CALDWELL FAMILY DYNASTY TRUST
BENEFICIARY DESIGNATION AND PER STIRPES SCHEDULE
Schedule B
to the
Caldwell Family Dynasty Trust Agreement
dated April 1, 2023
CONFIDENTIAL TREATMENT REQUESTED — This Schedule contains confidential personal and financial information regarding the Grantor and beneficiaries of the Caldwell Family Dynasty Trust. Distribution of this Schedule should be limited to the Grantor, the Co-Trustees, the Trust Protector, and their respective legal counsel. Unauthorized reproduction or distribution is prohibited.
This Schedule B is an integral part of the Caldwell Family Dynasty Trust Agreement dated April 1, 2023 (the "Trust Agreement") and should be read in conjunction with Article IV (Beneficiaries and Distributions) and Article VII (Per Stirpes Provisions) thereof. In the event of any conflict between the provisions of this Schedule and the Trust Agreement, the Trust Agreement shall control, except to the extent that a provision of this Schedule expressly supplements or provides additional detail not addressed in the Trust Agreement, in which case both instruments shall be read together to give full effect to the Grantor's intent.
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SECTION 1: DEFINITIONS
1.1 Defined Terms
As used in this Schedule, the following terms shall have the meanings set forth below:
(a) "Beneficiary" or "Beneficiaries" shall mean the individuals listed in Section 2 of this Schedule, together with their issue as described in Section 3 of this Schedule, who are eligible to receive distributions from the Trust. The term "Beneficiary" includes Primary Beneficiaries, Descendant Beneficiaries, and Eligible Spouses, each as defined below, unless the context requires otherwise. The determination of whether any individual qualifies as a Beneficiary shall be made by the Co-Trustees in their reasonable discretion, subject to the provisions of this Schedule and the Trust Agreement.
(b) "Primary Beneficiaries" shall mean the three children of the Grantor, specifically:
(i) Thomas Robert Caldwell;
(ii) Katherine Claire Hartfield (née Caldwell); and
(iii) Olivia Grace Caldwell.
The Primary Beneficiaries are the first-generation beneficiaries of the Trust and constitute the initial class of beneficiaries for whom the Trust was established. Each Primary Beneficiary holds an equal undivided one-third (1/3) beneficial interest in the Trust for purposes of discretionary distribution consideration, as more fully described in Section 2.2 of this Schedule.
(c) "Descendant Beneficiaries" shall mean the issue of the Primary Beneficiaries, per stirpes, including those individuals currently living as of the date of this Schedule and those born or legally adopted after the date of this Schedule. For purposes of this definition, "issue" includes children, grandchildren, great-grandchildren, and all more remote lineal descendants of a Primary Beneficiary, whether related by blood or by legal adoption. The term "Descendant Beneficiary" shall encompass all generations of descendants in perpetuity, consistent with the perpetual nature of the Trust under Delaware law.
(d) "Eligible Spouse" shall mean the spouse of any Primary Beneficiary or Descendant Beneficiary who is eligible for distributions from the Trust solely under the HEMS standard (as defined below) as set forth in Section 5 of this Schedule and the corresponding provisions of the Trust Agreement. The term "spouse" refers exclusively to an individual who is legally married to a Primary Beneficiary or Descendant Beneficiary under the laws of the jurisdiction in which the marriage was solemnized. An Eligible Spouse's eligibility for distributions is limited in scope and shall not extend to broader discretionary distributions, membership on the Distribution Committee, or any power of appointment under the Trust Agreement.
(e) "HEMS" shall mean distributions limited to those reasonably necessary for the health, education, maintenance, and support of the beneficiary, as that phrase is used in Sections 2041(b)(1)(A) and 2514(c)(1) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. The HEMS standard as applied under this Trust is intended to constitute an ascertainable standard within the meaning of the Code, and the Co-Trustees shall exercise their discretion in making HEMS distributions in accordance with the Trust Agreement.
(f) "Distribution Committee" shall mean the committee composed of:
(i) Thomas R. Caldwell;
(ii) Katherine C. Hartfield; and
(iii) Olivia G. Caldwell,
acting pursuant to the Distribution Committee Operating Procedures adopted in connection with the Trust Agreement. The Distribution Committee has authority over discretionary distributions exceeding One Hundred Thousand Dollars ($100,000) per beneficiary per calendar year, as more fully described in Section 6.2 of this Schedule and the corresponding provisions of the Trust Agreement. The Distribution Committee shall act by unanimous vote of its members, subject to recusal requirements as set forth in the Distribution Committee Operating Procedures.
(g) "Per Stirpes" shall have the meaning set forth in Section 3.1 of this Schedule. In general, "per stirpes" indicates that if a Primary Beneficiary predeceases the Grantor, predeceases the distribution of any portion of the Trust property, or is otherwise treated as having predeceased (including by reason of disclaimer or renunciation), that Primary Beneficiary's share (or the share that would have been considered in making distributions to such Primary Beneficiary) passes to his or her then-living issue by right of representation, with each generation's share divided equally among the members of that generation who are then living or who have then-living issue.
(h) "Trust Agreement" shall mean the Caldwell Family Dynasty Trust Agreement dated April 1, 2023, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
(i) "GRAT" shall mean a Grantor Retained Annuity Trust established by the Grantor, as described in Section 10 of this Schedule.
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. References to specific sections of the Code include any successor provisions thereto and any applicable Treasury Regulations promulgated thereunder.
1.2 Incorporation by Reference
All capitalized terms used but not defined in this Schedule shall have the respective meanings ascribed to them in the Trust Agreement dated April 1, 2023. To the extent that any defined term in this Schedule conflicts with or varies from the definition of the same term in the Trust Agreement, the definition in the Trust Agreement shall control, unless this Schedule expressly states that a different meaning is intended. The provisions of the Trust Agreement, including but not limited to the distribution standards, fiduciary duties, investment provisions, tax provisions, and administrative powers, are hereby incorporated by reference into this Schedule as though fully set forth herein.
SECTION 2: PRIMARY BENEFICIARIES
2.1 Identification of Primary Beneficiaries
The following individuals are designated as the Primary Beneficiaries of the Caldwell Family Dynasty Trust. The Primary Beneficiaries are the three children of the Grantor, Jonathan Robert Caldwell, and constitute the initial and highest-priority class of beneficiaries under the Trust. Each Primary Beneficiary is identified below with his or her full legal name, relationship to the Grantor, date of birth, current residence, occupation, marital status, and any additional roles held in connection with the Trust or related family entities.
Thomas Robert Caldwell. Thomas Robert Caldwell is the firstborn child and only son of the Grantor, born June 7, 1985. As of the date of this Schedule, Thomas is thirty-eight (38) years of age and resides at 55 Perry Street, Unit 3, New York, New York 10014. Thomas is employed as Vice President of Acquisitions at Meridian Crest Partners LLC. He is married to Dr. Sarah P. Caldwell (née Brennan). Thomas and Dr. Sarah Caldwell have two minor children, Lucas Thomas Caldwell and Nora Eleanor Caldwell, each of whom is identified as a Descendant Beneficiary in Section 3.2 of this Schedule. In addition to his status as a Primary Beneficiary, Thomas serves as the Family Co-Trustee of the Trust, is a member of the Distribution Committee, and is a Director Designee of The Caldwell Family Foundation.
Katherine Claire Hartfield (née Caldwell). Katherine Claire Hartfield (née Caldwell) is the second child and eldest daughter of the Grantor, born November 19, 1987. As of the date of this Schedule, Katherine is thirty-five (35) years of age and resides at 210 Briarcliff Lane, Greenwich, Connecticut 06830. Katherine is a freelance interior designer. She is married to Dr. Andrew W. Hartfield, an orthopedic surgeon practicing at Preswick Medical Center. Katherine and Dr. Andrew Hartfield have two minor children, James William Hartfield and Charlotte Margaret Hartfield, each of whom is identified as a Descendant Beneficiary in Section 3.2 of this Schedule. Katherine serves as a member of the Distribution Committee and is a Director Designee of The Caldwell Family Foundation.
Olivia Grace Caldwell. Olivia Grace Caldwell is the third child and youngest daughter of the Grantor, born April 2, 1993. As of the date of this Schedule, Olivia is thirty (30) years of age and resides at 1240 North Dearborn Street, Apartment 807, Chicago, Illinois 60610. Olivia is employed as an Associate at Linden & Fairchild LLP, where she practices environmental law. As of the date of this Schedule, Olivia is unmarried and has no children. Olivia serves as a member of the Distribution Committee and is a Director Designee of The Caldwell Family Foundation. Any future issue of Olivia, whether born or legally adopted, shall automatically become Descendant Beneficiaries under this Schedule as provided in Section 3.3.
2.2 Equality of Beneficial Interests
Each Primary Beneficiary holds an equal undivided one-third (1/3) beneficial interest in the Trust for purposes of discretionary distribution consideration, subject to the Co-Trustees' exercise of discretion under the Trust Agreement's distribution provisions. The one-third (1/3) beneficial interest of each Primary Beneficiary is not a vested property right but rather a guideline for the Co-Trustees and the Distribution Committee in considering the allocation of discretionary distributions among the Primary Beneficiaries and their respective lines of issue. The Co-Trustees retain full discretion, as set forth in the Trust Agreement, to make unequal distributions among the Primary Beneficiaries where circumstances warrant, including but not limited to differences in financial need, health conditions, educational requirements, or other factors deemed relevant by the Co-Trustees.
It is noted that the Trust is not divided into separate shares for each Primary Beneficiary unless and until a division event occurs as set forth in the Trust Agreement. A "division event" includes, without limitation, the death of a Primary Beneficiary, at which time the deceased Primary Beneficiary's notional one-third (1/3) share (or the remaining balance attributable to such share) shall be held for or distributed to such deceased Primary Beneficiary's then-living issue, per stirpes, in accordance with Section 3 of this Schedule. Until such a division event occurs, the Trust shall be administered as a single, undivided fund for the collective benefit of all Beneficiaries, with the one-third (1/3) beneficial interest of each Primary Beneficiary serving as a distributive guideline rather than a mandatory allocation.
SECTION 3: DESCENDANT BENEFICIARIES — PER STIRPES
3.1 Per Stirpes Distribution Rule
Upon the death of any Primary Beneficiary, such Primary Beneficiary's share (or the share that would have been considered in making distributions to such Primary Beneficiary) shall be held for or distributed to such deceased Primary Beneficiary's then-living issue, per stirpes. For purposes of this Section 3.1, "per stirpes" means that the share of a deceased beneficiary shall be divided equally among such deceased beneficiary's children who survive, and if any such child has predeceased leaving issue then surviving, such deceased child's share shall be further divided among such deceased child's issue by right of representation, continuing through all generations.
By way of illustration and not limitation: if Thomas R. Caldwell were to predecease, his one-third (1/3) notional share would be divided equally between his then-living children, Lucas T. Caldwell and Nora E. Caldwell (each receiving one-half (1/2) of the one-third (1/3) share, or one-sixth (1/6) of the total Trust). If, however, one of Thomas's children had also predeceased Thomas but left surviving issue, that deceased child's one-half (1/2) portion of Thomas's share would be further divided among such deceased child's own issue by right of representation. This same principle applies at each successive generation.
This per stirpes designation applies to all generations of descendants, consistent with the perpetual nature of the Trust under Delaware law. The Trust is intended to continue in existence and to benefit the Grantor's descendants for the maximum duration permitted under the laws of the State of Delaware, which, as of the date of this Schedule, imposes no rule against perpetuities limitation on trusts governed by Delaware law. The per stirpes distribution rule shall remain in effect throughout the entire duration of the Trust, regardless of how many generations of descendants come into existence.
In the event that a Primary Beneficiary or Descendant Beneficiary dies without surviving issue, the deceased beneficiary's share shall be reallocated among the then-living Primary Beneficiaries and their respective lines of issue in the proportions then applicable, or if no Primary Beneficiaries survive, among all then-living Descendant Beneficiaries, per stirpes. If no descendants of the Grantor survive, the contingent beneficiary provisions of Section 7.1 of this Schedule shall apply.
3.2 Identification of Current Descendant Beneficiaries
The following individuals are the Descendant Beneficiaries of the Trust as of the date of this Schedule. All Descendant Beneficiaries identified below are minor children and reside with their respective parents (who are Primary Beneficiaries). Distributions for the benefit of minor Descendant Beneficiaries are subject to the provisions of Section 6.3 of this Schedule.
Issue of Thomas R. Caldwell:
Lucas Thomas Caldwell is the elder child of Thomas R. Caldwell and Dr. Sarah P. Caldwell (née Brennan). Born in approximately 2020, Lucas is approximately three (3) years of age as of the date of this Schedule and resides with his parents at 55 Perry Street, Unit 3, New York, New York 10014. As a minor, Lucas is not capable of receiving direct distributions from the Trust, and any distributions for his benefit shall be governed by Section 6.3 of this Schedule.
Nora Eleanor Caldwell is the younger child of Thomas R. Caldwell and Dr. Sarah P. Caldwell (née Brennan). Born in approximately 2022, Nora is approximately one (1) year of age as of the date of this Schedule and resides with her parents at the same address as her brother. As a minor, Nora is not capable of receiving direct distributions from the Trust, and any distributions for her benefit shall be governed by Section 6.3 of this Schedule.
Issue of Katherine C. Hartfield:
James William Hartfield is the elder child of Katherine C. Hartfield and Dr. Andrew W. Hartfield. Born in approximately 2015, James is approximately eight (8) years of age as of the date of this Schedule and resides with his parents at 210 Briarcliff Lane, Greenwich, Connecticut 06830. As a minor, James is not capable of receiving direct distributions from the Trust, and any distributions for his benefit shall be governed by Section 6.3 of this Schedule.
Charlotte Margaret Hartfield is the younger child of Katherine C. Hartfield and Dr. Andrew W. Hartfield. Born in approximately 2018, Charlotte is approximately five (5) years of age as of the date of this Schedule and resides with her parents at the same address as her brother. As a minor, Charlotte is not capable of receiving direct distributions from the Trust, and any distributions for her benefit shall be governed by Section 6.3 of this Schedule.
Issue of Olivia G. Caldwell:
As of the date of this Schedule, Olivia G. Caldwell has no issue, whether by birth or legal adoption. Olivia is currently unmarried and has no children. Any future issue of Olivia G. Caldwell, whether born or legally adopted after the date of this Schedule, shall automatically become Descendant Beneficiaries under this Schedule without the need for any amendment or supplemental designation, in accordance with Section 3.3 below.
3.3 After-Born and After-Adopted Issue
Any child or more remote descendant of a Primary Beneficiary born or legally adopted after the date of this Schedule shall automatically be a Descendant Beneficiary and shall participate in per stirpes distributions as set forth in Section 3.1 of this Schedule without further action or amendment to this Schedule. This provision is intended to ensure that all lineal descendants of the Primary Beneficiaries, regardless of when they are born or adopted, are included as Beneficiaries of the Trust and share in the benefits thereof in accordance with the per stirpes distribution rule.
For purposes of this Section 3.3, "legally adopted" shall mean adoption that is final and non-revocable under the laws of the jurisdiction in which the adoption is completed. A child whose adoption is pending but not yet finalized shall not be treated as a Descendant Beneficiary until such adoption becomes final. A child who is placed in foster care with a Primary Beneficiary or Descendant Beneficiary but who has not been legally adopted shall not be treated as a Descendant Beneficiary unless and until a legal adoption is finalized.
The Co-Trustees shall maintain an updated record of all Descendant Beneficiaries from time to time, appended as an addendum to this Schedule. Such record shall include the full legal name, date of birth, relationship to the Grantor, parent (Primary Beneficiary or Descendant Beneficiary), and current address of each Descendant Beneficiary. The Co-Trustees shall update such record promptly upon learning of the birth or legal adoption of any new Descendant Beneficiary, and shall provide a copy of the updated record to the Trust Protector and to each member of the Distribution Committee within thirty (30) days of any such update.
3.4 Summary Chart — Per Stirpes Distribution Diagram
The following diagram illustrates the generational structure of the Trust's beneficiary designations as of the date of this Schedule. This diagram is provided for informational and illustrative purposes only and does not modify or supersede any provision of this Schedule or the Trust Agreement.
Generation 1 — Grantor:
Jonathan R. Caldwell — Grantor; not a beneficiary of the Trust
Generation 2 — Primary Beneficiaries (Children of the Grantor):
Thomas R. Caldwell → One-third (1/3) beneficial interest
Katherine C. Hartfield → One-third (1/3) beneficial interest
Olivia G. Caldwell → One-third (1/3) beneficial interest
Generation 3 — Descendant Beneficiaries (Grandchildren of the Grantor):
Under Thomas R. Caldwell:
Lucas T. Caldwell (b. c. 2020)
Nora E. Caldwell (b. c. 2022)
Under Katherine C. Hartfield:
James W. Hartfield (b. c. 2015)
Charlotte M. Hartfield (b. c. 2018)
Under Olivia G. Caldwell:
None as of April 1, 2023
Generation 4 and Beyond — Future Descendants:
Future issue of Generation 3 and subsequent generations, per stirpes, in perpetuity under Delaware law. All such future issue shall automatically become Descendant Beneficiaries upon birth or legal adoption and shall participate in distributions in accordance with the per stirpes distribution rule set forth in Section 3.1 of this Schedule.
SECTION 4: GENERATION-SKIPPING TRANSFER TAX CLASSIFICATION
4.1 GST-Exempt Trust
It is the express intention of the Grantor that the Caldwell Family Dynasty Trust qualify as a generation-skipping transfer ("GST") tax-exempt trust to the fullest extent possible under Chapter 13 of the Code (Sections 2601 through 2664). The Grantor has structured the Trust and the related estate planning transactions described herein with the specific objective of achieving a zero inclusion ratio for the Trust under Section 2642 of the Code, such that no generation-skipping transfer tax will be imposed on any distribution from, or termination of any interest in, the Trust.
In furtherance of this objective, the Grantor has allocated Five Million Dollars ($5,000,000) of his available GST exemption to the initial funding of the Trust on April 1, 2023. This allocation is made on a timely basis and is intended to be reported on the Grantor's United States Gift (and Generation-Skipping Transfer) Tax Return (IRS Form 709) for the calendar year ending December 31, 2023.
Additional GST exemption will be allocated to the GRAT remainder interests as they pour into the Trust upon termination of the annuity terms of the following Grantor Retained Annuity Trusts established by the Grantor:
(a) Caldwell 2023 Securities GRAT (GRAT A);
(b) Caldwell 2023 Realty GRAT (GRAT B); and
(c) Caldwell 2023 Carried Interest GRAT (GRAT C).
It is noted that during the GRAT annuity terms, the Estate Tax Inclusion Period ("ETIP") rules under Section 2642(f) of the Code prevent the allocation of GST exemption to the remainder interests in the GRATs. Accordingly, GST exemption cannot be allocated to the GRAT remainder interests until the expiration of each GRAT's annuity term and the transfer of the remainder interest to the Trust. The Grantor intends to allocate sufficient GST exemption at that time to ensure that the Trust's inclusion ratio remains at zero after receipt of each GRAT remainder.
For the calendar year 2023, the GST exemption amount is Twelve Million Nine Hundred Twenty Thousand Dollars ($12,920,000). The coordination of the Grantor's total available GST exemption, prior allocations, and planned future allocations is addressed in the GST Exemption Allocation Memorandum prepared by Calderwood & Harkness LLP and dated March 15, 2023, a copy of which has been provided to the Co-Trustees and is maintained in the Trust's administrative files.
4.2 Skip Persons and Non-Skip Persons
For purposes of the generation-skipping transfer tax provisions of the Code, the following classifications apply to the Beneficiaries of the Trust:
Non-Skip Persons. Thomas R. Caldwell, Katherine C. Hartfield, and Olivia G. Caldwell are non-skip persons within the meaning of Section 2613(b) of the Code, as each is assigned to the generation one generation below the Grantor (i.e., the Grantor's children).
Skip Persons. James W. Hartfield, Charlotte M. Hartfield, Lucas T. Caldwell, and Nora E. Caldwell are skip persons within the meaning of Section 2613(a) of the Code, as each is assigned to the generation two generations below the Grantor (i.e., the Grantor's grandchildren). Distributions to skip persons from a trust with an inclusion ratio greater than zero would be subject to the generation-skipping transfer tax; however, because the Grantor intends that the Trust's inclusion ratio shall be zero, no GST tax is expected to be imposed on distributions to these or any other skip persons.
All more remote descendants of the Grantor — including great-grandchildren, great-great-grandchildren, and all subsequent generations — are likewise skip persons and would be subject to the same analysis. The perpetual GST-exempt status of the Trust is a central feature of its design and is intended to shelter the Trust's assets from generation-skipping transfer taxation for the entire duration of the Trust under Delaware law.
SECTION 5: SPOUSAL ELIGIBILITY — HEMS DISTRIBUTIONS ONLY
5.1 Eligible Spouses — Limitation on Distribution Standard
The spouse of each Primary Beneficiary and each Descendant Beneficiary is an eligible beneficiary of the Trust, but solely for distributions made under the HEMS standard (health, education, maintenance, and support) as set forth in the Trust Agreement. Eligible Spouses are included as beneficiaries of the Trust in recognition of the important role that spouses play in the family unit and to ensure that the Trust can support the reasonable needs of the household in which a Primary Beneficiary or Descendant Beneficiary resides. However, the Grantor's intent is to preserve the Trust corpus primarily for the benefit of his lineal descendants, and accordingly, the eligibility of spouses is limited to the HEMS standard and does not extend to broader discretionary distributions.
The following individuals are Eligible Spouses as of the date of this Schedule:
(a) Dr. Sarah P. Caldwell (née Brennan), spouse of Thomas R. Caldwell. Dr. Sarah Caldwell is currently married to Thomas R. Caldwell and is eligible for HEMS distributions from the Trust.
(b) Dr. Andrew W. Hartfield, spouse of Katherine C. Hartfield. Dr. Andrew Hartfield is currently married to Katherine C. Hartfield and is eligible for HEMS distributions from the Trust.
(c) Olivia G. Caldwell is currently unmarried as of the date of this Schedule. Any future spouse of Olivia G. Caldwell shall automatically become an Eligible Spouse under this provision upon the date of their legal marriage, without the need for any amendment to this Schedule.
Eligible Spouses are subject to the following express limitations:
(i) Eligible Spouses are NOT entitled to broader discretionary distributions from the Trust. Distributions to Eligible Spouses are limited exclusively to those amounts reasonably necessary for the health, education, maintenance, and support of the Eligible Spouse, as determined by the Co-Trustees in their discretion.
(ii) Eligible Spouses are NOT members of the Distribution Committee and have no voting rights or decision-making authority with respect to distributions from the Trust.
(iii) Eligible Spouses do NOT hold any limited power of appointment, general power of appointment, or any other power of appointment over any property held in the Trust.
(iv) In the event of a divorce from a Primary Beneficiary or Descendant Beneficiary, a former spouse shall immediately and automatically cease to be an Eligible Spouse upon the entry of a final decree of divorce, annulment, or legal dissolution of the marriage by a court of competent jurisdiction. Upon such cessation, the former spouse shall have no further right, title, interest, or claim in or to any property held in the Trust, and shall not be entitled to any further distributions from the Trust. For purposes of this provision, a legal separation that does not constitute a final dissolution of the marriage shall not cause an Eligible Spouse to lose his or her eligibility, although the Co-Trustees may take a legal separation into account in exercising their discretion with respect to HEMS distributions.
5.2 Spouses of Descendant Beneficiaries
The spouses of Descendant Beneficiaries shall likewise be Eligible Spouses under the same HEMS limitation set forth in Section 5.1 above. As of the date of this Schedule, all current Descendant Beneficiaries (Lucas T. Caldwell, Nora E. Caldwell, James W. Hartfield, and Charlotte M. Hartfield) are minors and are unmarried. Upon the marriage of any Descendant Beneficiary in the future, the spouse of such Descendant Beneficiary shall automatically become an Eligible Spouse without the need for any amendment to this Schedule.
This provision applies to all generations of Descendant Beneficiaries in perpetuity, consistent with the perpetual nature of the Trust under Delaware law. The same limitations set forth in Section 5.1 above — including the limitation to HEMS distributions only, the exclusion from the Distribution Committee, the absence of any power of appointment, and the automatic cessation of eligibility upon divorce — shall apply to the spouses of all Descendant Beneficiaries in all generations.
SECTION 6: DISTRIBUTION STANDARDS — CROSS-REFERENCE
6.1 HEMS Distributions
All Beneficiaries of the Trust — including Primary Beneficiaries, Descendant Beneficiaries, and Eligible Spouses — may receive HEMS distributions as determined by the Co-Trustees in accordance with the distribution standards set forth in the Trust Agreement. The HEMS standard permits distributions that are reasonably necessary for the health, education, maintenance, and support of the beneficiary in question, taking into account all relevant facts and circumstances.
In making HEMS distributions, the Co-Trustees shall consider, among other factors, the following:
(a) the beneficiary's other resources and means of support, including earned income, investment income, separate property, and assets held outside the Trust;
(b) the beneficiary's age, health, and physical and mental condition;
(c) the beneficiary's station in life and accustomed standard of living;
(d) the beneficiary's current and anticipated educational needs, including undergraduate, graduate, and professional education and vocational training;
(e) the beneficiary's need for medical care, including preventive care, ongoing treatment, hospitalization, rehabilitation, mental health services, and long-term care;
(f) the size of the Trust estate and the impact of any proposed distribution on the Trust's ability to make future distributions to other Beneficiaries; and
(g) the tax consequences of any proposed distribution to the beneficiary and to the Trust.
The Co-Trustees are not required to make equal HEMS distributions among the Beneficiaries and may give greater weight to the needs of one Beneficiary over another, consistent with the Trust Agreement's distribution provisions.
6.2 Discretionary Distributions Exceeding $100,000
Discretionary distributions exceeding One Hundred Thousand Dollars ($100,000) per beneficiary per calendar year require the unanimous approval of the Distribution Committee, which is composed of Thomas R. Caldwell, Katherine C. Hartfield, and Olivia G. Caldwell. The Distribution Committee shall consider requests for such distributions in accordance with the Distribution Committee Operating Procedures adopted in connection with the Trust Agreement.
Such broader discretionary distributions are available to Primary Beneficiaries and Descendant Beneficiaries only and are not available to Eligible Spouses. The broader discretionary standard permits the Co-Trustees and the Distribution Committee to take into account factors beyond the HEMS standard, including but not limited to the beneficiary's desire to purchase a home, start a business, make charitable gifts, or pursue other endeavors that, while not strictly necessary for health, education, maintenance, or support, are consistent with the Grantor's goals of supporting the personal and professional development of his descendants.
Recusal requirements apply when a member of the Distribution Committee is the proposed recipient of a distribution or when a member's spouse or minor child is the proposed recipient. In such cases, the conflicted member shall recuse himself or herself from the deliberation and vote, and the remaining members of the Distribution Committee shall act on the distribution request. If a quorum cannot be achieved after recusal, the matter shall be referred to the Trust Protector for resolution, as set forth in the Distribution Committee Operating Procedures.
6.3 Distributions to or for Minors
Distributions for the benefit of minor Beneficiaries — currently Lucas T. Caldwell (age 3), Nora E. Caldwell (age 1), James W. Hartfield (age 8), and Charlotte M. Hartfield (age 5) — shall be made to the parent or legal guardian of such minor, or applied directly for the minor's benefit, as determined by the Co-Trustees in their discretion. No distribution from the Trust shall be made directly to a minor Beneficiary.
The Co-Trustees may, in their discretion, direct that distributions for the benefit of a minor Beneficiary be applied directly to the provider of goods or services for the minor's benefit (such as a school, medical provider, camp, or other service provider) rather than to the minor's parent or legal guardian, if the Co-Trustees determine that such direct payment is in the best interest of the minor Beneficiary. Any distribution made to a parent or legal guardian on behalf of a minor Beneficiary shall be applied exclusively for the benefit of the minor Beneficiary, and the parent or legal guardian receiving such distribution shall account for the use of such funds to the Co-Trustees upon reasonable request.
Upon a minor Beneficiary's attainment of the age of majority (which is eighteen (18) years of age in the State of Delaware and in most other states), the minor Beneficiary shall be eligible to receive distributions directly, subject to any age-based distribution restrictions set forth in the Trust Agreement.
SECTION 7: CONTINGENT AND REMOTE BENEFICIARIES
7.1 Failure of All Issue
In the unlikely event that all Primary Beneficiaries and all Descendant Beneficiaries die without surviving issue, such that no lineal descendant of the Grantor remains alive to benefit from the Trust, the remaining Trust property shall be distributed outright and free of trust to:
The Caldwell Family Foundation EIN: 88-3021547 330 Madison Avenue, Suite 2401 New York, NY 10017
or its successor charitable organization, for charitable purposes consistent with the Foundation's stated mission of supporting arts, education, and environmental conservation. If The Caldwell Family Foundation is not then in existence and no successor charitable organization has been designated, the Co-Trustees shall distribute the remaining Trust property to one or more charitable organizations selected by the Co-Trustees in their discretion, with preference given to organizations that support the arts, education, or environmental conservation in a manner consistent with the Grantor's philanthropic values and the historical mission of The Caldwell Family Foundation.
Any distribution made pursuant to this Section 7.1 shall be structured so as to qualify for the charitable deduction under Section 2055 and/or Section 2522 of the Code, to the extent applicable.
7.2 Disclaimer / Renunciation
Any Beneficiary may disclaim or renounce all or any part of his or her interest in the Trust in accordance with applicable law, including but not limited to Section 2518 of the Code and the Uniform Disclaimer of Property Interests Act as adopted in Delaware (25 Del. C. § 101 et seq.) or the corresponding disclaimer statute of the Beneficiary's state of domicile. Any disclaimer or renunciation must be in writing, must be delivered to the Co-Trustees, and must satisfy the requirements of applicable law to be effective.
If a Beneficiary disclaims or renounces all or any part of his or her interest in the Trust, the disclaimed interest shall pass as if the disclaiming Beneficiary had predeceased the date of the disclaimer without surviving issue, unless the disclaiming Beneficiary has then-living issue, in which case the disclaimed interest shall pass per stirpes among such issue in accordance with the per stirpes distribution rule set forth in Section 3.1 of this Schedule. In no event shall a disclaimed interest pass to or for the benefit of the disclaiming Beneficiary or the disclaiming Beneficiary's creditors.
SECTION 8: POWERS OF APPOINTMENT — CROSS-REFERENCE
8.1 Limited Powers of Appointment
Certain Primary Beneficiaries and Descendant Beneficiaries hold limited (also referred to as "special") powers of appointment as set forth in the Trust Agreement. The limited powers of appointment permit the holder thereof to appoint Trust property, by will or by written instrument delivered to the Co-Trustees during the holder's lifetime, among a class of permissible appointees limited to the Grantor's descendants and their spouses. The class of permissible appointees expressly excludes the power holder, the power holder's creditors, the power holder's estate, and creditors of the power holder's estate.
The specific terms, conditions, and limitations of each limited power of appointment are set forth in the Trust Agreement and are not repeated in this Schedule. The exercise of any limited power of appointment shall not affect the GST-exempt status of the Trust, provided that the power is exercised in a manner consistent with the requirements of Section 2041 and Section 2514 of the Code and the generation-skipping transfer tax provisions of Chapter 13 of the Code. The Co-Trustees and the Trust Protector shall monitor the exercise of any limited power of appointment to ensure compliance with these requirements.
8.2 No General Power of Appointment
No Beneficiary of the Trust holds a general power of appointment over any Trust property. A "general power of appointment" is a power exercisable in favor of the power holder, the power holder's creditors, the power holder's estate, or creditors of the power holder's estate, as defined in Section 2041(b) and Section 2514(c) of the Code. The Trust Agreement expressly prohibits the creation or grant of any general power of appointment to any Beneficiary, and no provision of this Schedule shall be construed to create or imply such a power. The absence of any general power of appointment is a deliberate structural feature of the Trust, intended to ensure that no portion of the Trust property is included in the gross estate of any Beneficiary for federal estate tax purposes and that the GST-exempt status of the Trust is preserved.
SECTION 9: TRUST PROTECTOR — MODIFICATION AUTHORITY
Victoria Chambers, of Calderwood & Harkness LLP, 375 Park Avenue, 42nd Floor, New York, New York 10152, is designated as the Trust Protector of the Caldwell Family Dynasty Trust, acting in a non-fiduciary capacity as set forth in the Trust Agreement. The Trust Protector holds the following powers, each of which may be exercised in the Trust Protector's sole and absolute discretion:
(a) the power to modify the administrative provisions of the Trust, including investment provisions, accounting provisions, and trustee compensation provisions, to the extent that such modifications are consistent with the Grantor's overall intent and do not materially alter the beneficial interests set forth in this Schedule;
(b) the power to change the situs of the Trust from Delaware to another jurisdiction, if the Trust Protector determines that such a change is in the best interests of the Beneficiaries, provided that any such change in situs shall not adversely affect the Trust's perpetual duration or its GST-exempt status;
(c) the power to remove and replace one or both Co-Trustees, with or without cause, in accordance with the succession provisions of the Trust Agreement; and
(d) such other powers as are expressly granted to the Trust Protector under the Trust Agreement.
The Trust Protector's powers do not extend to altering the beneficial interests set forth in this Schedule, except as may be incident to a situs change or a decanting of the Trust under the Delaware Trust Act (12 Del. C. § 3528) or any successor provision, provided that any such decanting preserves the substantive beneficial terms of the Trust, including the per stirpes distribution provisions, the HEMS standard for Eligible Spouses, and the GST-exempt status of the Trust.
The Trust Protector is not a fiduciary and shall not owe any fiduciary duty to the Grantor, the Co-Trustees, any Beneficiary, or any other party. The Trust Protector shall have no liability for any action taken or omitted in good faith, and shall be entitled to indemnification from the Trust estate for any costs, expenses, or liabilities incurred in connection with the exercise of the Trust Protector's powers, as set forth in the Trust Agreement.
SECTION 10: ADDITIONAL TRUST FUNDING — GRAT REMAINDERS
10.1 Expected Additional Contributions
In addition to the initial funding of the Trust described in Section 11 of this Schedule, the Grantor has established three Grantor Retained Annuity Trusts (GRATs) that are designed to transfer excess appreciation to the Caldwell Family Dynasty Trust upon the termination of their respective annuity terms. Upon termination of the annuity terms of the following GRATs, the remainder interests shall pour into the Caldwell Family Dynasty Trust, thereby increasing the Trust corpus:
(a) Caldwell 2023 Securities GRAT (GRAT A).
• Term: Two (2) years
• Funding Date: April 15, 2023
• Initial Funding Amount: Sixty Million Dollars ($60,000,000) in publicly traded securities
• Annual Annuity Payment: Thirty-Two Million One Hundred Ninety-Five Thousand One Hundred Twenty-Two Dollars ($32,195,122) per year
• Expected Termination Date / Remainder Transfer: On or after April 15, 2025
• Remainder Beneficiary: Caldwell Family Dynasty Trust
(b) Caldwell 2023 Realty GRAT (GRAT B).
• Term: Three (3) years
• Funding Date: May 1, 2023
• Initial Funding Amount: 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)
• Annual Annuity Payment: Twenty-Nine Million Three Hundred Seventy-Five Thousand Eight Hundred Fifty-Nine Dollars ($29,375,859) per year
• Expected Termination Date / Remainder Transfer: On or after May 1, 2026
• Remainder Beneficiary: Caldwell Family Dynasty Trust
(c) Caldwell 2023 Carried Interest GRAT (GRAT C).
• Term: Three (3) years
• Funding Date: June 1, 2023
• Initial Funding Amount: Thirty-Eight Million Dollars ($38,000,000) in limited partnership interests and carried interest positions in Caldwell Ridgeline Capital Funds IV, V, and VI
• Annual Annuity Payment: Thirteen Million Nine Hundred Fifty-Three Thousand Seven Hundred Fifty-Nine Dollars ($13,953,759) per year
• Expected Termination Date / Remainder Transfer: On or after June 1, 2026
• Remainder Beneficiary: Caldwell Family Dynasty Trust
The total GRAT-funded assets contributed to the three GRATs aggregate One Hundred Seventy-Eight Million Dollars ($178,000,000) on a pre-discount basis. The GRATs are structured as "zeroed-out" GRATs, meaning that the annuity payments are calculated to exhaust the initial funding amount (plus a return equal to the Section 7520 rate of 5.0% in effect at the time of funding), with the result that the taxable gift upon funding each GRAT is approximately zero. Any excess appreciation above the 5.0% Section 7520 hurdle rate will transfer to the Caldwell Family Dynasty Trust at the end of each GRAT's annuity term, free of gift tax and estate tax.
Based on current investment projections and historical performance data, the estimated aggregate excess appreciation transferring to the Dynasty Trust from all three GRATs is expected to be in the range of Thirty-Five Million Dollars ($35,000,000) to Fifty Million Dollars ($50,000,000), assuming the GRAT assets collectively outperform the 5.0% Section 7520 hurdle rate by approximately four percent (4%) per annum. These estimates are projections only and are subject to market conditions, asset performance, and other factors that may cause actual results to differ materially.
10.2 Impact on Beneficiary Designations
All GRAT remainder interests pouring into the Trust upon the termination of the annuity terms of GRAT A, GRAT B, and GRAT C shall be held for and distributed among the Beneficiaries designated in this Schedule under the same terms, distribution standards, and per stirpes provisions as apply to all other Trust property. The receipt of GRAT remainder interests does not alter the beneficiary designations set forth in this Schedule, does not change the per stirpes distribution rule, and does not modify any other provision of this Schedule or the Trust Agreement.
No amendment to this Schedule is required upon receipt of GRAT remainder interests. The Co-Trustees shall maintain a record of all GRAT remainder interests received by the Trust, including the date of receipt, the value of the assets received, and the GRAT from which the remainder interest originated, and shall include such information in the Trust's annual accounting.
SECTION 11: INITIAL FUNDING SUMMARY
The Caldwell Family Dynasty Trust was initially funded on April 1, 2023, with the following contribution from the Grantor:
Initial Trust Property: Five Million Dollars ($5,000,000) in cash, contributed by the Grantor, Jonathan Robert Caldwell, on April 1, 2023.
This initial contribution was funded from the Grantor's remaining applicable exclusion amount (unified credit) under Section 2010 of the Code. Prior to the execution of this Trust and the related estate planning transactions, the Grantor had a remaining lifetime gift tax exemption of approximately Six Million One Hundred Seventy Thousand Dollars ($6,170,000). Of this amount, Five Million Dollars ($5,000,000) was allocated to the initial funding of this Trust, leaving approximately One Million One Hundred Seventy Thousand Dollars ($1,170,000) remaining after this gift and before additional gifts, including Irrevocable Life Insurance Trust (ILIT) premium gifts.
The Grantor has allocated Five Million Dollars ($5,000,000) of his available GST exemption to the initial funding of this Trust, as described in Section 4.1 of this Schedule. This allocation is intended to result in an inclusion ratio of zero for the Trust with respect to the initial funding, and the Grantor's tax advisors at Calderwood & Harkness LLP will report this allocation on the Grantor's Form 709 for the 2023 calendar year.
SECTION 12: AMENDMENTS TO THIS SCHEDULE
This Schedule may be updated by the Co-Trustees from time to time to reflect changes in circumstances, including but not limited to the following:
(a) the birth or legal adoption of new Descendant Beneficiaries;
(b) changes in the addresses, contact information, or residences of Beneficiaries;
(c) marriages, divorces, or changes in marital status of Beneficiaries;
(d) deaths of Beneficiaries;
(e) changes in the membership of the Distribution Committee (due to death, resignation, or removal of a member);
(f) receipt of GRAT remainder interests or other additional contributions to the Trust; and
(g) other factual or administrative changes that do not alter the substantive beneficiary designations or distribution provisions of the Trust.
Updates of a purely administrative nature — such as changes in addresses, contact information, or the addition of after-born or after-adopted Descendant Beneficiaries — may be made by the Co-Trustees without the consent of the Trust Protector, and shall be reflected in addenda appended to this Schedule.
Substantive amendments to the beneficiary designations or distribution provisions set forth in this Schedule — including but not limited to the addition or removal of Primary Beneficiaries, changes to the per stirpes distribution rule, modifications to the HEMS standard as applied to Eligible Spouses, or alterations to the powers of the Distribution Committee — require the prior written consent of the Trust Protector and must be consistent with the terms of the Trust Agreement. Any such substantive amendment must be in writing, must be signed by both Co-Trustees and the Trust Protector, and must be appended to this Schedule as a formal amendment.
SECTION 13: GOVERNING LAW
This Schedule is governed by and shall be construed in accordance with the laws of the State of Delaware, without regard to conflict-of-laws principles that would require the application of the laws of any other jurisdiction. The Caldwell Family Dynasty Trust is established under Delaware's perpetual trust statute, codified at 25 Del. C. § 503(a), and is not subject to any rule against perpetuities limitation, common-law or statutory, under the laws of the State of Delaware. The Trust is intended to continue in existence and benefit the Grantor's descendants in perpetuity, and all provisions of this Schedule shall be construed in a manner consistent with that intent.