Contract analysis

I. EXECUTIVE SUMMARY The purpose of this memorandum is to set forth the methodology, results, and tax basis for the allocation of the $412,000,000 aggregate enterprise value paid by Ardent Healthcare Intermediate Inc. (a Delaware C-corporation, EIN 93-2187512) for 100% of the membership interests in Pinnacle Health Services Group LLC ("Pinnacle" or the "Company," EIN 82-1947632) in connection with the reverse merger

II. TRANSACTION OVERVIEW AND PURCHASE PRICE DETERMINATION A. Transaction Structure The Transaction involved the acquisition of 100% of the outstanding membership interests in Pinnacle Health Services Group LLC via a reverse merger. Specifically, Ardent Healthcare Merger Sub LLC, a newly formed Delaware limited liability company organized solely for the purpose of effecting the Transaction, merged with and into Pinnac

III. LEGAL FRAMEWORK FOR PURCHASE PRICE ALLOCATION A. Inapplicability of Section 1060 to Partnership Interest Purchases

Section 1060 of the Internal Revenue Code applies to "applicable asset acquisitions" — that is, direct acquisitions of assets that constitute a trade or business, as defined in Treasury Regulations Section 1.1060-1(b)(2). In an applicable asset acquisition, both the buyer and seller are required to allocate the aggregate consideration among the acquired assets using the residual method prescribed by Section 1060 and

Section 754 of the Internal Revenue Code provides that a partnership may elect to adjust the basis of partnership property in the case of a transfer of a partnership interest (under Section 743) or a distribution of partnership property (under Section 734). The election, once made, applies to all transfers and distributions occurring in the taxable year for which the election is made and in all subsequent taxable yea

Section 743(b) basis step-up: $412,000,000 − $187,600,000 = $224,400,000 This step-up of $224,400,000 is personal to Intermediate Inc. and is reflected as a special basis adjustment that exists only for the benefit of Intermediate Inc. in computing its allocable share of partnership income, gain, loss, and deductions. The step-up does not affect Pinnacle's common basis in its assets, does not appear on Pinnacle's bal

IV. PURCHASE PRICE ALLOCATION — DETAILED SCHEDULE A. Summary Allocation Table The following table summarizes the allocation of the $412,000,000 aggregate Enterprise Value among Pinnacle's assets, the existing Pinnacle inside basis in each asset class, the resulting Section 743(b) step-up, the applicable useful life for tax amortization purposes, and the estimated annual amortization of the step-up portion: As reflect

1. Medical Equipment Medical equipment includes diagnostic equipment (x-ray machines, ultrasound units, laboratory analyzers), surgical equipment (arthroscopic systems, endoscopy towers, anesthesia machines) deployed at the eight ambulatory surgery centers, and imaging equipment (CT scanners, digital radiography systems) installed at selected urgent care locations. The aggregate fair market value of medical equipment

2. Leasehold Improvements Leasehold improvements include build-outs, tenant improvements, HVAC modifications, plumbing and electrical upgrades, and specialized medical facility construction across Pinnacle's 42 leased facilities. The aggregate fair market value of leasehold improvements is $22,800,000, and Pinnacle's inside basis is approximately $14,200,000, yielding a step-up of approximately $8,600,000. The estima

3. Furniture, Fixtures, and Office Equipment This category includes waiting room furniture, examination room fixtures, reception desks, computer hardware, telephone systems, and other office equipment. The aggregate fair market value is $6,500,000, and Pinnacle's inside basis is approximately $4,100,000, yielding a step-up of approximately $2,400,000. The estimated remaining useful life is 3 to 5 years, with a MACRS

1. Payor Contracts and Payor Relationships Fair Market Value: $78,300,000 Pinnacle Inside Basis: $38,700,000

Section 743(b) Step-Up: $39,600,000 Useful Life for Tax Amortization: 15 years (Section 197 intangible) Annual Amortization of Step-Up: $39,600,000 ÷ 15 = $2,640,000 per year Pinnacle's contracts and relationships with commercial insurance payors, managed care organizations, Medicare, and Medicaid represent the single most significant identifiable intangible asset of the business. These relationships are the foundati

2. Assembled Workforce Fair Market Value: $12,100,000 Pinnacle Inside Basis: $4,200,000

Section 743(b) Step-Up: $7,900,000 Useful Life for Tax Amortization: 15 years (Section 197 intangible) Annual Amortization of Step-Up: $7,900,000 ÷ 15 = $526,667 per year Pinnacle employs approximately 1,620 individuals, including 142 employed physicians and mid-level practitioners, as well as registered nurses, medical assistants, surgical technicians, administrative and billing staff, and management personnel. The

3. Trade Name — "Pinnacle Health Services" Fair Market Value: $38,400,000 Pinnacle Inside Basis: $8,700,000

Section 743(b) Step-Up: $29,700,000 Useful Life for Tax Amortization: 15 years (Section 197 intangible) Annual Amortization of Step-Up: $29,700,000 ÷ 15 = $1,980,000 per year The "Pinnacle Health Services" trade name is a recognized regional brand with significant patient and referral source recognition across Pinnacle's five-state footprint. The brand is associated with quality urgent care and ambulatory surgical se

4. Non-Compete Agreements Fair Market Value: $17,400,000 Pinnacle Inside Basis: $10,800,000

Section 743(b) Step-Up: $6,600,000 Useful Life for Tax Amortization: 15 years (Section 197 intangible) Annual Amortization of Step-Up: $6,600,000 ÷ 15 = $440,000 per year In connection with the Transaction, Pinnacle's three founding members — Dr. Raymond Carvallo, M.D., Dr. Nadia Ostrowski, M.D., and Jonathan Farnsworth — entered into non-compete, non-solicitation, and non-disclosure agreements with Pinnacle and Inte

Section 743(b) Step-Up Allocated to Goodwill: $157,200,000 − $42,000,000 = $115,200,000 Useful Life for Tax Amortization: 15 years (Section 197 intangible) Annual Amortization of Step-Up: $115,200,000 ÷ 15 = $7,680,000 per year The goodwill allocated to Class VI reflects Pinnacle's going concern value — that is, the value attributable to the Company's assembled platform, established market position, operational infra

V. AMORTIZATION AND TAX BENEFIT ANALYSIS A. Weighted-Average Useful Life Computation The weighted-average useful life of the assets receiving a Section 743(b) step-up is computed as follows, weighting each asset class's step-up amount by its applicable amortization period: Weighted-Average Useful Life = $3,162,800,000 ÷ $224,400,000 = approximately 14.1 years However, because the Class IV tangible property includes a

VI. TAX RECEIVABLE AGREEMENT IMPLICATIONS In connection with the Transaction, Ardent Healthcare Intermediate Inc. and Holdings LLC entered into a Tax Receivable Agreement (the "TRA") with the rollover participants and certain pre-closing minority physician-investors (collectively, the "TRA Holders"), execution version dated May 28, 2024. The TRA provides that 85% of the realized cash tax savings attributable to the S

VII. REPORTING AND COMPLIANCE OBLIGATIONS A. Form 8594 As discussed in Section III.A, Form 8594 (Asset Acquisition Statement Under Section 1060) is not required in connection with the Transaction, because the acquisition of membership interests in Pinnacle (a partnership) is not an "applicable asset acquisition" within the meaning of Section 1060. No Form 8594 will be filed by either the buyer or the sellers in conne