SCHEDULE A
TO THE CALDWELL 2023 CARRIED INTEREST GRAT AGREEMENT
Dated as of June 1, 2023
DESCRIPTION OF FUNDED PROPERTY
This Schedule A is attached to and forms a part of the Caldwell 2023 Carried Interest GRAT Agreement (the "Trust Agreement") dated as of June 1, 2023, by Jonathan Robert Caldwell, as Grantor and Trustee. The following property has been contributed and assigned by the Grantor to the Trustee effective as of June 1, 2023, and constitutes the initial trust corpus of the Caldwell 2023 Carried Interest GRAT (the "Trust"). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Trust Agreement.
Section 1. Identification of Grantor and Trust
The following identifying information is provided for reference purposes in connection with the contribution described in this Schedule A:
Grantor: Jonathan Robert Caldwell, an individual residing at 418 East 72nd Street, Apt. 14A, New York, New York 10021 (Social Security Number: XXX-XX-4781).
Trust: Caldwell 2023 Carried Interest GRAT, an irrevocable grantor retained annuity trust established under the laws of the State of New York pursuant to the Trust Agreement dated as of June 1, 2023, and intended to qualify as a "grantor retained annuity trust" within the meaning of Section 2702 of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder.
Date of Contribution: June 1, 2023.
Trustee: Jonathan Robert Caldwell, serving as Trustee of the Trust during the annuity term, with all rights, powers, duties, and responsibilities set forth in the Trust Agreement.
Section 2. Description of Contributed Property
The Grantor has contributed the following limited partnership interests and carried-interest position to the Trust as of the date set forth above. Each interest is described in detail below. The Grantor has transferred all right, title, and interest in and to each of the following described interests, effective as of June 1, 2023, to the Trustee to be held, administered, and distributed in accordance with the terms of the Trust Agreement.
2.1 Caldwell Ridgeline Fund IV LP — Limited Partnership Interest
Entity Name: Caldwell Ridgeline Fund IV LP
Entity Type: Delaware limited partnership, formed under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq.
Vintage Year: 2015
General Partner / Manager: Caldwell Ridgeline Capital LLC, a Delaware limited liability company, with principal offices at 280 Park Avenue, 35th Floor, New York, New York 10017
Nature of Interest: Limited partnership interest
Description: The Grantor's entire limited partnership interest in Caldwell Ridgeline Fund IV LP, representing the Grantor's capital account balance and all rights, title, and interest appurtenant thereto, including, without limitation, the right to receive allocations of income, gain, loss, deduction, and credit, and all rights to distributions (whether of income, capital, or otherwise), together with all other economic and non-economic rights associated with such limited partnership interest as set forth in the governing partnership agreement, as amended from time to time.
Fair Market Value (Pre-discount): $12,000,000
Valuation discount Applied: 35% combined discount for lack of marketability and minority/non-controlling interest
Fair Market Value (Post-discount): $12,000,000 × (1 – 0.35) = $7,800,000
Appraiser: Ashford Valuation Group LLC (Dr. Leonard K. Whitfield, ASA, Managing Partner), 1120 Avenue of the Americas, Suite 3500, New York, New York 10036
Valuation Date: June 1, 2023
Governing Agreement: Amended and Restated Agreement of Limited Partnership of Caldwell Ridgeline Fund IV LP, dated as of March 15, 2015, as amended by Amendment No. 1 dated September 30, 2016, Amendment No. 2 dated January 15, 2018, and any subsequent amendments thereto (collectively, the "Fund IV LPA")
2.2 Caldwell Ridgeline Fund V LP — Limited Partnership Interest
Entity Name: Caldwell Ridgeline Fund V LP
Entity Type: Delaware limited partnership, formed under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq.
Vintage Year: 2018
General Partner / Manager: Caldwell Ridgeline Capital LLC, a Delaware limited liability company, with principal offices at 280 Park Avenue, 35th Floor, New York, New York 10017
Nature of Interest: Limited partnership interest
Description: The Grantor's entire limited partnership interest in Caldwell Ridgeline Fund V LP, representing the Grantor's capital account balance and all rights, title, and interest appurtenant thereto, including, without limitation, the right to receive allocations of income, gain, loss, deduction, and credit, and all rights to distributions (whether of income, capital, or otherwise), together with all other economic and non-economic rights associated with such limited partnership interest as set forth in the governing partnership agreement, as amended from time to time.
Fair Market Value (Pre-discount): $14,000,000
Valuation discount Applied: 35% combined discount for lack of marketability and minority/non-controlling interest
Fair Market Value (Post-discount): $14,000,000 × (1 – 0.35) = $9,100,000
Appraiser: Ashford Valuation Group LLC (Dr. Leonard K. Whitfield, ASA, Managing Partner), 1120 Avenue of the Americas, Suite 3500, New York, New York 10036
Valuation Date: June 1, 2023
Governing Agreement: Amended and Restated Agreement of Limited Partnership of Caldwell Ridgeline Fund V LP, dated as of June 1, 2018, as amended by Amendment No. 1 dated December 15, 2019, and any subsequent amendments thereto (collectively, the "Fund V LPA")
2.3 Caldwell Ridgeline Fund VI LP — Carried Interest
Entity Name: Caldwell Ridgeline Fund VI LP
Entity Type: Delaware limited partnership, formed under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq.
Vintage Year: 2021
General Partner / Manager: Caldwell Ridgeline Capital LLC, a Delaware limited liability company, with principal offices at 280 Park Avenue, 35th Floor, New York, New York 10017
Nature of Interest: Carried interest (profits interest / performance allocation)
Description: The Grantor's entire carried-interest position in Caldwell Ridgeline Fund VI LP, representing the Grantor's right to receive performance-based allocations and distributions from such Fund, including all rights, title, and interest appurtenant thereto, including, without limitation, allocations of carried interest, income, gain, loss, deduction, and credit, and all rights to distributions attributable to such carried interest (whether of income, capital, or otherwise). The carried interest entitles the holder to a performance-based allocation of net profits of the Fund, subject to the applicable preferred return hurdle, catch-up provision, and clawback obligations, all as more fully described in the governing partnership agreement of Caldwell Ridgeline Fund VI LP.
Fair Market Value (Pre-discount): $12,000,000
Valuation discount Applied: 30% discount for lack of marketability and other applicable factors relating to the nature of the carried-interest position
Fair Market Value (Post-discount): $12,000,000 × (1 – 0.30) = $8,400,000
Appraiser: Ashford Valuation Group LLC (Dr. Leonard K. Whitfield, ASA, Managing Partner), 1120 Avenue of the Americas, Suite 3500, New York, New York 10036
Valuation Date: June 1, 2023
Governing Agreement: Amended and Restated Agreement of Limited Partnership of Caldwell Ridgeline Fund VI LP, dated as of February 1, 2021, as amended by Amendment No. 1 dated August 15, 2022, and any subsequent amendments thereto (collectively, the "Fund VI LPA")
Section 3. Summary Valuation Table
The following table consolidates the fair market value determinations for all contributed interests constituting the initial trust corpus of the Trust:
The blended post-discount fair market value of $25,300,000 is computed as follows: the aggregate discounted value of the limited partnership interests is ($12,000,000 + $14,000,000) × 0.65 = $16,900,000, plus the discounted value of the carried interest is $12,000,000 × 0.70 = $8,400,000, resulting in a combined total discounted fair market value of $25,300,000. This amount represents the value of the initial trust corpus for all purposes under the Trust Agreement, including the computation of the annuity amount payable to the Grantor during the annuity term.
Section 4. Valuation and Appraisal Information
All fair market value determinations set forth in this Schedule A have been made as of June 1, 2023, the date of contribution, in accordance with the standard of fair market value under Section 2512 of the Code and the applicable Treasury Regulations promulgated thereunder. For purposes of this Schedule A, "fair market value" means the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. See Treas. Reg. § 25.2512-1.
Independent qualified appraisals of each of the contributed interests were prepared by Ashford Valuation Group LLC, an independent valuation firm specializing in the appraisal of interests in private equity funds, limited partnerships, and alternative investment vehicles. The appraisals were supervised and signed by Dr. Leonard K. Whitfield, ASA (Accredited Senior Appraiser, American Society of Appraisers), Managing Partner, with offices located at 1120 Avenue of the Americas, Suite 3500, New York, New York 10036. Each appraisal was prepared in compliance with the requirements of Section 170(f)(11) of the Code, the regulations thereunder, and the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by The Appraisal Foundation.
The appraisal reports were completed and received on June 15, 2023, and are incorporated herein by reference for all purposes, including for purposes of gift tax reporting on IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, for the calendar year 2023.
Underlying valuation data and financial information for each Fund interest, including audited and unaudited financial statements, portfolio company valuations, net asset value reports, distribution histories, capital call and commitment schedules, and management projections, were provided by Gregory S. Fenton, Chief Financial Officer, Caldwell Ridgeline Capital LLC, 280 Park Avenue, 35th Floor, New York, New York 10017. Mr. Fenton certified the accuracy and completeness of such data and financial information as of the valuation date.
Section 5. Discount Methodology Summary
The valuation discounts applied to the contributed interests are summarized below and are supported in full by the detailed analysis contained in the Ashford Valuation Group LLC appraisal reports referenced in Section 4 above.
LP Interests (Fund IV and Fund V). The 35% combined discount applied to the limited partnership interests in Caldwell Ridgeline Fund IV LP and Caldwell Ridgeline Fund V LP reflects the following components:
(a) Lack of Marketability. The partnership interests are not publicly traded and cannot be freely transferred on any established securities market. There is no active secondary market for such interests, and any transfer is subject to significant restrictions under the applicable limited partnership agreements, including the requirement of General Partner consent, rights of first refusal in favor of the partnership and other limited partners, and other transfer restrictions customary for private equity fund interests. The absence of an established trading market significantly reduces the liquidity and marketability of the interests.
(b) Minority/Non-Controlling Interest. The Grantor holds a limited partnership interest with no management rights or control over investment decisions, distribution timing, portfolio company dispositions, or liquidation events. The General Partner retains sole and exclusive authority over all material management and investment decisions of the respective Funds. A hypothetical buyer of the Grantor's limited partnership interest would acquire no ability to influence the timing or amount of distributions or the liquidation of the Fund, thereby warranting an additional discount for the lack of control associated with a minority interest position.
The 35% combined discount level is supported by comparable rulings, empirical studies of restricted stock transactions, pre-IPO discount studies, and accepted valuation methodology as set forth in the Ashford appraisal reports. The discount is within the range of discounts sustained by the United States Tax Court and accepted by the Internal Revenue Service in analogous circumstances.
Carried Interest (Fund VI). The 30% discount applied to the carried-interest position in Caldwell Ridgeline Fund VI LP reflects the following factors:
(a) Lack of Marketability. The carried-interest position is not publicly traded and is subject to transfer restrictions under the Fund VI LPA, including General Partner consent requirements and prohibitions on assignment absent compliance with specific conditions. The carried-interest position is inherently less liquid than even a standard limited partnership interest, as it represents a contingent right to future performance-based allocations rather than a proportional share of existing partnership capital.
(b) Contingent and Uncertain Nature of Future Performance Allocations. The value of the carried interest depends upon the future investment performance of Caldwell Ridgeline Fund VI LP, the timing and magnitude of realization events for underlying portfolio investments, the applicable preferred return hurdle rate (which must be exceeded before any performance allocation is earned), potential clawback obligations, and general market and economic conditions affecting the private equity sector. These contingencies introduce a material degree of uncertainty into the valuation of the carried interest.
The 30% discount applicable to the carried interest is lower than the 35% discount applied to the LP interests. This differential reflects the fact that, while the carried interest represents a potentially higher-return position with favorable economic characteristics (including disproportionate upside participation in fund performance above the hurdle rate), the lower discount is offset by the speculative and performance-dependent character of the carried interest, which introduces risk factors not present in a standard limited partnership interest with a fixed capital account. The Ashford appraisal reports provide a comprehensive analysis of comparable carried-interest transactions and the methodologies employed in arriving at the 30% discount.
Section 6. Transfer Restrictions and Consents
The Grantor hereby represents and warrants that he has reviewed and complied with all applicable transfer restriction provisions contained in the governing limited partnership agreements for each of Caldwell Ridgeline Fund IV LP, Caldwell Ridgeline Fund V LP, and Caldwell Ridgeline Fund VI LP, and has obtained or is in the process of obtaining all necessary consents, approvals, and acknowledgments from Caldwell Ridgeline Capital LLC, in its capacity as General Partner of each such Fund, for the assignment of the contributed interests to the Trustee of the Trust. The Grantor further represents that, to the extent any such consent is pending as of the date of this Schedule A, the Grantor has received written confirmation from Caldwell Ridgeline Capital LLC that such consent will not be unreasonably withheld, conditioned, or delayed.
The transfer and assignment of the contributed interests is evidenced by the separate Assignment of Caldwell Ridgeline Capital LP Interests and Carried Interest to GRAT (the "Assignment Agreement"), executed concurrently herewith on June 1, 2023, by Jonathan Robert Caldwell, as assignor, and by Jonathan Robert Caldwell, as Trustee of the Caldwell 2023 Carried Interest GRAT, as assignee. The Assignment Agreement is incorporated herein by reference.
The Grantor further represents and warrants that, as of the date of contribution, each of the contributed interests described in Section 2 above is free and clear of all liens, pledges, security interests, charges, claims, options, encumbrances, and restrictions of any kind or nature, other than (i) restrictions on transfer arising under the applicable governing partnership agreements and (ii) restrictions arising under applicable federal and state securities laws.
Section 7. Annuity Calculation Reference
The contributed property described in this Schedule A constitutes the entire initial trust corpus for purposes of computing the annuity amount payable to the Grantor under Article III of the Trust Agreement. The annuity amount has been determined based on the aggregate post-discount fair market value of the contributed property of $25,300,000, as set forth in Section 3 above.
The Section 7520 rate applicable to the Trust is 5.0%, being the applicable federal rate published by the Internal Revenue Service for transfers occurring in May 2023, the month immediately preceding the month in which the Trust was funded. See Rev. Rul. 2023-09; IRC § 7520(a).
The annuity term is three (3) years, commencing on June 1, 2023, and terminating on June 1, 2026 (or, if earlier, upon the death of the Grantor during the annuity term). Annual annuity payments of $13,953,759 are due and payable on the following dates:
(i) June 1, 2024 — $13,953,759
(ii) June 1, 2025 — $13,953,759
(iii) June 1, 2026 — $13,953,759
The aggregate annuity payments over the three-year term total $41,861,277. The annuity amount has been calculated to produce a "zeroed-out" GRAT under Section 2702 of the Code and the regulations promulgated thereunder, such that the actuarial value of the Grantor's retained annuity interest equals the fair market value of the property contributed to the Trust. Accordingly, the taxable gift with respect to the remainder interest passing to the Caldwell Family Dynasty Trust (as described in Section 8 below) is $0 (or as close to zero as mathematically practicable under the applicable actuarial tables).
Reference is made to the Caldwell 2023 Carried Interest GRAT — Annuity Payment Schedule, prepared by counsel, which sets forth the detailed actuarial calculations supporting the annuity amount and the zeroed-out structure. Such Annuity Payment Schedule is attached to the Trust Agreement and incorporated herein by reference.
Section 8. Remainder Beneficiary
Upon termination of the annuity term and full and complete satisfaction of all annuity payments due to the Grantor (or the Grantor's estate, as applicable) under the Trust Agreement, the remainder of the Trust property, including all appreciation, accumulated income, and undistributed assets, shall be distributed to the Caldwell Family Dynasty Trust, an irrevocable trust established under the laws of the State of Delaware on April 1, 2023, pursuant to the Caldwell Family Dynasty Trust Agreement of the same date.
The Caldwell Family Dynasty Trust is administered by Northgate Trust Company of Delaware, a Delaware trust company with offices at 1201 North Market Street, Suite 1600, Wilmington, Delaware 19801, serving as institutional co-trustee, and Thomas R. Caldwell, an individual, serving as family co-trustee. The Caldwell Family Dynasty Trust is designed to be exempt from the federal generation-skipping transfer tax to the fullest extent permitted by law.
The designation of the Caldwell Family Dynasty Trust as the remainder beneficiary is irrevocable and may not be altered, amended, or revoked by the Grantor or any other person, consistent with the requirements of Section 2702 of the Code and the irrevocable character of the Trust.
EXECUTION
IN WITNESS WHEREOF, the undersigned has executed this Schedule A as of the date first set forth above.
GRANTOR AND TRUSTEE:
________________________________________
Jonathan Robert Caldwell Individually, as Grantor
________________________________________
Jonathan Robert Caldwell As Trustee of the Caldwell 2023 Carried Interest GRAT
Date: June 1, 2023
This Schedule A is incorporated into and made a part of the Caldwell 2023 Carried Interest GRAT Agreement dated as of June 1, 2023. All references to the Trust Agreement shall be deemed to include this Schedule A and any amendments or supplements hereto.
| Item | Entity | Nature of Interest | Vintage | Pre-discount FMV | Discount | Post-discount FMV |
| 1 | Caldwell Ridgeline Fund IV LP | LP Interest | 2015 | $12,000,000 | 35% | $7,800,000 |
| 2 | Caldwell Ridgeline Fund V LP | LP Interest | 2018 | $14,000,000 | 35% | $9,100,000 |
| 3 | Caldwell Ridgeline Fund VI LP | Carried Interest | 2021 | $12,000,000 | 30% | $8,400,000 |
| Total | $38,000,000 | $25,300,000 |