CALDWELL FAMILY DYNASTY TRUST AGREEMENT
Dated as of April 1, 2023
Grantor: Jonathan Robert Caldwell 418 East 72nd Street, Apt. 14A New York, New York 10021
Family Trustee: Thomas Robert Caldwell 55 Perry Street, Unit 3 New York, New York 10014
Institutional Trustee: Northgate Trust Company of Delaware 1201 North Market Street, Suite 1600 Wilmington, Delaware 19801
Trust Name: Caldwell Family Dynasty Trust Situs: State of Delaware Governing Law: Delaware
Prepared by: Calderwood & Harkness LLP 375 Park Avenue, 42nd Floor New York, New York 10152 Matter No. 1034-00004
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RECITALS
WHEREAS, Jonathan Robert Caldwell (hereinafter, the "Grantor"), born March 14, 1956, Social Security Number ending in 4781, a resident of the State of New York, desires to establish an irrevocable trust for the benefit of his descendants and their spouses, to be known as the "Caldwell Family Dynasty Trust" (the "Trust"), upon the terms and conditions set forth in this Trust Agreement (this "Agreement");
WHEREAS, the Grantor intends to transfer to the Trust the property described in Schedule A attached hereto, consisting of Five Million Dollars ($5,000,000) in cash, and additional property may be transferred to the Trust from time to time by the Grantor or by other persons, including but not limited to remainder interests from the Caldwell 2023 Securities GRAT (also known as "GRAT A"), the Caldwell 2023 Realty GRAT (also known as "GRAT B"), and the Caldwell 2023 Carried Interest GRAT (also known as "GRAT C"), each of which has been established by the Grantor on or about the date hereof as part of a comprehensive generational estate plan;
WHEREAS, the Grantor has selected the State of Delaware as the situs of the Trust in order to take advantage of Delaware's perpetual trust statute codified at 12 Del. C. § 3556, the absence of a rule against perpetuities limitation for trusts governed by Delaware law, and the absence of state income tax on undistributed trust income for out-of-state beneficiaries, all of which the Grantor has determined to be in the best interests of the Trust and its Beneficiaries;
WHEREAS, Thomas Robert Caldwell, son of the Grantor, has agreed to serve as the initial Family Trustee of the Trust, and Northgate Trust Company of Delaware, a Delaware trust company duly authorized to exercise fiduciary powers, has agreed to serve as the initial Institutional Trustee of the Trust, each subject to the terms and conditions set forth herein;
WHEREAS, the Grantor intends that this Trust be irrevocable upon execution of this Agreement and that the Trust Property not be included in the Grantor's gross estate for federal estate tax purposes under Sections 2036, 2037, 2038, or 2042 of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor provisions thereto;
WHEREAS, the Grantor intends to allocate his available generation-skipping transfer ("GST") tax exemption to the Trust to the maximum extent possible, with Five Million Dollars ($5,000,000) of GST exemption allocated to the initial funding of the Trust; additional GST exemption to be allocated as GRAT remainder interests pour into the Trust, subject to the estate tax inclusion period ("ETIP") rules under Section 2642(f) of the Code, which prevent the allocation of GST exemption to property transferred to a trust during any period in which the property would be includible in the gross estate of the transferor (other than by reason of Section 2035 of the Code) if the transferor died during such period;
WHEREAS, the Grantor's 2023 lifetime gift tax exemption is Twelve Million Nine Hundred Twenty Thousand Dollars ($12,920,000); the Grantor has made prior taxable gifts of Six Million Seven Hundred Fifty Thousand Dollars ($6,750,000), leaving a remaining applicable exclusion amount of Six Million One Hundred Seventy Thousand Dollars ($6,170,000) before this transfer; the Five Million Dollar ($5,000,000) gift to this Trust is within the remaining applicable exclusion amount, resulting in no federal gift tax due, and a remaining applicable exclusion amount of One Million One Hundred Seventy Thousand Dollars ($1,170,000) after this gift;
WHEREAS, this Agreement has been prepared by Calderwood & Harkness LLP, 375 Park Avenue, 42nd Floor, New York, New York 10152 (Matter No. 1034-00004), counsel to the Grantor;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and intending to be legally bound, the Grantor, the Family Trustee, and the Institutional Trustee agree as follows:
ARTICLE I — DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below. Terms defined elsewhere in this Agreement shall have the meanings ascribed to them in the sections in which they are defined. Unless the context otherwise requires, words in the singular shall include the plural and vice versa, and words importing any gender shall include all other genders.
Section 1.1 — "Beneficiaries"
The term "Beneficiaries" shall mean, collectively, the Primary Beneficiaries, the Descendant Beneficiaries, and the Spousal Beneficiaries, as defined below:
(a) Primary Beneficiaries. The term "Primary Beneficiaries" shall mean the following individuals, each of whom is a child of the Grantor:
(i) Thomas Robert Caldwell, son of the Grantor, born June 7, 1985;
(ii) Katherine Claire Hartfield (née Caldwell), daughter of the Grantor, born November 19, 1987; and
(iii) Olivia Grace Caldwell, daughter of the Grantor, born April 2, 1993.
(b) Descendant Beneficiaries. The term "Descendant Beneficiaries" shall mean the issue of each Primary Beneficiary, determined per stirpes, including any issue born or adopted after the date of this Agreement. As of the date hereof, the Descendant Beneficiaries include the following individuals:
(i) James W. Hartfield (age 8), child of Katherine Claire Hartfield and Dr. Andrew W. Hartfield;
(ii) Charlotte M. Hartfield (age 5), child of Katherine Claire Hartfield and Dr. Andrew W. Hartfield;
(iii) Lucas T. Caldwell (age 3), child of Thomas Robert Caldwell and Dr. Sarah P. Caldwell; and
(iv) Nora E. Caldwell (age 1), child of Thomas Robert Caldwell and Dr. Sarah P. Caldwell.
Any future issue of the Primary Beneficiaries or of any Descendant Beneficiary shall automatically be included as Descendant Beneficiaries under this Agreement without the need for any amendment or supplemental instrument.
(c) Spousal Beneficiaries. The term "Spousal Beneficiaries" shall mean the spouse of each Primary Beneficiary and the spouse of each Descendant Beneficiary, whether such spouse is married to the applicable Beneficiary as of the date hereof or becomes married to such Beneficiary in the future. As of the date hereof, the Spousal Beneficiaries include:
(i) Dr. Sarah P. Caldwell (née Brennan), spouse of Thomas R. Caldwell; and
(ii) Dr. Andrew W. Hartfield, spouse of Katherine C. Hartfield.
Spousal Beneficiaries shall be eligible only for distributions made under the HEMS Standard as defined in Section 1.6 hereof and as provided in Sections 4.1 and 4.2 of this Agreement, and shall not be eligible for broader discretionary distributions under Section 4.3 of this Agreement.
Section 1.2 — "Code"
The term "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute thereto. References to any particular section of the Code shall include any successor provision, any applicable regulations promulgated thereunder, and any authoritative interpretive guidance published by the Internal Revenue Service or the United States Treasury Department.
Section 1.3 — "Distribution Committee"
The term "Distribution Committee" shall mean the committee established under Article IX of this Agreement, initially composed of Thomas R. Caldwell, Katherine C. Hartfield, and Olivia G. Caldwell, which shall govern discretionary distributions exceeding One Hundred Thousand Dollars ($100,000) per Beneficiary per calendar year, subject to the terms and conditions set forth in Article IX.
Section 1.4 — "Family Trustee"
The term "Family Trustee" shall mean the individual serving from time to time as a Co-Trustee of the Trust who is not the Institutional Trustee. The initial Family Trustee shall be Thomas Robert Caldwell, residing at 55 Perry Street, Unit 3, New York, New York 10014. Successor Family Trustees shall be determined in accordance with Section 7.4 of this Agreement.
Section 1.5 — "Grantor"
The term "Grantor" shall mean Jonathan Robert Caldwell, born March 14, 1956, residing at 418 East 72nd Street, Apt. 14A, New York, New York 10021. As used herein, the term "Grantor" shall refer only to Jonathan Robert Caldwell and shall not include any other transferor of property to the Trust, unless the context expressly requires otherwise.
Section 1.6 — "HEMS" or "HEMS Standard"
The term "HEMS" or "HEMS Standard" shall mean distributions for the health, education, maintenance, and support of a Beneficiary, determined in accordance with the ascertainable standard set forth in Sections 2041(b)(1)(A) and 2514(c)(1) of the Code and the Treasury Regulations promulgated thereunder. For purposes of this Agreement, the HEMS Standard shall be construed strictly in accordance with the ascertainable standard exception to general powers of appointment, so as not to create a general power of appointment in any Beneficiary. The term "health" shall include medical, dental, and mental health expenses and insurance premiums; the term "education" shall include tuition, room and board, books, fees, and related educational expenses at primary, secondary, undergraduate, graduate, and professional institutions; the term "maintenance" shall refer to the Beneficiary's accustomed standard of living; and the term "support" shall encompass reasonable living expenses consistent with the Beneficiary's station in life.
Section 1.7 — "Institutional Trustee"
The term "Institutional Trustee" shall mean the corporate fiduciary serving from time to time as a Co-Trustee of the Trust. The initial Institutional Trustee shall be Northgate Trust Company of Delaware, a Delaware trust company, with offices at 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801. Successor Institutional Trustees shall be determined in accordance with Section 7.5 of this Agreement.
Section 1.8 — "Trust Estate" or "Trust Property"
The terms "Trust Estate" and "Trust Property" shall mean all property transferred to the Trust, including the initial cash contribution described in Schedule A attached hereto and any additional property received by the Trust from any source, together with all income earned thereon, all appreciation in value thereof, all proceeds from the sale, exchange, or other disposition thereof, and all reinvestments and substitutions thereof. The Trust Estate shall include, without limitation, any property received by the Trust as remainder interests from GRAT A, GRAT B, or GRAT C, as described in Section 2.2 of this Agreement.
Section 1.9 — "Trust Protector"
The term "Trust Protector" shall mean the person serving from time to time in the capacity of Trust Protector under Article XI of this Agreement. The initial Trust Protector shall be Victoria Chambers of Calderwood & Harkness LLP, 375 Park Avenue, 42nd Floor, New York, New York 10152. Successor Trust Protectors shall be determined in accordance with Section 11.4 of this Agreement.
Section 1.10 — "Qualified Beneficiary"
The term "Qualified Beneficiary" shall mean any Beneficiary who has attained the age of twenty-five (25) years. Until a Beneficiary attains the age of twenty-five (25) years, such Beneficiary shall not be deemed a Qualified Beneficiary for purposes of receiving direct accountings, exercising information rights under Article XII, or other purposes where the designation of Qualified Beneficiary is relevant. The legal representative of a Beneficiary who is a minor or who is incapacitated may, however, exercise certain rights on behalf of such Beneficiary as expressly provided herein.
Section 1.11 — Other Defined Terms
The following additional terms shall have the meanings set forth below:
(a) "Adverse Party" shall mean any person having a substantial beneficial interest in the Trust which would be adversely affected by the exercise or nonexercise of the power that he or she possesses respecting the Trust, within the meaning of Section 672(a) of the Code.
(b) "Disqualified Person" shall mean any person who is (i) a contributor to the Trust, (ii) a Beneficiary of the Trust, (iii) a spouse of any contributor or Beneficiary, (iv) an employee of any contributor or Beneficiary, or (v) a corporation or other entity in which a contributor or Beneficiary holds a significant ownership interest, as determined under the attribution rules of Section 267(c) of the Code.
(c) "Independent Trustee" shall mean a Trustee who is not (i) the Grantor, (ii) a Beneficiary, (iii) a spouse of the Grantor or any Beneficiary, (iv) a Related or Subordinate Party with respect to the Grantor or any Beneficiary, or (v) any other person whose appointment would cause the Trust Property to be includible in the gross estate of the Grantor or any Beneficiary.
(d) "Related or Subordinate Party" shall mean a related or subordinate party within the meaning of Section 672(c) of the Code, including without limitation the Grantor's spouse, father, mother, brothers, sisters, children, and any employee of the Grantor.
(e) "GRAT" or "Grantor Retained Annuity Trust" shall mean a trust described in Section 2702(b) of the Code, from which the Grantor retains the right to receive a fixed annuity for a specified term of years, with the remainder passing to one or more designated remainder beneficiaries.
(f) "ETIP" or "Estate Tax Inclusion Period" shall mean the period described in Section 2642(f) of the Code during which transferred property would be includible in the gross estate of the transferor (other than by reason of Section 2035 of the Code) if the transferor died during such period, thereby precluding the allocation of GST exemption during such period.
(g) "Per Stirpes" shall mean a distribution scheme in which the share of a deceased Beneficiary passes to such Beneficiary's issue by right of representation, as determined under Delaware law.
ARTICLE II — TRUST PROPERTY; ACCEPTANCE
Section 2.1 — Initial Trust Property
The Grantor hereby irrevocably transfers, assigns, conveys, and delivers to the Co-Trustees the property described in Schedule A attached hereto and incorporated herein by this reference (the "Initial Trust Property"), consisting of Five Million Dollars ($5,000,000) in cash, to be held in trust and administered in accordance with the terms and conditions of this Agreement. The Co-Trustees hereby acknowledge receipt of the Initial Trust Property and agree to hold, manage, invest, and distribute the same, together with all income, appreciation, and proceeds therefrom, in accordance with the terms and provisions of this Agreement.
The parties acknowledge that the transfer of the Initial Trust Property constitutes a completed gift by the Grantor for federal gift tax purposes, and that such gift utilizes a portion of the Grantor's remaining applicable exclusion amount under Section 2505 of the Code, as more particularly described in the Recitals hereto and in Schedule A.
Section 2.2 — Additional Contributions
The Grantor or any other person may transfer additional property to the Trust from time to time with the consent of the Institutional Trustee, which consent shall not be unreasonably withheld. The Co-Trustees shall execute such instruments of acceptance as may be reasonably necessary to effectuate such additional transfers. Any property so transferred shall become part of the Trust Estate and shall be held, administered, and distributed in accordance with the terms and provisions of this Agreement.
Without limiting the generality of the foregoing, the Trust is specifically designated as the remainder beneficiary of the following Grantor Retained Annuity Trusts established by the Grantor:
(a) Caldwell 2023 Securities GRAT ("GRAT A"). GRAT A was funded on or about April 15, 2023, with approximately Sixty Million Dollars ($60,000,000) in publicly traded securities. GRAT A has a two (2) year annuity term and provides for annual annuity payments to the Grantor of Thirty-Two Million One Hundred Ninety-Five Thousand One Hundred Twenty-Two Dollars ($32,195,122) per year. Upon the termination of GRAT A's annuity term, any remaining trust property (representing appreciation in excess of the applicable Section 7520 rate, which is 5.0% for April 2023) shall be distributed to this Trust as the designated remainder beneficiary.
(b) Caldwell 2023 Realty GRAT ("GRAT B"). GRAT B was funded on or about May 1, 2023, with approximately Eighty Million Dollars ($80,000,000) in membership interests in Stonecrest Realty Holdings LLC (representing approximately 59.7% of the outstanding membership interests in Stonecrest Realty Holdings LLC, a New York limited liability company). GRAT B has a three (3) year annuity term and provides for annual annuity payments to the Grantor of Twenty-Nine Million Three Hundred Seventy-Five Thousand Eight Hundred Fifty-Nine Dollars ($29,375,859) per year. Upon the termination of GRAT B's annuity term, any remaining trust property shall be distributed to this Trust as the designated remainder beneficiary.
(c) Caldwell 2023 Carried Interest GRAT ("GRAT C"). GRAT C was funded on or about June 1, 2023, with approximately Thirty-Eight Million Dollars ($38,000,000) in limited partnership interests and carried-interest positions in Caldwell Ridgeline Capital Fund IV LP, Caldwell Ridgeline Capital Fund V LP, and Caldwell Ridgeline Capital Fund VI LP (each a Delaware limited partnership). GRAT C has a three (3) year annuity term and provides for annual annuity payments to the Grantor of Thirteen Million Nine Hundred Fifty-Three Thousand Seven Hundred Fifty-Nine Dollars ($13,953,759) per year. Upon the termination of GRAT C's annuity term, any remaining trust property shall be distributed to this Trust as the designated remainder beneficiary.
Remainder interests in each GRAT, representing appreciation in excess of the 5.0% Section 7520 hurdle rate applicable at the time of each GRAT's creation, shall be distributed to this Trust upon termination of each GRAT's annuity term. The aggregate value of GRAT remainder interests is estimated to be between Thirty-Five Million Dollars ($35,000,000) and Fifty Million Dollars ($50,000,000), depending on investment performance; however, the actual amount transferred will depend on the appreciation of the underlying assets during the annuity terms and the satisfaction of the required annuity payments.
No additional contribution to the Trust shall alter the terms of this Agreement unless expressly provided herein. Each additional contribution shall become part of the Trust Estate and shall be subject to all of the provisions of this Agreement, including the distribution, investment, and administrative provisions set forth herein.
Section 2.3 — Separate Shares for GST Purposes
The Co-Trustees shall maintain such separate shares, sub-trusts, or accounting records as may be necessary or advisable to preserve the Trust's GST-exempt status with respect to property for which GST exemption has been allocated, and to segregate any property that is not GST-exempt. Without limiting the generality of the foregoing, the Co-Trustees shall establish and maintain separate shares for GRAT remainder interests received at different times, as GST exemption allocation may differ based on ETIP rules under Section 2642(f) of the Code.
Specifically, because the Grantor retains an annuity interest in each GRAT during its annuity term, the ETIP rules prevent the allocation of GST exemption to GRAT remainder interests until the annuity term expires and the GRAT remainder interest is actually distributed to this Trust. The Co-Trustees shall cooperate with the Grantor's tax advisors to ensure that GST exemption is allocated at the earliest permissible time following the termination of each GRAT's annuity term, and that adequate records are maintained to support the allocation on the Grantor's federal gift tax return (Form 709).
The Co-Trustees are authorized to treat separate shares as separate trusts for purposes of Section 2654(b) of the Code and the regulations promulgated thereunder, and to administer such separate shares independently to the extent necessary or advisable.
ARTICLE III — IRREVOCABILITY
Section 3.1 — Irrevocable Trust
This Trust is irrevocable. The Grantor hereby expressly and permanently relinquishes all right, title, and interest in and to the Trust Property and all power to alter, amend, revoke, or terminate the Trust or any of its provisions, except as expressly provided herein with respect to (a) the Trust Protector's limited powers under Article XI, (b) the Grantor's substitution power under Section 10.3, and (c) such other limited exceptions as are expressly set forth in this Agreement. The Grantor acknowledges that this transfer constitutes a completed gift and that the Grantor retains no beneficial interest in the Trust Property, no reversionary interest, no power to control beneficial enjoyment, no power of revocation, and no incident of ownership over any life insurance policies held in the Trust, if any, within the meaning of Sections 2036, 2037, 2038, and 2042 of the Code. The Grantor further acknowledges that the only power retained by the Grantor is the substitution power described in Section 10.3 hereof, which is a power exercisable in a non-fiduciary capacity and is intended to maintain the Trust's grantor trust status under Section 675(4)(C) of the Code.
Section 3.2 — Grantor Trust Status
Notwithstanding the irrevocability of this Trust for estate and gift tax purposes, the parties acknowledge that this Trust may be treated as a "grantor trust" for federal income tax purposes under Sections 671 through 679 of the Code with respect to property transferred directly by the Grantor or received from the Grantor's GRATs, to the extent any provision herein (including, without limitation, the Grantor's substitution power under Section 10.3) causes the Grantor or another person to be treated as the owner of all or a portion of the Trust for income tax purposes. The Grantor understands and intends that, during any period in which the Trust is a grantor trust, the Grantor shall be personally responsible for the payment of income taxes on Trust income, and that such payment shall not be treated as an additional gift to the Trust or to any Beneficiary.
The Trust Protector shall have the power, exercisable in the Trust Protector's sole and absolute discretion, to toggle grantor trust status on or off to the extent permissible under applicable law and consistent with the preservation of the Trust's estate and GST tax benefits. In exercising this power, the Trust Protector may cause the release of the Grantor's substitution power under Section 10.3 or may modify other provisions that give rise to grantor trust status, provided that any such action does not (i) cause inclusion of Trust Property in the Grantor's gross estate for federal estate tax purposes, (ii) jeopardize the Trust's GST-exempt status, or (iii) violate any applicable law or regulation. The Trust Protector shall consult with the Grantor's tax advisors before exercising this power, to the extent practicable.
ARTICLE IV — DISTRIBUTION PROVISIONS
Section 4.1 — Distributions During the Grantor's Lifetime
During the lifetime of the Grantor, the Co-Trustees may distribute to or for the benefit of any one or more Beneficiaries (including Primary Beneficiaries, Descendant Beneficiaries, and Spousal Beneficiaries) such amounts of net income and/or principal of the Trust as the Co-Trustees, in their discretion, determine to be advisable for such Beneficiary's health, education, maintenance, and support, as measured by the HEMS Standard defined in Section 1.6 hereof. In making any such distribution, the Co-Trustees shall take into account all of the distribution considerations set forth in Section 4.4 of this Agreement.
Notwithstanding the foregoing, no distribution shall be made during the Grantor's lifetime that would cause the Trust Property or any portion thereof to be included in the Grantor's gross estate for federal estate tax purposes under Sections 2036, 2037, or 2038 of the Code. Without limiting the generality of the foregoing, no distribution shall be made to the Grantor or to the Grantor's spouse, Eleanor V. Caldwell, during the Grantor's lifetime, and no distribution shall be made in satisfaction of any legal obligation of the Grantor.
Section 4.2 — Distributions After the Grantor's Death — HEMS Distributions
After the death of the Grantor, the Co-Trustees shall distribute to or for the benefit of any one or more Primary Beneficiaries, Descendant Beneficiaries, and Spousal Beneficiaries such amounts of net income and/or principal of the Trust as the Co-Trustees, in their discretion, determine to be advisable for such Beneficiary's health, education, maintenance, and support, as measured by the HEMS Standard.
Spousal Beneficiaries shall be eligible for distributions under this Section 4.2 only under the HEMS Standard and shall not be eligible for broader discretionary distributions under Section 4.3. The Co-Trustees shall apply the HEMS Standard conservatively with respect to Spousal Beneficiaries, giving primary consideration to the needs of Primary Beneficiaries and Descendant Beneficiaries and taking into account the Spousal Beneficiary's own income, assets, and earning capacity.
Distributions under this Section 4.2 of One Hundred Thousand Dollars ($100,000) or less per Beneficiary per calendar year may be made by the Co-Trustees without the approval of the Distribution Committee. Distributions under this Section 4.2 in excess of One Hundred Thousand Dollars ($100,000) per Beneficiary per calendar year shall additionally require the prior written approval of the Distribution Committee, as set forth in Section 4.3.
Section 4.3 — Broader Discretionary Distributions — Distribution Committee Approval Required
In addition to HEMS distributions under Sections 4.1 and 4.2, the Co-Trustees, with the prior written approval of the Distribution Committee established under Article IX, may distribute to or for the benefit of any one or more Primary Beneficiaries and Descendant Beneficiaries (but not Spousal Beneficiaries) such additional amounts of net income and/or principal of the Trust as the Distribution Committee, in its sole and absolute discretion, determines to be advisable, taking into account the Beneficiary's other resources, needs, and circumstances. The Distribution Committee's discretion under this Section 4.3 shall not be limited to the HEMS Standard and may encompass any purpose that the Distribution Committee deems to be in the best interests of the Beneficiary and consistent with the long-term purposes of the Trust.
Distribution Committee approval shall be required for any discretionary distribution (whether under the HEMS Standard or broader discretionary standards) exceeding One Hundred Thousand Dollars ($100,000) per Beneficiary per calendar year. Such approval shall be obtained in accordance with the procedures set forth in Article IX.
Distributions of One Hundred Thousand Dollars ($100,000) or less per Beneficiary per calendar year may be made by the Co-Trustees without Distribution Committee approval, provided that such distributions are made pursuant to the HEMS Standard and in accordance with the distribution considerations set forth in Section 4.4.
Section 4.4 — Distribution Considerations
In making any distribution under this Article IV, the Co-Trustees and, where applicable, the Distribution Committee, shall take into account, among other factors, the following considerations:
(a) the Beneficiary's other income and resources, including assets held outside the Trust, employment income, investment income, and any other available means of support;
(b) the Beneficiary's age, health, family situation, and station in life;
(c) the desirability of preserving the Trust Estate for the benefit of future generations, including the Beneficiary's issue and more remote descendants;
(d) the federal, state, and local income, estate, gift, and generation-skipping transfer tax consequences of any proposed distribution to the Beneficiary, to the Trust, and to other Beneficiaries;
(e) any written statement of intent, guidance, or family values communication provided by the Grantor to the Co-Trustees or to the Distribution Committee, whether at the time of this Agreement or thereafter (provided that any such statement shall be advisory and non-binding); and
(f) any other factors that the Co-Trustees or the Distribution Committee deem relevant to a particular distribution decision, including the impact of the distribution on the Beneficiary's character, work ethic, and financial independence.
The enumeration of the foregoing considerations shall not be deemed to limit the Co-Trustees' or the Distribution Committee's discretion in making distribution decisions, nor shall the Co-Trustees or the Distribution Committee be required to give any particular weight to any individual consideration.
Section 4.5 — Income Accumulation
Any net income of the Trust not distributed in any calendar year shall be accumulated and added to the principal of the Trust. There shall be no requirement that income be distributed currently to any Beneficiary. All accumulated income shall thereafter be treated as principal for all purposes of this Agreement and shall be subject to the same distribution provisions applicable to principal.
Section 4.6 — Separate Trust for Minor or Incapacitated Beneficiaries
The Co-Trustees may, in their discretion, establish one or more separate sub-trusts for the benefit of any minor Beneficiary (a Beneficiary who has not attained the age of eighteen (18) years) or any Beneficiary who is, in the judgment of the Co-Trustees, incapacitated by reason of mental or physical disability. Distributions from any such sub-trust shall be applied for the benefit of the applicable Beneficiary as the Co-Trustees deem appropriate, including without limitation by payment directly to the Beneficiary's parent, guardian, or custodian, or by direct payment of expenses on the Beneficiary's behalf.
As of the date of this Agreement, the following Beneficiaries are minors and may be the subject of separate sub-trusts established under this Section 4.6:
(a) James W. Hartfield, age 8, child of Katherine Claire Hartfield;
(b) Charlotte M. Hartfield, age 5, child of Katherine Claire Hartfield;
(c) Lucas T. Caldwell, age 3, child of Thomas Robert Caldwell; and
(d) Nora E. Caldwell, age 1, child of Thomas Robert Caldwell.
Any sub-trust established under this Section 4.6 shall be subject to all of the terms and provisions of this Agreement, including the spendthrift provision set forth in Section 4.7, and shall terminate and be distributed outright to the Beneficiary upon the Beneficiary's attaining the age of twenty-five (25) years or such earlier age as the Co-Trustees may determine, unless the Co-Trustees determine that continued management in trust is advisable.
Section 4.7 — Spendthrift Provision
No Beneficiary shall have any power to anticipate, pledge, assign, sell, transfer, alienate, or encumber his or her interest in the Trust, whether as to income or principal, and no such interest shall be subject to attachment, garnishment, execution, levy, or any other form of legal or equitable process, or to the claims of any creditor, spouse, former spouse, or any other person whatsoever, except to the extent required by applicable law that cannot be waived.
This spendthrift provision shall be interpreted under the laws of the State of Delaware, including the provisions of 12 Del. C. § 3536 and the Delaware Qualified Dispositions in Trust Act (12 Del. C. §§ 3570–3576), to the maximum extent applicable. The Grantor and the Co-Trustees intend that this provision be enforced to the fullest extent permitted by Delaware law to protect the interests of all Beneficiaries from the claims of their respective creditors and other third parties.
No Beneficiary shall have any vested right to any distribution from the Trust. All distributions hereunder are in the sole and absolute discretion of the Co-Trustees and, where applicable, the Distribution Committee, and no Beneficiary may compel a distribution from the Trust.
ARTICLE V — POWERS OF APPOINTMENT
Section 5.1 — Limited Testamentary Power of Appointment
Each Primary Beneficiary shall hold a limited testamentary power of appointment over his or her allocable share of the Trust Estate (determined in accordance with the provisions of this Agreement, including Section 5.3), exercisable only by a specific reference to the "Caldwell Family Dynasty Trust" or to this Agreement in a valid last will and testament or valid revocable trust instrument executed by such Primary Beneficiary.
Such power may be exercised in favor of any one or more persons or entities, other than the following excluded appointees: (i) the powerholder, (ii) the powerholder's estate, (iii) the powerholder's creditors, and (iv) the creditors of the powerholder's estate. Accordingly, the limited testamentary power of appointment granted herein is intended to be, and shall be construed as, a non-general power of appointment within the meaning of Sections 2041 and 2514 of the Code, such that the exercise, release, or lapse of such power shall not cause the Trust Property subject to such power to be included in the gross estate of the powerholder for federal estate tax purposes or to be treated as a transfer by the powerholder for federal gift tax purposes.
The exercise of the limited testamentary power of appointment shall not impair the GST-exempt status of the Trust or any portion thereof. No Primary Beneficiary may exercise his or her power of appointment in a manner that would cause a taxable termination or taxable distribution within the meaning of Section 2612 of the Code with respect to any GST-exempt portion of the Trust. If the exercise of a power of appointment would jeopardize the Trust's GST-exempt status, such exercise shall be void to the extent necessary to preserve such status.
Section 5.2 — Inter Vivos Limited Power of Appointment
Each Primary Beneficiary who has attained the age of forty (40) years shall hold an inter vivos limited power of appointment, exercisable only with the prior written consent of the Trust Protector, to appoint all or any portion of such Primary Beneficiary's allocable share of the Trust Property to or among one or more of the Primary Beneficiary's descendants. Such inter vivos power of appointment shall be subject to the same limitations applicable to the limited testamentary power of appointment set forth in Section 5.1, including the prohibition on appointment to the powerholder, the powerholder's estate, the powerholder's creditors, or the creditors of the powerholder's estate. Any appointment made pursuant to this Section 5.2 may be made outright or in further trust, on such terms and conditions as the Primary Beneficiary may specify, subject to the limitations set forth herein.
The Trust Protector's consent shall not be unreasonably withheld, but the Trust Protector shall consider the impact of any proposed appointment on the overall purposes of the Trust, the needs of other Beneficiaries, the GST tax implications, and the Grantor's expressed intentions.
Section 5.3 — Default in Appointment
To the extent a Primary Beneficiary does not exercise his or her limited testamentary or inter vivos power of appointment under this Article V, or to the extent any attempted exercise is invalid or ineffective, such Primary Beneficiary's allocable share of the Trust Estate shall continue to be held in trust for the benefit of such Primary Beneficiary's issue, per stirpes, subject to the terms and provisions of this Agreement.
If a Primary Beneficiary dies without exercising his or her power of appointment and without surviving issue, such Primary Beneficiary's allocable share shall be divided equally among the remaining living Primary Beneficiaries (or if a remaining Primary Beneficiary has predeceased, among such Primary Beneficiary's then-living issue, per stirpes), to be held in trust and administered in accordance with the terms and provisions of this Agreement.
If no Primary Beneficiary and no issue of any Primary Beneficiary survives to take distribution under this Section 5.3, the provisions of Section 6.2 (Ultimate Distribution) shall apply.
ARTICLE VI — PERPETUITIES; TRUST DURATION
Section 6.1 — No Rule Against Perpetuities
Pursuant to 12 Del. C. § 3556, which provides that a trust governed by Delaware law may have an unlimited duration, the Trust established under this Agreement shall have no maximum duration. No rule against perpetuities, rule restricting the suspension of the absolute power of alienation, or any other rule limiting the duration of trusts shall apply to the Trust. The Grantor intends that the Trust continue in existence for the benefit of his descendants and their spouses for as long as is practicable and permitted by law, to serve as a lasting source of financial security and a vehicle for intergenerational wealth transfer.
Section 6.2 — Ultimate Distribution
Notwithstanding the perpetual duration of the Trust under Section 6.1, if at any time there are no living Beneficiaries (including Primary Beneficiaries, Descendant Beneficiaries, and Spousal Beneficiaries) and no reasonable possibility of future Beneficiaries coming into existence, the Trust shall terminate and all remaining Trust Property shall be distributed as follows:
(a) First, to The Caldwell Family Foundation (Employer Identification Number 88-3021547), a private foundation with offices at 330 Madison Avenue, Suite 2401, New York, New York 10017, if such foundation is then in existence and is then an organization described in Section 501(c)(3) of the Code; or
(b) If The Caldwell Family Foundation is not then in existence or is not then an organization described in Section 501(c)(3) of the Code, then to one or more charitable organizations selected by the then-serving Co-Trustees that are described in Section 501(c)(3) of the Code and that, in the judgment of the Co-Trustees, further the mission of arts, education, and environmental conservation.
Any distribution under this Section 6.2 shall be made free and clear of trust and shall constitute the final termination of the Trust.
ARTICLE VII — CO-TRUSTEES; DUTIES AND POWERS
Section 7.1 — Identification of Initial Co-Trustees
The initial Co-Trustees of the Trust are as follows:
(a) Family Trustee: Thomas Robert Caldwell, residing at 55 Perry Street, Unit 3, New York, New York 10014.
(b) Institutional Trustee: Northgate Trust Company of Delaware, a Delaware trust company authorized to exercise fiduciary powers under Delaware law, with offices at 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801. The initial key contact at Northgate Trust Company of Delaware shall be Philip A. Rossiter, Senior Vice President, Trust Administration.
Each Co-Trustee, by executing this Agreement, accepts the office of Co-Trustee and agrees to perform the duties and exercise the powers conferred upon him or it by this Agreement and by applicable law.
Section 7.2 — Allocation of Duties Between Co-Trustees
The duties and responsibilities of the Co-Trustees shall be allocated as follows:
(a) Institutional Trustee. The Institutional Trustee shall have primary responsibility for: (i) custody and safekeeping of all Trust assets; (ii) federal, state, and local tax reporting and compliance for the Trust, including the preparation and filing of all required tax returns; (iii) maintaining complete and accurate books and records of all Trust transactions; (iv) processing and effectuating distributions as directed by the Co-Trustees (and, where applicable, as approved by the Distribution Committee); (v) providing annual and other accountings to Beneficiaries and the Trust Protector as required by this Agreement and applicable law; (vi) maintaining the Trust's situs in the State of Delaware; and (vii) performing such other ministerial and administrative duties as are customarily performed by a corporate trustee.
(b) Family Trustee. The Family Trustee shall have primary responsibility for: (i) evaluating distribution requests from Beneficiaries and making recommendations to the Institutional Trustee concerning the merits and appropriateness of such requests; (ii) making observations and assessments concerning the needs, circumstances, and financial situations of the Beneficiaries; (iii) serving as the principal liaison between the Trust and the Beneficiaries, including communicating Trust information to Beneficiaries as appropriate; and (iv) participating in all joint decisions required under this Agreement.
(c) Shared Investment Responsibilities. Investment responsibilities shall be shared by both Co-Trustees, subject to the provisions of Article VIII (Investment Provisions) and any delegation of investment management authority to a qualified investment advisor pursuant to Section 8.4. In the event of a disagreement between the Co-Trustees regarding investment decisions, the provisions of Section 11.2(e) (Trust Protector dispute resolution) shall apply.
Section 7.3 — Actions Requiring Joint Action
The following actions shall require the joint approval and consent of both the Family Trustee and the Institutional Trustee:
(a) any discretionary distribution to a Beneficiary under the HEMS Standard (Sections 4.1 and 4.2);
(b) acceptance of additional contributions to the Trust (Section 2.2);
(c) engagement or termination of investment advisors (Section 8.4);
(d) initiation, prosecution, defense, or settlement of any litigation, arbitration, or other legal proceeding on behalf of the Trust;
(e) any transaction with a related party, Beneficiary, or any entity in which a Beneficiary holds a direct or indirect interest, including, without limitation, loans to Beneficiaries and transactions involving Stonecrest Realty Holdings LLC or any Caldwell Ridgeline Capital entity;
(f) the execution of any guaranty, pledge, or other encumbrance of Trust Property;
(g) the establishment of any sub-trust under this Agreement; and
(h) any other action that this Agreement specifies requires joint approval.
Distributions exceeding One Hundred Thousand Dollars ($100,000) per Beneficiary per calendar year shall, in addition to joint approval of the Co-Trustees, require the prior written approval of the Distribution Committee pursuant to Article IV, Section 4.3, and Article IX.
In the event of a disagreement between the Co-Trustees on any matter requiring joint action, the Co-Trustees shall attempt in good faith to resolve the disagreement. If the Co-Trustees are unable to resolve the disagreement within thirty (30) days, the Trust Protector shall resolve the dispute in accordance with Section 11.2(e).
Section 7.4 — Successor Family Trustees
If Thomas R. Caldwell is unable or unwilling to serve as Family Trustee, whether due to death, disability, resignation, or removal, the successor Family Trustee shall be Katherine C. Hartfield. If Katherine C. Hartfield is unable or unwilling to serve as Family Trustee, the successor Family Trustee shall be Olivia G. Caldwell.
If none of the above-named individuals is able or willing to serve as Family Trustee, the Trust Protector shall appoint a successor Family Trustee, which successor shall be either (i) a Beneficiary who has attained the age of thirty (30) years and who is not a Related or Subordinate Party with respect to the Grantor, or (ii) an independent person who is not a Beneficiary, the Grantor, or a Related or Subordinate Party with respect to the Grantor or any Beneficiary.
No person who serves as Family Trustee may also serve as Trust Protector or as the sole member of the Distribution Committee.
Section 7.5 — Successor Institutional Trustees
If Northgate Trust Company of Delaware is unable or unwilling to serve as Institutional Trustee, whether due to merger, dissolution, loss of charter, resignation, or removal, the Trust Protector shall appoint a successor Institutional Trustee that is a corporate fiduciary authorized to exercise trust powers in the State of Delaware, with trust assets under management of not less than Five Hundred Million Dollars ($500,000,000) at the time of appointment. The Trust Protector shall use reasonable efforts to select a successor Institutional Trustee that is experienced in the administration of multi-generational dynasty trusts and is familiar with Delaware trust law.
If the Trust Protector fails to appoint a successor Institutional Trustee within ninety (90) days after the vacancy arises, the Family Trustee may petition the Delaware Court of Chancery to appoint a successor Institutional Trustee meeting the qualifications described in this Section 7.5.
Section 7.6 — Resignation
Either Co-Trustee may resign upon sixty (60) days' prior written notice to the other Co-Trustee, the Trust Protector, and all current adult Beneficiaries (or the legal representatives of minor or incapacitated Beneficiaries). The resignation of a Co-Trustee shall not become effective until a successor has been appointed and has accepted the appointment, unless the resigning Co-Trustee is the Family Trustee and the Institutional Trustee consents to serve as sole Trustee on an interim basis pending the appointment of a successor Family Trustee (such interim period not to exceed ninety (90) days).
Section 7.7 — Removal
The Trust Protector may remove either the Family Trustee or the Institutional Trustee, with or without cause, upon thirty (30) days' prior written notice to the Co-Trustee being removed, the other Co-Trustee, and all current adult Beneficiaries (or the legal representatives of minor or incapacitated Beneficiaries). Such removal shall be subject to the requirement that at least one Family Trustee and one Institutional Trustee must be serving at all times. The Trust Protector shall appoint a successor to the removed Co-Trustee in accordance with Section 7.4 or Section 7.5, as applicable, prior to the effective date of the removal, unless the remaining Co-Trustee consents to serve on an interim basis pending such appointment.
Section 7.8 — Compensation
(a) Institutional Trustee. The Institutional Trustee shall be compensated for its services in accordance with its published fee schedule in effect from time to time, as agreed upon at the time of acceptance by the Institutional Trustee and as may be modified from time to time with the consent of the Trust Protector. The current fee schedule of Northgate Trust Company of Delaware has been provided to the Grantor and the Family Trustee and is incorporated herein by reference. Fees shall be payable from Trust assets in accordance with standard billing practices of the Institutional Trustee.
(b) Family Trustee. The Family Trustee shall receive no compensation for his or her services as Family Trustee unless and until the Trust Protector, in the Trust Protector's discretion, authorizes reasonable compensation for the Family Trustee. Any compensation so authorized shall be commensurate with the services rendered and shall not exceed the compensation that would be payable to a professional individual fiduciary performing similar services in the relevant market.
All Co-Trustees shall be entitled to reimbursement from the Trust for reasonable out-of-pocket expenses incurred in the administration of the Trust, including travel expenses, professional fees, and other costs directly related to Trust administration.
Section 7.9 — Limitation of Liability; Indemnification
No Co-Trustee shall be liable for any loss or diminution in the value of the Trust Property, or for any other adverse consequence arising from the administration of the Trust, except for losses directly resulting from such Co-Trustee's own willful misconduct, gross negligence, or knowing breach of fiduciary duty. Neither Co-Trustee shall be liable for the acts or omissions of the other Co-Trustee, any predecessor trustee, any investment advisor, or any other agent or professional employed by the Trust.
The Trust shall indemnify, defend, and hold harmless each Co-Trustee (and each predecessor trustee) from and against any and all claims, liabilities, losses, damages, costs, and expenses (including reasonable attorneys' fees) incurred in connection with the good-faith administration of the Trust, except to the extent such claims arise from the Co-Trustee's own willful misconduct, gross negligence, or knowing breach of fiduciary duty. This indemnification shall survive the resignation, removal, or termination of any Co-Trustee and shall be enforceable against the Trust Estate.
ARTICLE VIII — INVESTMENT PROVISIONS
Section 8.1 — Investment Standard
The Co-Trustees shall invest and manage the Trust Property as prudent investors would, in accordance with the Delaware Prudent Investor Act, codified at 12 Del. C. §§ 3302 through 3304, and any successor provisions thereto. In applying the prudent investor standard, the Co-Trustees shall consider the purposes, terms, distribution requirements, and other circumstances of the Trust, including the Trust's perpetual duration, the long-term investment horizon, the multiple generations of Beneficiaries, and the need to balance current income with long-term growth and preservation of purchasing power. Investment decisions shall be evaluated not in isolation but in the context of the Trust portfolio as a whole and as part of an overall investment strategy having risk and return objectives reasonably suited to the Trust.
Section 8.2 — Permitted Investments
The Co-Trustees may invest and reinvest the Trust Property in any type of property or investment, whether or not producing current income, including but not limited to publicly traded equity and debt securities, privately held equity and debt securities, limited partnership interests, limited liability company interests, real estate (whether held directly or through entities), real estate investment trusts, hedge funds, private equity funds, venture capital funds, commodities, futures, options, and any other investment vehicle or instrument, regardless of the degree of risk, concentration, or lack of diversification.
Specifically, and without limitation, the Trust may hold and retain the following interests, which may be received as remainder distributions from the Grantor's GRATs or otherwise contributed to the Trust:
(a) Membership interests in Stonecrest Realty Holdings LLC, a New York limited liability company with offices at 330 Madison Avenue, Suite 2401, New York, New York 10017, including the approximately 59.7% membership interest expected to be received from GRAT B;
(b) Limited partnership interests and carried-interest positions in Caldwell Ridgeline Capital Fund IV LP, Caldwell Ridgeline Capital Fund V LP, and Caldwell Ridgeline Capital Fund VI LP, each a Delaware limited partnership managed by Caldwell Ridgeline Capital LLC, with offices at 280 Park Avenue, 35th Floor, New York, New York 10017; and
(c) Any other interests, securities, or property received as remainder distributions from GRAT A, GRAT B, or GRAT C, or otherwise contributed to the Trust from any source.
The Co-Trustees shall have no duty to diversify with respect to contributed property for a reasonable period following receipt, as more fully provided in Section 8.3.
Section 8.3 — Retention of Contributed Property
The Co-Trustees shall have no duty to diversify Trust investments immediately upon receipt of GRAT remainder interests or other contributed property. The Co-Trustees may retain contributed property for such period as they deem prudent under the circumstances, taking into account the nature of the property, market conditions, tax considerations (including the avoidance of capital gains tax recognition in a grantor trust context and the potential for step-up in basis upon the Grantor's death), liquidity constraints, and the overall investment objectives of the Trust.
Notwithstanding the foregoing, the Co-Trustees shall develop a diversification plan in consultation with the Trust's investment advisor within twelve (12) months of receipt of any significant contributed property, setting forth a proposed timeline and strategy for diversification. The Co-Trustees shall review and update such diversification plan at least annually.
Section 8.4 — Delegation to Investment Advisor
The Co-Trustees may delegate investment management responsibilities to one or more qualified investment advisors, in accordance with the Delaware Prudent Investor Act and the delegation provisions of 12 Del. C. § 3313. Any such delegation shall be evidenced by a written investment management agreement that sets forth the scope of the advisor's authority, the investment guidelines applicable to the advisor, the reporting requirements, the compensation arrangements, and the terms for termination.
Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director, Family Office Services, 900 Third Avenue, 18th Floor, New York, New York 10022) is hereby authorized as the initial investment advisor for the Trust, subject to the execution of a written investment management agreement between the Co-Trustees and Havensbrook Wealth Advisors LLC.
The Investment Policy Statement adopted contemporaneously with this Agreement (see Exhibit C) shall govern the investment advisor's authority and shall establish the asset allocation guidelines, risk parameters, performance benchmarks, and other investment policies applicable to the management of the Trust's investment portfolio. The Investment Policy Statement may be amended from time to time by the Co-Trustees with the consent of the Trust Protector.
Section 8.5 — Tax-Sensitive Investing
In managing and investing the Trust Property, the Co-Trustees and any investment advisor shall take into account the following tax considerations: