Contract analysis

I. Executive Summary The purpose of this memorandum is to summarize all tax elections, filings, compliance obligations, and action items arising from the closing of the acquisition of 100% of the membership interests in Pinnacle Health Services Group LLC ("Pinnacle" or "PHSG") by Ardent Healthcare Intermediate Inc. ("Intermediate"), a wholly owned subsidiary of Ardent Healthcare Holdings LLC ("Holdings"), which occur

II. Transaction Structure at Closing A. Overview of Closing Structure The acquisition was implemented through a three-tier acquisition structure designed to achieve the following objectives: (i) facilitate the flow-through of partnership-level tax deductions (including the Section 743(b) basis step-up amortization) to Intermediate and, ultimately, to Holdings; (ii) block unrelated business taxable income ("UBTI") fro

III. Section 754 Election A. Election Requirement Pursuant to Section 6.04(c) of the Merger Agreement, Pinnacle is required to make an election under Section 754 of the Internal Revenue Code for its taxable year that includes the Closing Date. Section 754 of the Code provides that a partnership may elect to adjust the basis of its property in the case of a transfer of a partnership interest (under Section 743(b)) or

IV. Section 743(b) Basis Step-Up Computation A. Computation. The Section 743(b) basis adjustment is computed as follows: Purchase price allocable to Intermediate's interest in Pinnacle: The entire enterprise value of $412,000,000 is allocable to Intermediate's interest, as Intermediate acquired 100% of Pinnacle's membership interests via the reverse merger. The purchase price for this purpose includes the cash consid

Section 743(b) step-up computation: This $224,400,000 step-up represents the incremental tax basis that Intermediate will receive in Pinnacle's assets over and above Pinnacle's existing common basis. The step-up is allocated among Pinnacle's individual assets in accordance with Section 755 of the Code, as described below. B. Allocation of Step-Up Among Asset Classes The Section 743(b) adjustment must be allocated amo

V. Section 83(b) Elections for Rollover Participants A. Background. Each of Dr. Raymond Carvallo (Co-Founder and Chief Executive Officer of Pinnacle), Dr. Nadia Ostrowski (Co-Founder and Chief Medical Officer of Pinnacle), and Jonathan Farnsworth (Chief Financial Officer of Pinnacle) received Class B Units of Ardent Healthcare Holdings LLC in connection with their respective rollover equity contributions at closing.

Section 83(a) of the Code provides that if property is transferred in connection with the performance of services, and such property is subject to a substantial risk of forfeiture, the excess of the fair market value of the property over the amount paid for the property is includible in the service provider's gross income in the first taxable year in which the property is no longer subject to a substantial risk of fo

1. File the original election with the IRS. The signed election form and transmittal letter should be mailed via certified mail, return receipt requested to the IRS Service Center where the participant files his or her individual federal income tax return. The use of certified mail provides evidence of timely filing. The election should be mailed sufficiently in advance of the deadline to ensure delivery within the 3

2. Provide a copy to Ardent Healthcare Holdings LLC. A copy of the filed Section 83(b) election (including the certified mail receipt) should be delivered to Ardent Healthcare Holdings LLC at the following address: Ardent Healthcare Holdings LLC c/o Ardent Capital Partners III LP 600 Lexington Avenue, 38th Floor New York, NY 10022 Attention: Marcus Pellegrino, Partner, Healthcare

3. Attach a copy to the participant's federal income tax return. A copy of the filed Section 83(b) election must be attached to the participant's timely filed federal income tax return (Form 1040) for the 2024 taxable year. Although the IRS has stated informally that the failure to attach a copy to the income tax return does not invalidate the election if the election was otherwise timely filed, best practice require

4. Retain records. Each participant should retain the original certified mail receipt and a copy of the filed election form in his or her permanent tax records. Critical Action Item: The failure to file a timely Section 83(b) election by June 30, 2024 (or July 1, 2024 at the latest, as discussed above) will result in ordinary income recognition upon the vesting of each tranche of unvested Class B Units, measured as t

VI. Rollover Equity Treatment A. Tax-Deferred Contribution Under Section 721 The contribution of Pinnacle membership interests by each rollover participant to Ardent Healthcare Holdings LLC in exchange for Class B Units of Holdings qualifies as a tax-deferred contribution under Section 721 of the Internal Revenue Code. Section 721(a) provides that no gain or loss is recognized by a partner or a partnership on the con

VII. Nonresident State Withholding Obligations A. Withholding Requirements Several of the states in which Pinnacle operates impose withholding obligations on gains allocable to nonresident individual sellers upon the sale of interests in a partnership or pass-through entity that conducts business in the state. These withholding requirements are designed to ensure that nonresident sellers pay state income tax on the p

VIII. Tax Escrow Deposits A. Tax Indemnity Escrow A tax indemnity escrow in the amount of $4,120,000 (equal to 1.0% of the enterprise value of $412,000,000) was established at closing to secure the sellers' indemnification obligations for pre-closing tax liabilities under Article IX of the Merger Agreement. The escrow deposit was funded from the sellers' equity proceeds at closing and deposited with Ironbridge Trust

IX. Form 8308 Filing Obligation A. Requirement. Section 6050K of the Internal Revenue Code requires a partnership to file Form 8308 (Report of a Sale or Exchange of Certain Partnership Interests) for any calendar year during which there is a sale or exchange of a partnership interest that involves the exchange of "section 751 property" — i.e., unrealized receivables or inventory items as defined in Section 751(c) and

X. Purchase Price Allocation Summary A. Methodology. The purchase price allocation was performed under the residual method prescribed by Section 1060 of the Code and the applicable Treasury Regulations thereunder. Although the transaction is structured as an equity acquisition (the purchase of membership interests in a partnership) rather than a direct asset acquisition, the allocation is performed on an asset-level

XI. Tax Receivable Agreement — Effective Date and Administration A. TRA Effective Date The Tax Receivable Agreement (the "TRA") was executed in its definitive form on May 28, 2024 and became effective upon the Closing Date, May 31, 2024. The TRA sets forth the terms under which the TRA Holders will receive payments equal to a specified percentage of the realized cash tax savings attributable to the Section 743(b) bas

XII. FIRPTA Certificates A. Non-Foreign Status Affidavits

Section 1445 of the Internal Revenue Code imposes a withholding obligation on the transferee (buyer) in a disposition of a "United States real property interest" ("USRPI") by a foreign person. A partnership interest may constitute a USRPI if the partnership holds U.S. real property interests among its assets. To avoid the application of FIRPTA withholding, each seller may furnish to the buyer an affidavit (a "non-for

XIII. Other Closing Tax Deliverables A. Seller's Tax Closing Certificate A Seller's Tax Closing Certificate was executed by the sellers' representative on May 31, 2024, certifying as of the Closing Date the truth and correctness of the tax representations and warranties contained in Article III, Section 3.13 of the Merger Agreement. The certificate confirms, among other things, that: (a) Pinnacle Health Services Grou