLC), the Debtor's investment banker (Solstice Partners LLC), counsel to the ad hoc group of first lien lenders (Hartwell & Crane LLP), counsel to any official committee of unsecured creditors, and other parties in interest — may not be protected by the attorney-client privilege or work-product doctrine, and that such communications should be conducted with appropriate care regarding the potential waiver of privilege. The Firm will advise the Client as appropriate regarding the boundaries of privilege in the context of multi-party bankruptcy negotiations.
11. Termination
Either party may terminate this engagement at any time upon written notice to the other party. Termination by the Client shall be effective upon receipt of written notice by the Firm. Termination by the Firm shall be effective upon reasonable notice to the Client, subject to the considerations described below.
Upon termination of the engagement, regardless of the reason therefor, the Client shall remain liable for all fees and expenses incurred by the Firm through the effective date of termination, including any fees and expenses incurred in connection with the transition of the matter to successor counsel.
The Client acknowledges that, following the commencement of the Cascabel bankruptcy case, the Firm's withdrawal from the engagement may be subject to the approval of the Bankruptcy Court if the Firm has entered an appearance or been recognized as counsel of record in the case. In such circumstances, the Firm will comply with all applicable rules and orders of the Bankruptcy Court governing the withdrawal of counsel, and the effective date of termination may be deferred until such approval is obtained.
Upon termination, the Firm will take reasonable steps to protect the Client's interests, including providing a reasonable transition period, delivering to the Client (or its successor counsel) copies of all material documents and work product prepared by the Firm in connection with the engagement, and cooperating with successor counsel to ensure an orderly and efficient transition of the matter.
12. Limitation of Liability
The Firm's aggregate liability to the Client for any and all claims arising out of or relating to this engagement, whether based in contract, tort, negligence, breach of fiduciary duty, or otherwise, shall not exceed the total amount of fees actually paid by or on behalf of the Client to the Firm under this engagement letter. This limitation of liability applies to all claims and causes of action of every kind and nature, whether known or unknown, and regardless of the theory of liability.
In no event shall the Firm be liable to the Client for any consequential, incidental, indirect, special, exemplary, or punitive damages of any kind, including but not limited to lost profits, lost business opportunities, diminution in value, or reputational harm, regardless of whether such damages were foreseeable or whether the Firm was advised of the possibility of such damages.
The limitations set forth in this Section 12 shall survive the termination of this engagement and shall apply to the fullest extent permitted by applicable law.
13. Governing Law and Dispute Resolution
This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to any choice of law or conflict of laws principles that would result in the application of the laws of any other jurisdiction.
Any dispute, controversy, or claim arising out of or relating to this engagement letter, the Firm's services hereunder, or the breach, termination, or validity thereof, shall be resolved by binding arbitration administered by JAMS (or such other arbitral body as may be mutually agreed upon by the parties) in New York, New York, in accordance with the then-prevailing JAMS Comprehensive Arbitration Rules and Procedures. The arbitration shall be conducted before a single arbitrator selected by mutual agreement of the parties, or, failing such agreement, appointed by JAMS in accordance with its rules. The arbitrator shall have the authority to award any remedy that would be available in a court of competent jurisdiction, subject to the limitations on liability set forth in Section 12 of this engagement letter. The decision of the arbitrator shall be final and binding upon the parties and may be enforced in any court of competent jurisdiction. Each party shall bear its own costs and expenses in connection with the arbitration, unless the arbitrator determines otherwise.
14. Miscellaneous
This engagement letter constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, discussions, representations, understandings, and agreements, whether oral or written, between the parties relating to the Firm's engagement by the Client in connection with the matters described herein.
This engagement letter may not be amended, modified, supplemented, or waived except by a writing signed by both the Firm and the Client. No failure or delay by either party in exercising any right or remedy under this engagement letter shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude any further exercise thereof or the exercise of any other right or remedy.
This engagement letter may be executed in one or more counterparts (including by facsimile or electronic transmission in portable document format), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
If any provision of this engagement letter is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this engagement letter shall be construed as if such invalid, illegal, or unenforceable provision had never been included herein.
All notices required or permitted under this engagement letter shall be in writing and shall be deemed given when delivered personally, sent by email (with confirmation of receipt), or sent by nationally recognized overnight courier to the addresses set forth herein, or to such other address as either party may designate in writing.
15. Acceptance
We are grateful for the opportunity to represent Driftwood in connection with this significant and complex matter. We look forward to working closely with you, your colleagues at DCA, and your other advisors to achieve a successful outcome.
If the foregoing terms are acceptable, please indicate the Client's acceptance by countersigning this engagement letter in the space provided below and returning one fully executed copy to the Firm by no later than September 5, 2023. Concurrently therewith, please arrange for the wire transfer of the Retainer in the amount of $500,000 in accordance with the wire instructions set forth in Enclosure 1.
Please do not hesitate to contact Colette Whitman at (212) 455-3610 or cwhitman@calderwoodharkness.com, or Nathaniel Bower at (212) 455-3625 or nbower@calderwoodharkness.com, if you have any questions regarding this engagement letter or any other aspect of the representation.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Colette Whitman
Title: Partner
Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022
ACKNOWLEDGED AND ACCEPTED:
DRIFTWOOD CAPITAL ADVISORS LLC, as investment manager of and on behalf of DRIFTWOOD ABSOLUTE RETURN FUND LTD.
By: ________
Name: Marcus Ellison
Title: Co-Founder & Chief Investment Officer
Date: ________
Enclosures:
1.  Wire transfer instructions for Retainer payment
2.  Firm's standard billing policies and procedures
cc: Priya Venkatesh, Co-Founder & Chief Operating Officer, Driftwood Capital Advisors LLC cc: Nathaniel Bower, Partner, Calderwood & Harkness LLP
Professional Category | Hourly Rate
Partners | $1,650
Associates | $950
Paraprofessionals (Paralegals and Legal Assistants) | $425

CALDERWOOD & HARKNESS LLP Counselors at Law

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP

ACKNOWLEDGED AND ACCEPTED:

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