ASSIGNMENT OF LIMITED PARTNERSHIP INTERESTS AND CARRIED INTEREST
Assignment of Interests in Caldwell Ridgeline Fund IV LP, Caldwell Ridgeline Fund V LP, and Carried Interest in Caldwell Ridgeline Fund VI LP to the Caldwell 2023 Carried Interest GRAT
Dated as of June 1, 2023
THIS ASSIGNMENT OF LIMITED PARTNERSHIP INTERESTS AND CARRIED INTEREST (this "Assignment") is made and entered into as of June 1, 2023, by and between:
ASSIGNOR: Jonathan R. Caldwell, an individual residing at 418 East 72nd Street, Apt. 14A, New York, New York 10021 (the "Assignor"); and
ASSIGNEE / TRUSTEE: Jonathan R. Caldwell, not in his individual capacity, but solely as Trustee of the Caldwell 2023 Carried Interest GRAT, an irrevocable trust dated June 1, 2023 (the "Assignee," the "Trustee," or, together with the trust estate, the "GRAT").
The Assignor and the Trustee are referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. Identification of Assignor. Jonathan Robert Caldwell is an individual residing at 418 East 72nd Street, Apt. 14A, New York, New York 10021 (SSN: XXX-XX-4781). The Assignor is the founder and former Managing Partner of Caldwell Ridgeline Capital LLC, a Delaware limited liability company, with principal offices located at 280 Park Avenue, 35th Floor, New York, New York 10017. In his capacity as founder and former Managing Partner, the Assignor has accumulated substantial investment interests in private investment funds managed by Caldwell Ridgeline Capital LLC, as more particularly described below.
B. Description of Assigned Interests. The Assignor is the sole legal and beneficial holder of the following interests (collectively, the "Assigned Interests"):
(i) A limited partnership interest in Caldwell Ridgeline Fund IV LP, a Delaware limited partnership ("Fund IV"), having a fair market value of Twelve Million Dollars ($12,000,000) as of the date hereof. Fund IV is a vintage 2015 private equity fund, the general partner and manager of which is Caldwell Ridgeline Capital LLC.
(ii) A limited partnership interest in Caldwell Ridgeline Fund V LP, a Delaware limited partnership ("Fund V"), having a fair market value of Fourteen Million Dollars ($14,000,000) as of the date hereof. Fund V is a vintage 2018 private equity fund, the general partner and manager of which is Caldwell Ridgeline Capital LLC.
(iii) A carried interest position (i.e., a profits interest or performance allocation entitlement) in Caldwell Ridgeline Fund VI LP, a Delaware limited partnership ("Fund VI"), having a fair market value of Twelve Million Dollars ($12,000,000) as of the date hereof. Fund VI is a vintage 2021 private equity fund, the general partner and manager of which is Caldwell Ridgeline Capital LLC.
The aggregate pre-discount fair market value of all Assigned Interests as of the date hereof is Thirty-Eight Million Dollars ($38,000,000). Fund IV, Fund V, and Fund VI are each sometimes referred to herein individually as a "Fund" and collectively as the "Funds."
C. Description of the GRAT. The Assignor established the Caldwell 2023 Carried Interest GRAT (the "GRAT" or the "Trust") pursuant to a trust agreement dated June 1, 2023 (the "Trust Agreement"), which is governed by the laws of the State of New York. The GRAT is an irrevocable trust that constitutes a grantor retained annuity trust within the meaning of Section 2702 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"). The Assignor serves as the initial Trustee of the GRAT during the annuity term. The GRAT has a term of three (3) years, during which the Assignor, as annuitant, is entitled to receive annuity payments in the fixed annual amount of Thirteen Million Nine Hundred Fifty-Three Thousand Seven Hundred Fifty-Nine Dollars ($13,953,759) per year, payable on or before June 1, 2024; June 1, 2025; and June 1, 2026. The GRAT has been structured as a "zeroed-out" GRAT at the applicable Section 7520 rate of 5.0% (based on the May 2023 rate published by the Internal Revenue Service), such that the value of the retained annuity interest equals, for gift tax purposes, the value of the property transferred to the GRAT. Upon the termination of the annuity term, the remainder of the GRAT, if any, shall pass to the Caldwell Family Dynasty Trust, an irrevocable trust with Delaware situs, dated April 1, 2023, as the designated remainder beneficiary under the Trust Agreement.
D. Purpose of Assignment. The Assignor desires to assign, transfer, convey, and deliver the Assigned Interests to the Trustee in order to fund the GRAT as required by the Trust Agreement. The Assigned Interests shall constitute the initial trust corpus of the GRAT and shall be set forth on Schedule A to the Trust Agreement. This Assignment is executed to memorialize the transfer of the Assigned Interests and to provide a clear record of the conveyance for all legal, tax, and administrative purposes.
E. Valuation and discounts. An independent qualified appraisal of the Assigned Interests has been performed by Ashford Valuation Group LLC (Dr. Leonard K. Whitfield, ASA, Managing Partner), with offices at 1120 Avenue of the Americas, Suite 3500, New York, New York 10036. The appraisal reports, dated on or about June 15, 2023, establish the fair market value of the Assigned Interests as of June 1, 2023, the Effective Date of this Assignment. For purposes of gift tax reporting on IRS Form 709 for the 2023 tax year, the following valuation discounts have been applied:
(i) Fund IV LP Interest: A combined lack-of-marketability and minority interest discount of thirty-five percent (35%) has been applied to the pre-discount fair market value of $12,000,000, yielding a discounted value of $12,000,000 × 0.65 = $7,800,000.
(ii) Fund V LP Interest: A combined lack-of-marketability and minority interest discount of thirty-five percent (35%) has been applied to the pre-discount fair market value of $14,000,000, yielding a discounted value of $14,000,000 × 0.65 = $9,100,000.
(iii) Fund VI Carried Interest: A discount of thirty percent (30%) has been applied to the pre-discount fair market value of $12,000,000, yielding a discounted value of $12,000,000 × 0.70 = $8,400,000.
(iv) Aggregate Post-discount Fair Market Value: $7,800,000 + $9,100,000 + $8,400,000 = $25,300,000.
Because the GRAT is structured as a zeroed-out GRAT under IRC § 2702, the taxable gift value resulting from the transfer of the Assigned Interests to the GRAT is zero ($0).
F. Partnership Agreements and Transfer Provisions. Each of Fund IV, Fund V, and Fund VI is governed by its respective Amended and Restated Agreement of Limited Partnership (each, a "Partnership Agreement," and collectively, the "Partnership Agreements"). The Partnership Agreements contain certain restrictions on the transfer of partnership interests and carried interest positions, including, without limitation, requirements for the prior written consent of the general partner and compliance with specified notice provisions. Caldwell Ridgeline Capital LLC, as general partner of each Fund, has administrative authority over the approval and effectuation of transfers of interests in the Funds. Gregory S. Fenton, in his capacity as Chief Financial Officer of Caldwell Ridgeline Capital LLC, serves as the primary point of contact for administrative matters relating to the Funds, including the processing of transfers and amendments to the books and records of each Fund.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — ASSIGNMENT AND TRANSFER
Section 1.1 — Assignment.
Effective as of June 1, 2023 (the "Effective Date"), the Assignor hereby irrevocably assigns, transfers, conveys, sets over, and delivers to the Trustee, as Trustee of the Caldwell 2023 Carried Interest GRAT, all of the Assignor's right, title, and interest in and to the following:
(a) The limited partnership interest held by the Assignor in Caldwell Ridgeline Fund IV LP, a Delaware limited partnership, having a fair market value of Twelve Million Dollars ($12,000,000) as of the Effective Date (the "Fund IV LP Interest");
(b) The limited partnership interest held by the Assignor in Caldwell Ridgeline Fund V LP, a Delaware limited partnership, having a fair market value of Fourteen Million Dollars ($14,000,000) as of the Effective Date (the "Fund V LP Interest"); and
(c) The carried interest position held by the Assignor in Caldwell Ridgeline Fund VI LP, a Delaware limited partnership, having a fair market value of Twelve Million Dollars ($12,000,000) as of the Effective Date (the "Fund VI Carried Interest").
The foregoing interests, together with all rights to distributions (whether of cash, securities, or other property), allocations of income, gain, loss, deduction, and credit, voting rights (if any), inspection rights, information rights, and all other economic and non-economic rights appurtenant thereto, are collectively referred to herein as the "Assigned Interests." The Assignor hereby relinquishes all right, title, claim, and interest in and to the Assigned Interests, and the Assigned Interests shall hereafter be held exclusively by the Trustee as part of the trust corpus of the GRAT.
Section 1.2 — Acceptance by Trustee.
The Trustee hereby accepts the Assigned Interests as trust corpus of the GRAT, subject to and in accordance with the terms and conditions of the Trust Agreement dated June 1, 2023. Upon acceptance, the Assigned Interests shall be reflected on Schedule A to the Trust Agreement, and the Trustee shall hold, administer, invest, and distribute the Assigned Interests (and any proceeds therefrom) in accordance with the provisions of the Trust Agreement, including the obligation to make annuity payments to the Assignor during the annuity term. The Trustee acknowledges receipt of the Assigned Interests as described herein and confirms that the initial trust corpus of the GRAT consists solely of the Assigned Interests as of the Effective Date.
Section 1.3 — Effective Date.
The assignment contemplated by this Article I shall be effective as of June 1, 2023 (the "Effective Date"). All distributions, allocations of income, gain, loss, deduction, and credit, and all other economic benefits and obligations attributable to the Assigned Interests that accrue on or after the Effective Date shall belong to and be for the account of the GRAT. Any distributions or allocations attributable to the Assigned Interests that accrued prior to the Effective Date and that have not yet been paid or credited as of such date shall remain the property of the Assignor in his individual capacity, unless otherwise agreed in writing by the Parties.
ARTICLE II — REPRESENTATIONS AND WARRANTIES OF ASSIGNOR
The Assignor hereby represents and warrants to the Trustee as follows:
Section 2.1 — Title and Ownership.
The Assignor represents and warrants that he is the sole legal and beneficial owner of the Assigned Interests, free and clear of all liens, pledges, encumbrances, security interests, options, charges, claims, and restrictions of any kind or nature whatsoever, except for (a) restrictions imposed by the applicable Partnership Agreements governing the Funds, and (b) restrictions arising under the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws. No other person or entity has any right, title, or interest in or to the Assigned Interests, and no person or entity has any option, warrant, or other right to acquire any interest in the Assigned Interests.
Section 2.2 — Authority.
The Assignor has full legal right, power, capacity, and authority to execute, deliver, and perform this Assignment and to transfer the Assigned Interests to the Trustee as contemplated herein. The Assignor has not previously assigned, transferred, pledged, hypothecated, or otherwise encumbered any of the Assigned Interests, and no prior conveyance of the Assigned Interests has been made that would impair or conflict with the transfer contemplated by this Assignment. No court order, injunction, decree, judgment, or legal or administrative proceeding of any kind prohibits, restricts, or otherwise impairs the transfer of the Assigned Interests or the execution and performance of this Assignment.
Section 2.3 — Partnership Consent and Transfer Restrictions.
The Assignor represents and warrants that:
(a) To the extent required by the Partnership Agreements, the consent of the general partner (Caldwell Ridgeline Capital LLC) has been obtained, or will be obtained prior to or contemporaneously with the Effective Date, for the transfer of the Fund IV LP Interest, the Fund V LP Interest, and the Fund VI Carried Interest to the Trustee, as Trustee of the GRAT.
(b) The Assignor, as founder and former Managing Partner of Caldwell Ridgeline Capital LLC, has the ability and standing to facilitate such consents and has taken all reasonable steps to ensure that such consents are duly obtained and properly documented.
(c) All applicable notice provisions under the Partnership Agreements have been complied with, or will be complied with prior to or contemporaneously with the Effective Date, in connection with the transfer of the Assigned Interests.
(d) No right of first refusal, right of first offer, tag-along right, drag-along right, co-sale right, or other preferential purchase or participation right applicable to the Assigned Interests has been triggered in connection with the transfer contemplated by this Assignment that has not been duly waived or satisfied.
(e) The Assignor will deliver, or cause to be delivered, to the Trustee, promptly following the Effective Date (and in any event within thirty (30) days thereof), written evidence of general partner consent from Caldwell Ridgeline Capital LLC (with Gregory S. Fenton, Chief Financial Officer, as signatory) in a form reasonably satisfactory to the Trustee, substantially in the form attached hereto as Exhibit A.
Section 2.4 — Securities Law Representations.
The Assignor acknowledges and represents that the Assigned Interests have not been registered under the Securities Act or under the securities laws of any state or other jurisdiction. The Assigned Interests constitute "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act. The transfer of the Assigned Interests to the Trustee is being made in reliance on applicable exemptions from registration requirements under the Securities Act and applicable state securities laws. The Assignor further acknowledges that the Assigned Interests are subject to significant restrictions on further transfer and are not freely transferable on any established securities market or secondary market, and that any subsequent transfer of the Assigned Interests must be made in compliance with applicable securities laws and the terms of the Partnership Agreements.
Section 2.5 — No Litigation.
The Assignor represents and warrants that there is no pending or, to the Assignor's knowledge after due inquiry, threatened litigation, arbitration, investigation, or administrative proceeding of any kind relating to or affecting the Assigned Interests or the Assignor's ownership thereof. The Assignor is not aware of any facts or circumstances that would reasonably be expected to give rise to any such litigation, arbitration, investigation, or proceeding.
Section 2.6 — Tax Status.
The Assignor represents and warrants that the GRAT is and shall be treated as a "grantor trust" as to the Assignor for federal income tax purposes under Sections 671 through 679 of the Code during the entire annuity term of the GRAT. The assignment and transfer of the Assigned Interests to the GRAT as contemplated by this Assignment is not intended to be, and shall not be treated as, a taxable sale, exchange, or other disposition of property for federal income tax purposes. During the annuity term of the GRAT, all items of income, gain, loss, deduction, and credit with respect to the Assigned Interests (and any assets received in exchange therefor or in substitution thereof) shall continue to be reported on the Assignor's personal federal, state, and local income tax returns, and the GRAT shall not be required to file a separate income tax return as a non-grantor trust during such period.
Section 2.7 — Valuation.
The Assignor represents and warrants that the fair market values set forth herein with respect to the Assigned Interests are based upon the independent qualified appraisal performed by Ashford Valuation Group LLC (Dr. Leonard K. Whitfield, ASA, Managing Partner) as of the Effective Date. The Assignor undertakes to report the transfer of the Assigned Interests to the GRAT on IRS Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) for the 2023 tax year, reflecting the discounted fair market values set forth in this Assignment and in the appraisal reports, and to timely file such Form 709 in coordination with (a) Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA, Senior Partner, 600 Third Avenue, 28th Floor, New York, New York 10016), the Assignor's accounting firm, and (b) Calderwood & Harkness LLP (Sylvia Hartwell, Specialist Partner, Tax), the Assignor's tax counsel. The Assignor shall provide to the Trustee copies of the appraisal reports and the filed Form 709 promptly upon their completion and filing.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF TRUSTEE
The Trustee hereby represents and warrants to the Assignor as follows:
Section 3.1 — Authority to Accept.
The Trustee represents and warrants that he has been duly appointed and is currently serving as Trustee of the Caldwell 2023 Carried Interest GRAT pursuant to the Trust Agreement dated June 1, 2023. The Trust Agreement has been duly executed and delivered and is in full force and effect. The Trustee has full authority under the Trust Agreement to accept the Assigned Interests on behalf of the GRAT, to hold, administer, and invest the Assigned Interests, and to execute this Assignment in his capacity as Trustee.
Section 3.2 — Compliance with Trust Agreement.
The Trustee covenants and agrees that he will hold, administer, invest, and distribute the Assigned Interests (and any proceeds or substitute assets received in respect thereof) in strict accordance with the terms of the Trust Agreement. Without limiting the generality of the foregoing, the Trustee acknowledges and agrees that the Trust Agreement requires the payment of annuity payments to the Assignor in the fixed annual amount of Thirteen Million Nine Hundred Fifty-Three Thousand Seven Hundred Fifty-Nine Dollars ($13,953,759) per year, payable on or before June 1, 2024; June 1, 2025; and June 1, 2026. The Trustee shall make such annuity payments in cash, in kind (by distributing Assigned Interests or portions thereof valued at fair market value as of the date of distribution), or in any combination thereof permitted by the Trust Agreement and applicable law.
Section 3.3 — Fiduciary Acknowledgment.
The Trustee acknowledges and accepts the fiduciary duties imposed upon him by the Trust Agreement and by applicable law with respect to the trust corpus of the GRAT, including the Assigned Interests. The Trustee will manage, hold, and administer the Assigned Interests in a manner consistent with the terms of the Trust Agreement, the fiduciary standards applicable to trustees under New York law, and the requirements of IRC § 2702 and the regulations promulgated thereunder. The Trustee shall exercise the care, skill, prudence, and diligence that a reasonably prudent trustee would exercise under similar circumstances.
ARTICLE IV — COVENANTS AND AGREEMENTS
Section 4.1 — Further Assurances.
The Assignor covenants and agrees to execute and deliver, or cause to be executed and delivered, such additional instruments, documents, agreements, certificates, and assurances as may be reasonably necessary or desirable to effectuate, confirm, and perfect the transfer of the Assigned Interests to the Trustee as contemplated by this Assignment, including, but not limited to:
(a) Amendments to the books and records of Caldwell Ridgeline Fund IV LP, Caldwell Ridgeline Fund V LP, and Caldwell Ridgeline Fund VI LP to reflect the Trustee (as Trustee of the Caldwell 2023 Carried Interest GRAT) as the holder of the Assigned Interests in place of the Assignor individually;
(b) Revised Schedules of Limited Partners, Schedules of Interest Holders, or similar schedules maintained by the general partner or administrator of each Fund, reflecting the Trustee as the record holder of the Assigned Interests;
(c) Any transfer forms, instruments of transfer, assignment agreements, consents, waivers, acknowledgments, or similar documents required by the general partner (Caldwell Ridgeline Capital LLC) or its agents to effectuate and record the transfer;
(d) Notices to any third parties (including fund administrators, legal counsel, auditors, and banking institutions) as may be required under the Partnership Agreements or by applicable law to give effect to the transfer; and
(e) Any filings with governmental authorities or regulatory bodies, if any, that may be required in connection with the transfer.
The Assignor shall cooperate in good faith with the Trustee and with the general partner of each Fund to ensure the orderly and timely completion of all administrative steps necessary to reflect the transfer on the books and records of each Fund.
Section 4.2 — Partnership Agreement Compliance.
Both the Assignor and the Trustee covenant and agree to comply in all material respects with the terms and provisions of each applicable Partnership Agreement governing the Assigned Interests, including, without limitation:
(a) Restrictions on further transfer of the Assigned Interests without the prior written consent of the general partner of the applicable Fund;
(b) Obligations with respect to capital calls, if any, including any unfunded capital commitments that may remain outstanding with respect to the Assigned Interests;
(c) Reporting and tax information requirements, including the obligation to furnish to each Fund such information as may be required for the preparation and delivery of IRS Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.) and any analogous state or local tax information;
(d) Confidentiality provisions contained in the Partnership Agreements, including restrictions on the disclosure of proprietary information, investment positions, portfolio company information, and financial performance data; and
(e) Any other obligations, restrictions, or covenants applicable to limited partners or interest holders under the Partnership Agreements.
The Trustee acknowledges that, upon acceptance of the Assigned Interests, the Trustee (in its capacity as Trustee of the GRAT) shall be bound by the terms of each applicable Partnership Agreement to the same extent as the Assignor was bound immediately prior to the transfer.
Section 4.3 — Tax Reporting Coordination.
The Assignor and the Trustee shall coordinate with each other and with the Assignor's professional advisors, including Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA, Senior Partner, 600 Third Avenue, 28th Floor, New York, New York 10016) and Calderwood & Harkness LLP (Sylvia Hartwell, Specialist Partner, Tax), regarding the following tax-related matters:
(a) Proper reporting of the assignment and transfer of the Assigned Interests on IRS Form 709 (United States Gift and Generation-Skipping Transfer Tax Return) for the 2023 tax year, including disclosure of the zeroed-out GRAT structure, the valuation discounts applied, and the resulting taxable gift value of zero;
(b) Allocation of income, gain, loss, deduction, and credit attributable to the Assigned Interests between the Assignor (in his individual capacity) and the GRAT for the tax year in which the transfer occurs (i.e., the 2023 tax year), taking into account the grantor trust status of the GRAT;
(c) Schedule K-1 reporting for each Fund for the year of transfer and for subsequent years during the grantor trust term, including coordination with the general partner and fund administrator of each Fund to ensure that Schedule K-1s are properly issued in the name and taxpayer identification number of the GRAT (or, if applicable, the Assignor's Social Security number, given the grantor trust status);
(d) Any required state income tax filings, including New York State and New York City income tax returns, as well as filings in any other jurisdictions in which the Funds operate or in which the Assignor or the GRAT may be subject to tax; and
(e) Any other tax reporting or compliance matters arising from or relating to the assignment of the Assigned Interests to the GRAT.
Section 4.4 — Indemnification.
The Assignor shall indemnify, defend, and hold harmless the Trustee (in the Trustee's fiduciary capacity as Trustee of the GRAT, and not in his individual capacity) from and against any and all claims, liabilities, damages, losses, costs, and expenses (including reasonable attorneys' fees and disbursements) arising out of or resulting from (a) any breach of the Assignor's representations and warranties contained in this Assignment, (b) any failure to obtain any required general partner consent or to comply with any applicable transfer restriction under the Partnership Agreements, or (c) any inaccuracy in the information provided by the Assignor in connection with the transfer of the Assigned Interests. This indemnification obligation shall survive the execution and delivery of this Assignment.
ARTICLE V — DESCRIPTION OF ASSIGNED INTERESTS
Section 5.1 — Fund IV LP Interest.
Entity: Caldwell Ridgeline Fund IV LP, a Delaware limited partnership
Vintage Year: 2015
General Partner: Caldwell Ridgeline Capital LLC, a Delaware limited liability company
Nature of Interest: Limited partnership interest
Fair Market Value as of June 1, 2023: Twelve Million Dollars ($12,000,000)
Applicable discount: Thirty-five percent (35%) combined lack-of-marketability and minority interest discount
discounted Value for Gift Tax Purposes: Seven Million Eight Hundred Thousand Dollars ($7,800,000) (computed as $12,000,000 × 0.65)
Principal Office of Fund: 280 Park Avenue, 35th Floor, New York, New York 10017
Description: The Fund IV LP Interest represents the Assignor's limited partnership interest in Caldwell Ridgeline Fund IV LP, a private equity fund organized in 2015 under the laws of the State of Delaware. The interest entitles the holder to its allocable share of the Fund's income, gains, losses, deductions, and credits, as well as distributions of cash and other property, in accordance with the terms of the Fund IV Partnership Agreement. As a vintage 2015 fund, Fund IV is in the later stages of its investment life cycle and is primarily in distribution mode.
Section 5.2 — Fund V LP Interest.
Entity: Caldwell Ridgeline Fund V LP, a Delaware limited partnership
Vintage Year: 2018
General Partner: Caldwell Ridgeline Capital LLC, a Delaware limited liability company
Nature of Interest: Limited partnership interest
Fair Market Value as of June 1, 2023: Fourteen Million Dollars ($14,000,000)
Applicable discount: Thirty-five percent (35%) combined lack-of-marketability and minority interest discount
discounted Value for Gift Tax Purposes: Nine Million One Hundred Thousand Dollars ($9,100,000) (computed as $14,000,000 × 0.65)
Principal Office of Fund: 280 Park Avenue, 35th Floor, New York, New York 10017
Description: The Fund V LP Interest represents the Assignor's limited partnership interest in Caldwell Ridgeline Fund V LP, a private equity fund organized in 2018 under the laws of the State of Delaware. The interest entitles the holder to its allocable share of the Fund's income, gains, losses, deductions, and credits, as well as distributions of cash and other property, in accordance with the terms of the Fund V Partnership Agreement. As a vintage 2018 fund, Fund V is in the active management and harvesting phase of its investment portfolio.
Section 5.3 — Fund VI Carried Interest.
Entity: Caldwell Ridgeline Fund VI LP, a Delaware limited partnership
Vintage Year: 2021
General Partner: Caldwell Ridgeline Capital LLC, a Delaware limited liability company
Nature of Interest: Carried interest position (profits interest / performance allocation)
Fair Market Value as of June 1, 2023: Twelve Million Dollars ($12,000,000)
Applicable discount: Thirty percent (30%) discount
discounted Value for Gift Tax Purposes: Eight Million Four Hundred Thousand Dollars ($8,400,000) (computed as $12,000,000 × 0.70)
Principal Office of Fund: 280 Park Avenue, 35th Floor, New York, New York 10017
Description: The Fund VI Carried Interest represents the Assignor's carried interest position in Caldwell Ridgeline Fund VI LP, a private equity fund organized in 2021 under the laws of the State of Delaware. The carried interest entitles the holder to a share of the Fund's performance-based profits allocation (commonly referred to as "carried interest" or "carry"), subject to any applicable vesting schedules, clawback obligations, preferred return hurdles, and distribution waterfall provisions set forth in the Fund VI Partnership Agreement. As a vintage 2021 fund, Fund VI is in the early-to-mid-stage investment period, and the realized value of the carried interest is expected to accrue principally over the coming years as portfolio investments mature and are realized. The carried interest is subject to any applicable holding period requirements under IRC § 1061 with respect to the characterization of long-term capital gain.
Section 5.4 — Aggregate Values.
The following summarizes the aggregate values of the Assigned Interests:
Total Pre-discount Fair Market Value of Assigned Interests: Thirty-Eight Million Dollars ($38,000,000), computed as $12,000,000 (Fund IV) + $14,000,000 (Fund V) + $12,000,000 (Fund VI) = $38,000,000.
Total Post-discount Fair Market Value: Twenty-Five Million Three Hundred Thousand Dollars ($25,300,000), computed as ($12,000,000 + $14,000,000) × 0.65 + $12,000,000 × 0.70 = $16,900,000 + $8,400,000 = $25,300,000.
Taxable Gift Value Under Zeroed-Out GRAT: Zero Dollars ($0). Because the GRAT is structured as a zeroed-out grantor retained annuity trust under IRC § 2702, the present value of the Assignor's retained annuity interest equals the value of the Assigned Interests transferred to the GRAT, resulting in a taxable gift of zero for purposes of the federal gift tax.
ARTICLE VI — TRANSFER RESTRICTIONS AND ACKNOWLEDGMENTS
Section 6.1 — Acknowledgment of Transfer Restrictions.
The Parties acknowledge that the Assigned Interests are subject to transfer restrictions under the respective Partnership Agreements of Fund IV, Fund V, and Fund VI. Such restrictions may include, without limitation:
(a) The requirement of prior written consent of the general partner (Caldwell Ridgeline Capital LLC) for any transfer, assignment, sale, pledge, hypothecation, or other disposition of partnership interests or carried interest positions;
(b) A prohibition on any transfer that would cause the applicable Fund to be treated as a "publicly traded partnership" within the meaning of IRC § 7704 or that would otherwise adversely affect the Fund's tax classification as a partnership for federal income tax purposes;
(c) A restriction on transfers to persons who are not "eligible transferees" or "permitted transferees" as defined in the applicable Partnership Agreement, which typically includes transfers to family members, trusts for the benefit of family members, and estate planning vehicles;
(d) Requirements for the delivery of an opinion of counsel (at the transferor's expense) regarding compliance with applicable securities laws and tax requirements in connection with any proposed transfer; and
(e) Such other transfer restrictions, conditions, and limitations as may be set forth in the Partnership Agreements from time to time.
The Parties agree to comply with all applicable transfer restrictions in connection with the assignment of the Assigned Interests contemplated by this Assignment.
Section 6.2 — General Partner Consent.
The Assignor represents that he has provided written notice to Caldwell Ridgeline Capital LLC (attention: Gregory S. Fenton, Chief Financial Officer) of the proposed transfer of the Assigned Interests from the Assignor, individually, to the Trustee, as Trustee of the Caldwell 2023 Carried Interest GRAT. The consent of Caldwell Ridgeline Capital LLC, as general partner of each of Fund IV, Fund V, and Fund VI, to the transfer has been obtained, or is being obtained contemporaneously with the execution and delivery of this Assignment. A copy of any written consent delivered by the general partner shall be attached hereto as Exhibit A upon receipt. In the event that written consent is obtained subsequent to the execution of this Assignment, the Assignor shall promptly deliver or cause to be delivered such written consent to the Trustee and shall cause a copy thereof to be attached to this Assignment as Exhibit A.
Section 6.3 — Substituted Limited Partner Status.
Upon completion of the assignment of the Assigned Interests and receipt of general partner consent, the Trustee (as Trustee of the Caldwell 2023 Carried Interest GRAT) shall be admitted as a substituted limited partner (or assignee, as applicable under the terms of the relevant Partnership Agreement) in each of Fund IV, Fund V, and Fund VI. The books and records of each Fund, including the Schedule of Limited Partners or Schedule of Interest Holders maintained by the general partner or fund administrator, shall be amended to reflect the Trustee as the record holder of the Assigned Interests. The Trustee shall thereafter be entitled to exercise all rights and receive all benefits of a limited partner or interest holder (as applicable) under the Partnership Agreements, subject to the terms and conditions thereof.
Section 6.4 — Compliance with IRC § 7704.
The Parties acknowledge and agree that no transfer of the Assigned Interests shall be effected pursuant to this Assignment if such transfer would cause any Fund to be classified as a "publicly traded partnership" within the meaning of IRC § 7704 or would otherwise adversely affect the tax treatment of any Fund as a partnership for federal, state, or local income tax purposes. The Parties shall cooperate with the general partner of each Fund and shall comply with any safe harbor provisions or transfer procedures established by the general partner to ensure continued compliance with IRC § 7704.
ARTICLE VII — MISCELLANEOUS PROVISIONS
Section 7.1 — Governing Law.
This Assignment shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflicts-of-law principles or rules that would cause the application of the laws of any other jurisdiction. To the extent that matters relating to the internal affairs of Fund IV, Fund V, or Fund VI (including matters relating to the validity and enforceability of the Partnership Agreements and the rights and obligations of partners and interest holders thereunder) are governed by the laws of the State of Delaware (as the jurisdiction of organization of each Fund), the laws of the State of Delaware shall apply to such matters. Any dispute arising under or in connection with this Assignment shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the County of New York and the United States District Court for the Southern District of New York.
Section 7.2 — Binding Effect.
This Assignment shall be binding upon and shall inure to the benefit of the Assignor, the Trustee (in his fiduciary capacity), and their respective heirs, executors, administrators, legal representatives, successors, and assigns. Nothing in this Section shall be construed to permit any assignment or transfer of this Assignment or any rights hereunder except as expressly provided herein or in the Trust Agreement.
Section 7.3 — Entire Agreement.
This Assignment, together with the Trust Agreement dated June 1, 2023 (including Schedule A thereto), constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, representations, and warranties, whether written or oral, relating to the transfer of the Assigned Interests. No representation, warranty, promise, or inducement has been made by either Party that is not embodied in this Assignment or the Trust Agreement.
Section 7.4 — Amendment.
This Assignment may not be amended, modified, supplemented, or waived except by a written instrument duly executed by both the Assignor and the Trustee. No oral modification or waiver shall be effective, and no course of dealing or performance shall constitute or imply any amendment or modification of the terms hereof.
Section 7.5 — Counterparts.
This Assignment may be executed in one or more counterparts, each of which shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart by facsimile or electronic transmission (including by .pdf or other electronic format) shall be effective as delivery of a manually executed counterpart.
Section 7.6 — Severability.
If any provision of this Assignment is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect or impair the validity, legality, or enforceability of the remaining provisions of this Assignment, and the remaining provisions shall continue in full force and effect. In such event, the Parties shall negotiate in good faith to replace the invalid, illegal, or unenforceable provision with a valid, legal, and enforceable provision that most closely approximates the intent and economic effect of the original provision.
Section 7.7 — Notices.
All notices, requests, demands, consents, approvals, and other communications under this Assignment shall be in writing and shall be deemed duly given when (i) delivered in person, (ii) sent by overnight courier service (with confirmation of delivery), (iii) sent by certified or registered United States mail, postage prepaid, return receipt requested, or (iv) sent by electronic mail (with confirmation of receipt), addressed as follows:
If to the Assignor:
Jonathan R. Caldwell 418 East 72nd Street, Apt. 14A New York, New York 10021
If to the Trustee:
Jonathan R. Caldwell, as Trustee Caldwell 2023 Carried Interest GRAT c/o Calderwood & Harkness LLP 375 Park Avenue, 42nd Floor New York, New York 10152
Attention: Victoria Chambers / Monica Reyes
With a copy (which shall not constitute notice) to counsel:
Calderwood & Harkness LLP 375 Park Avenue, 42nd Floor New York, New York 10152
Attention: Sylvia Hartwell, Specialist Partner, Tax
For informational purposes, a copy to the General Partner:
Caldwell Ridgeline Capital LLC 280 Park Avenue, 35th Floor New York, New York 10017
Attention: Gregory S. Fenton, Chief Financial Officer
Any Party may change its address for notice purposes by providing written notice to the other Parties in accordance with this Section 7.7.
Section 7.8 — Headings.
The section headings and article headings contained in this Assignment are for convenience of reference only and shall not affect in any way the meaning, interpretation, or construction of this Assignment.
Section 7.9 — No Third-Party Beneficiaries.
This Assignment is entered into for the sole benefit of the Parties hereto and shall not confer any rights, benefits, remedies, or claims upon any third party, whether as a third-party beneficiary or otherwise, except as may otherwise be expressly provided in the Trust Agreement with respect to the beneficiaries of the GRAT.
[Signature Pages Follow]
SIGNATURE PAGE TO ASSIGNMENT OF LIMITED PARTNERSHIP INTERESTS AND CARRIED INTEREST
IN WITNESS WHEREOF, the undersigned have executed this Assignment of Limited Partnership Interests and Carried Interest as of the date first written above.
ASSIGNOR:
________________________________________
Jonathan R. Caldwell, individually
Printed Name: Jonathan R. Caldwell
Date: ________
Address: 418 East 72nd Street, Apt. 14A
New York, New York 10021
TRUSTEE / ASSIGNEE:
________________________________________
Jonathan R. Caldwell, as Trustee of the Caldwell 2023 Carried Interest GRAT dated June 1, 2023
Printed Name: Jonathan R. Caldwell
Capacity: Trustee
Date: ________
ACKNOWLEDGMENT AND NOTARIZATION
NOTARY Block — ASSIGNOR
STATE OF NEW YORK COUNTY OF NEW YORK
On this _ day of June, 2023, before me, the undersigned, a Notary Public in and for the State of New York, personally appeared Jonathan R. Caldwell, known to me (or proved to me on the basis of satisfactory evidence) to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his individual capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.
________________________________________
Notary Public, State of New York
Printed Name: ________
Commission Expiration: ________
[NOTARIAL SEAL]
NOTARY Block — TRUSTEE