Contract analysis

1. PURPOSE AND SUMMARY This memorandum documents the formal close-out of Calderwood & Harkness LLP Matter No. 1001-00006 (Engagement No. 1001-00006) relating to the tax structuring engagement for Ardent Capital Partners III LP's acquisition of Pinnacle Health Services Group LLC. The purpose of this memorandum is to provide a comprehensive record of the engagement, including a summary of the work performed, all delive

2. ENGAGEMENT OVERVIEW 2.1 Client and Transaction Parties Client. Ardent Capital Partners III LP, a Delaware limited partnership (EIN 87-3491520), with its principal office located at 600 Lexington Avenue, 38th Floor, New York, New York 10022. Ardent Capital Partners III LP is the third institutional private equity fund managed by Ardent Capital, with a 2022 vintage and aggregate capital commitments of approximately

1. Entity Selection for the Acquisition Vehicle. Evaluation of alternative entity structures for the acquisition vehicle, including analysis of a three-tier holding structure (partnership holding company, C-corporation blocker, and acquisition subsidiary), with a focus on federal and state tax efficiency, UBTI considerations for tax-exempt limited partners, and future exit optionality.

2. Section 338(h)(10) vs. Section 754 Election Analysis. Comprehensive comparative analysis of the availability and advisability of a Section 338(h)(10) election versus a Section 754 election to achieve a step-up in the inside tax basis of Pinnacle's assets, including quantification of the net present value of each alternative. 3. blocker Entity (C-Corporation) Analysis. Analysis of the interposition of a C-corporati

4. Management Rollover Equity Treatment. Tax analysis of the rollover equity contributions by Pinnacle's founding physicians and management, including a comparative assessment of Section 721 (partnership contribution) and Section 351 (corporate contribution) treatment, and a detailed analysis of the characterization of management incentive equity as profits interests under Revenue Procedure 93-27 and Revenue Procedur

5. Earnout Tax Characterization and Reporting Methodology. Analysis and structuring of the earnout provisions of the Merger Agreement to support capital gain characterization for the selling Pinnacle members, including consideration of Section 483 imputed interest implications, installment method reporting under Section 453, and open transaction versus closed transaction methodology.

6. Purchase Price Allocation. Preparation of the purchase price allocation schedule in accordance with Section 1060 of the Internal Revenue Code and the corresponding Section 743(b) methodology, with supporting memorandum detailing the allocation among the seven asset classes.

7. Tax Receivable Agreement Structuring. Structuring and drafting of a Tax Receivable Agreement providing for the sharing of realized tax benefits from the Section 743(b) basis step-up between the acquiring entity and the rollover participants and pre-closing Pinnacle members.

8. State and Local Tax Optimization. Multi-state tax analysis covering each of Pinnacle's five operating states (Pennsylvania, Virginia, Maryland, North Carolina, and Georgia) as well as a New York nexus analysis for the holding company entities, including evaluation of apportionment methodologies, pass-through entity tax elections, nonresident withholding obligations, and state tax structuring recommendations.

9. Tax Provisions Review and Markup of the Merger Agreement. Review and markup of the tax-related representations, warranties, covenants, and indemnity provisions of the Merger Agreement, prepared in coordination with buyer's M&A counsel, Harcourt Shaw & DeVries LLP.

10. Tax Opinion on Rollover Treatment. Preparation and delivery of a formal tax opinion letter opining on the tax-deferred treatment of the rollover equity contributions under Section 721 of the Internal Revenue Code.

11. Closing Deliverables and Post-Closing Compliance Guidance. Preparation and delivery of all tax-related closing deliverables, including the tax closing certificate, Section 754 election draft, FIRPTA non-foreign status certificates, Section 83(b) election templates, and a comprehensive post-closing tax integration memorandum providing guidance to the client and its ongoing tax advisors. The engagement did not incl

3. KEY TRANSACTION DATES The following table sets forth the key dates in the engagement and transaction timeline, from the initial conflict check through the close-out of the engagement: The period from engagement opening (January 10, 2024) to transaction closing (May 31, 2024) was approximately four months and twenty-one days. The post-closing work phase extended an additional fourteen days through June 14, 2024. Th

4. COMPLETE DELIVERABLES LOG Set forth below is a complete log of all deliverables produced during the engagement, organized by workstream. Unless otherwise indicated, all deliverables were transmitted to the client (Ardent Capital Partners III LP, attention Marcus Pellegrino) and, where applicable, shared with buyer's M&A counsel (Harcourt Shaw & DeVries LLP) and the client's accounting firm (Caldwell Pratt & Mooreh

1. Engagement Letter — Executed January 10, 2024. Sets forth the scope of engagement, fee arrangement (hourly with a $2,000,000 fee cap), billing partner designation, responsible partner designation, and general terms and conditions of the attorney-client relationship. Countersigned by Marcus Pellegrino on behalf of Ardent Capital Partners III LP.

2. Conflict Check Memorandum — Completed January 8, 2024. Internal memorandum confirming that a comprehensive conflict check was performed against all known parties to the transaction and that no conflicts of interest were identified. Maintained in internal files.

3. Staffing & Budget Memorandum — Prepared January 10, 2024. Internal memorandum setting forth the proposed staffing plan, estimated hours by timekeeper, fee budget of $1,850,000, and fee cap of $2,000,000. Maintained in internal files.

4. Engagement Close-Out Memorandum — This document, dated June 25, 2024. Internal memorandum documenting the formal close-out of the engagement, summarizing all work performed and deliverables issued. 4.2 Structure & Entity Selection Documents

5. Preliminary Tax Structure Memorandum — Delivered February 12, 2024. Comprehensive memorandum analyzing alternative acquisition structures (asset purchase, equity purchase, merger) and entity selection options (partnership vs. C-corporation at each tier) for the acquisition vehicle. Included preliminary recommendations for a three-tier structure (partnership → C-corp blocker → target LLC).

6. Section 338(h)(10) vs. Section 754 Election Analysis Memorandum — Delivered February 28, 2024. Detailed comparative analysis of the availability, mechanics, and net present value implications of a Section 338(h)(10) election versus a Section 754 election for achieving a step-up in the inside tax basis of Pinnacle's assets. Recommended Section 754 election based on quantitative analysis demonstrating that Section 3

8. Entity Formation Checklist and Instructions — Finalized March 1, 2024. Detailed checklist and step-by-step instructions for the formation of the three acquisition vehicle entities in Delaware, including authorized signatory designations, registered agent information, and EIN application procedures.

9. Certificate of Formation — Ardent Healthcare Holdings LLC — Filed with the Delaware Secretary of State on March 5, 2024 (File No. 7834219). Holdings LLC classified as a partnership for federal tax purposes (default classification; no Form 8832 election filed). EIN 93-2187445 obtained.

10. Certificate of Incorporation — Ardent Healthcare Intermediate Inc. — Filed with the Delaware Secretary of State on March 5, 2024 (File No. 7834223). Intermediate Inc. organized as a C-corporation for federal tax purposes. EIN 93-2187512 obtained. Note: The Certificate of Formation for Merger Sub LLC (File No. 7834227) was also filed on March 5, 2024 by Harcourt Shaw & DeVries LLP, as buyer's M&A counsel, with tax

11. Rollover Equity Tax Memorandum — Section 721 vs. Section 351 — Delivered February 22, 2024. Memorandum comparing the federal tax consequences of structuring the rollover equity contributions as partnership contributions under Section 721 versus corporate contributions under Section 351, with particular attention to the preservation of the Section 743(b) basis step-up and the avoidance of gain recognition at the r

12. Profits Interest / Unvested Equity Memorandum — Delivered March 8, 2024. Memorandum analyzing the characterization of unvested management incentive equity as profits interests under Revenue Procedure 93-27 and Revenue Procedure 2001-43, including the safe harbor requirements and the consequences of failure to satisfy them. Also addressed the treatment of the vesting schedule under Section 83 and the importance of

13. Form — Section 83(b) Election Template — Delivered May 28, 2024. Template Section 83(b) election form, customized for each of the three rollover participants (Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and Jonathan Farnsworth), with instructions for completion, execution, and filing with the Internal Revenue Service.

14. Section 83(b) Election Transmittal Letter Templates — Delivered May 31, 2024. Template transmittal letters for certified-mail filing of the Section 83(b) elections with the IRS Service Center, including instructions for obtaining and retaining certified mail receipts as proof of timely filing.

15. Tax Provisions of LLC Agreement — Draft Markup — Delivered March 10, 2024. Markup of the tax-related provisions (including tax allocation, distribution, and reporting provisions) of the Amended and Restated Limited Liability Company Agreement of Ardent Healthcare Holdings LLC, prepared for review by Harcourt Shaw & DeVries LLP and the client. 4.4 Earnout Treatment Documents

16. Earnout Tax Characterization Memorandum — Delivered March 1, 2024. Memorandum analyzing the federal tax characterization of the contingent earnout payments under the Merger Agreement, including the distinction between additional purchase price (capital gain) and compensatory payments (ordinary income), and setting forth the structuring safeguards necessary to support capital gain treatment. Recommended and adopte

17. Earnout Provisions — Tax Review and Comment Letter to Harcourt Shaw & DeVries LLP — Sent March 12, 2024. Formal comment letter setting forth Calderwood & Harkness LLP's tax-related comments and suggested revisions to the earnout provisions of the Merger Agreement, with particular focus on avoiding language that could be construed as conditioning earnout payments on continued employment or service.

18. Open Transaction vs. Closed Transaction / Installment Method Memorandum — Delivered March 5, 2024. Memorandum analyzing the availability and advisability of open transaction reporting, closed transaction reporting, and installment method reporting under Section 453 for the earnout payments, with a recommendation that individual sellers utilize installment method reporting. 4.5 Purchase Price Allocation & TRA Docu

19. Purchase Price Allocation Schedule — Delivered April 18, 2024. Detailed schedule allocating the total consideration of $412.0 million across the Section 1060 asset classes (Classes I through VII), consistent with the Section 743(b) basis step-up methodology. The allocation was reviewed and agreed upon by the client, buyer's M&A counsel, and seller's counsel, and is reflected in the executed Merger Agreement.

20. Purchase Price Allocation Memorandum — Delivered April 18, 2024. Supporting memorandum providing the analytical basis for the purchase price allocation, including valuation methodologies applied to each asset class, useful life determinations for amortizable intangibles, and the interplay between the Section 1060 allocation and the Section 743(b) basis adjustment.

21. Tax Receivable Agreement — Draft — Delivered March 20, 2024. Initial draft of the Tax Receivable Agreement providing for the sharing of realized tax benefits from the Section 743(b) basis step-up between Holdings LLC / Intermediate Inc. and the TRA Holders (rollover participants and pre-closing Pinnacle members). Circulated to Harcourt Shaw & DeVries LLP, Whitford & Gaines LLP, and the client for review and comme

22. Tax Receivable Agreement — Execution Version — Finalized May 28, 2024. Final execution version of the Tax Receivable Agreement, incorporating all negotiated revisions and approved by all parties. Executed on May 31, 2024, at closing, among Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., and the TRA Holders. 4.6 State & Local Tax Documents

23. State & Local Tax Memorandum — Delivered February 20, 2024. Comprehensive memorandum analyzing the state and local tax implications of the transaction across Pinnacle's five operating states (Pennsylvania, Virginia, Maryland, North Carolina, and Georgia), including corporate income tax rates, apportionment methodologies, pass-through entity tax elections, nonresident withholding obligations, and the New York nexu

24. Nonresident Withholding Computation Schedule — Delivered May 15, 2024. Detailed computation schedule quantifying the state-level nonresident withholding tax obligations on gains recognized by individual selling Pinnacle members in Virginia ($1.46 million), Maryland ($2.41 million), and Georgia ($0.87 million), for an aggregate withholding amount of $4.74 million. Withholding amounts were remitted at closing.

25. State Tax Structuring Recommendations Letter — Delivered March 18, 2024. Letter to the client setting forth specific state tax structuring recommendations, including the recommendation to utilize a Maryland pass-through entity tax election, the recommendation to route management fee agreements through Ardent Capital GP III LLC to mitigate New York nexus risk for Holdings LLC, and guidance on apportionment factor

26. Tax Representations and Covenants — Draft Markup of Merger Agreement — Circulated March 8, 2024. Detailed markup of Article V (Tax Representations) and Article VI (Tax Covenants) of the Merger Agreement, including representations regarding Pinnacle's tax classification, the absence of outstanding tax liabilities, compliance with tax filing obligations, and pre-closing tax covenants regarding the conduct of the ta

27. Tax Indemnity Provisions — Draft Markup of Merger Agreement — Circulated March 10, 2024. Markup of Article IX (Indemnification) of the Merger Agreement as it relates to tax indemnification obligations, including the scope of pre-closing tax liabilities subject to seller indemnification, the treatment of transfer taxes, and the interplay between the tax indemnity and the general indemnification provisions.

28. Tax Opinion Letter — Rollover Tax-Deferred Treatment — Delivered May 29, 2024. Formal tax opinion letter, addressed to Ardent Capital Partners III LP, opining that the rollover equity contributions by Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and Jonathan Farnsworth to Ardent Healthcare Holdings LLC should constitute tax-deferred contributions of property to a partnership under Section 721(a) of the Internal Rev

29. IRS Reporting Obligations Checklist — Delivered May 30, 2024. Comprehensive checklist of all federal tax reporting obligations arising from or relating to the transaction, including Form 8594 (Asset Acquisition Statement), Form 8308 (Report of a Sale or Exchange of Certain Partnership Interests), Section 83(b) elections, Section 754 election statements, and the filing of short-period partnership returns. 4.8 Clos

30. Tax Closing Certificate — Delivered May 31, 2024. Certificate executed on behalf of the buyer certifying the accuracy of the tax representations and the satisfaction of the tax-related closing conditions set forth in the Merger Agreement.

31. Section 754 Election — Draft Form — Delivered May 31, 2024. Draft election statement to be attached to Pinnacle Health Services Group LLC's Form 1065 for the taxable year ending December 31, 2024, electing to adjust the basis of partnership property under Section 754 of the Internal Revenue Code. Filing responsibility transferred to Caldwell Pratt & Moorehouse LLP.

32. FIRPTA Non-Foreign Status Certificates — Delivered May 31, 2024. Certificates of Non-Foreign Status under Section 1445 of the Internal Revenue Code and Treasury Regulation Section 1.1445-2(b)(2), executed by each selling Pinnacle member, certifying their status as United States persons for purposes of the Foreign Investment in Real Property Tax Act.

33. Closing Tax Memorandum — Delivered May 31, 2024. Comprehensive memorandum summarizing all tax-related matters addressed at closing, including the status of all closing deliverables, the mechanics of the purchase price allocation, the Section 754 election, the nonresident withholding remittances, and immediate post-closing tax actions required. 4.9 Post-Closing Documents

34. Post-Closing Tax Integration Memorandum — Delivered June 14, 2024. Detailed memorandum addressed to the client and to Caldwell Pratt & Moorehouse LLP (as the ongoing tax compliance advisor) providing comprehensive guidance on all post-closing tax matters, including the Section 754 election filing procedures, short-period K-1 preparation, TRA administration, earnout tax tracking methodology, estimated tax payment

35. Engagement Summary and Lessons Learned Memorandum — Prepared June 25, 2024. Internal Calderwood & Harkness LLP memorandum summarizing the engagement for quality management and knowledge management purposes. This document is maintained solely in internal files and was not delivered to the client. Confirmation: All thirty-five (35) deliverables listed above have been issued to the client or filed internally, as app

5. SUMMARY OF KEY STRUCTURING DECISIONS AND OUTCOMES This Section 5 provides a summary of the principal tax structuring decisions made during the engagement, the analytical basis for each decision, and the outcomes as implemented in the transaction documentation. This summary is intended to serve as a convenient reference for the engagement record and should be read in conjunction with the detailed memoranda referenc

Section 338(h)(10) Election. A Section 338(h)(10) election would treat the acquisition as a deemed asset sale by the target, followed by a deemed liquidation, thereby stepping up the tax basis of all target assets to their fair market values. However, this election is available only where the target is a corporation (including an S corporation). Pinnacle Health Services Group LLC was classified as a partnership for f

Section 754 Election (Recommended and Adopted). A Section 754 election, made by Pinnacle Health Services Group LLC, would result in a Section 743(b) basis adjustment to the inside basis of Pinnacle's assets in an amount equal to the difference between the acquiring partner's (Intermediate Inc.'s) outside basis in its Pinnacle interest (equal to the purchase price) and its proportionate share of Pinnacle's inside basi

Section 721 vs. Section 351 Analysis. Calderwood & Harkness LLP analyzed two alternative characterizations for the rollover contribution: • Section 721 (partnership contribution): The rollover participants contribute their Pinnacle interests to Holdings LLC (a partnership for federal tax purposes) in exchange for Class B Units. Under Section 721(a), no gain or loss is recognized by the contributing partner or the par

Section 83(b) Elections. Each rollover participant is required to file a Section 83(b) election with the Internal Revenue Service within thirty (30) days of the closing date (i.e., by June 30, 2024). The Section 83(b) election causes the rollover participant to include in gross income the fair market value of the unvested units at the time of grant (less any amount paid), which in the case of properly structured prof

6. FINANCIAL SUMMARY — FEES AND EXPENSES 6.1 Fee Cap and Actuals The engagement letter dated January 10, 2024, established a fee arrangement based on hourly rates, subject to an estimated fee budget of $1,850,000 and a fee cap of $2,000,000 (inclusive of out-of-pocket expenses but exclusive of government filing fees). The actual fees and expenses billed are summarized below: Total actual fees and expenses of $1,742,3

7. POST-CLOSING MATTERS HANDED OFF TO CLIENT 7.1 Items Requiring Client Action After Engagement Close Upon close-out of this engagement, the following post-closing matters have been identified as requiring action by the client (Ardent Capital Partners III LP), the portfolio company entities, the rollover participants, and/or the client's ongoing tax advisors. Calderwood & Harkness LLP has provided comprehensive guida

Section 83(b) Elections. Each rollover participant — Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and Jonathan Marsh — must file a Section 83(b) election with the Internal Revenue Service via certified mail no later than June 30, 2024 (i.e., thirty (30) days after the May 31, 2024 closing date). Calderwood & Harkness LLP has prepared and delivered customized Section 83(b) election form templates (Deliverable 13) and tr

Section 754 Election Filing. A draft Section 754 election statement has been prepared and delivered (Deliverable 31). The election statement must be attached to Pinnacle Health Services Group LLC's Form 1065 (U.S. Return of Partnership Income) for the taxable year ending December 31, 2024. Filing responsibility has been transferred to Caldwell Pratt & Moorehouse LLP, as the ongoing tax return preparer for Pinnacle an

8. DOCUMENT RETENTION AND FILE MANAGEMENT All engagement files, both electronic and physical, are to be retained in accordance with Calderwood & Harkness LLP's Document Retention Policy (Firm Policy No. DR-2019-04, as amended). The applicable retention period for tax advisory engagement files is ten (10) years from the date of engagement close-out, unless a longer retention period is required by applicable law, regul

9. CONFLICT CLEARANCE — CLOSE-OUT The original conflict check for this engagement was completed on January 8, 2024, in accordance with Calderwood & Harkness LLP's Conflicts of Interest Policy (Firm Policy No. CI-2021-07). The conflict check was performed against all known parties to the transaction, including the client, the target, all selling members, all counterparty entities, and all external counsel and advisors