Contract analysis

I. Executive Summary This memorandum analyzes the federal income tax treatment of unvested Class B Units of Ardent Healthcare Holdings LLC ("Holdings LLC") to be received by the three rollover participants — Dr. Raymond Carvallo (Co-Founder and Chief Executive Officer of Pinnacle Health Services Group LLC ("Pinnacle")), Dr. Nadia Ostrowski (Co-Founder and Chief Medical Officer of Pinnacle), and Jonathan Farnsworth (C

1. The unvested Class B Units should be structured as "profits interests" within the meaning of Revenue Procedure 93-27 and Revenue Procedure 2001-43, with a participation threshold equal to the aggregate fair market value of Holdings LLC as of the closing date, such that the Class B Units have a liquidation value of zero at grant.

2. Each rollover participant should file a protective election under Section 83(b) of the Code within thirty (30) days of the closing date of the Transaction.

3. Holdings LLC should treat each Class B holder as a partner from the date of grant (i.e., the closing date), allocating distributive share items of partnership income, gain, loss, deduction, and credit to each such holder during the vesting period, consistent with the requirements of Revenue Procedure 2001-43. The anticipated closing date of the Transaction is May 31, 2024. Accordingly, the deadline for filing the

II. Background and Transaction Summary A. Transaction Structure Ardent Capital Partners III LP, a Delaware limited partnership with a $3.2 billion fund size (vintage 2022), managed by Ardent Capital Management LLC, is acquiring 100% of the outstanding membership interests in Pinnacle Health Services Group LLC through a reverse merger transaction. Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"),

III. Federal Income Tax Framework — Section 83 and Partnership Profits Interests A. Section 83 Generally

Section 83(a) of the Internal Revenue Code provides the general rule governing the taxation of property transferred in connection with the performance of services. Specifically, Section 83(a) provides that if, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of (i) the fair market value of such property (determ

1. Revenue Procedure 93-27. Revenue Procedure 93-27, 1993-2 C.B. 343, establishes the IRS's position on the tax treatment of partnership profits interests received in connection with the performance of services. The revenue procedure defines a "profits interest" as a partnership interest other than a "capital interest." A "capital interest" is defined as an interest that would give the holder a share of the proceeds

2. Revenue Procedure 2001-43. Revenue Procedure 2001-43, 2001-2 C.B. 191, supplements Revenue Procedure 93-27 by addressing the specific treatment of unvested profits interests — that is, profits interests that are subject to a substantial risk of forfeiture at the time of grant. The revenue procedure provides that the IRS will not treat the grant of an unvested profits interest for services as a taxable event if bot

IV. Analysis: Qualification of Class B Units as Profits Interests Having set forth the applicable legal framework, we now analyze whether the unvested Class B Units of Holdings LLC satisfy each of the four conditions of Revenue Procedure 93-27 for treatment as profits interests. A. Liquidation Value Test The threshold requirement for profits interest treatment is that the interest must have a liquidation value of zer

V. Section 83(b) Election — Protective Filing A. Purpose and Mechanics

Section 83(b) of the Code permits a service provider who receives property that is subject to a substantial risk of forfeiture to make an affirmative election to include in gross income, in the taxable year in which the property is transferred, the excess of the fair market value of the property at the time of transfer over the amount (if any) paid for the property. By making this election, the service provider accel

1. Timing. The election must be filed with the Internal Revenue Service within 30 days after the date on which the property is transferred to the service provider. In this case, the "transfer" occurs at the closing of the Transaction, which is anticipated to be May 31, 2024. Accordingly, the deadline for filing the Section 83(b) election is June 30, 2024 (30 calendar days after May 31, 2024). This deadline is absolut

2. Filing Location. The election must be filed with the IRS Service Center at which the participant files his or her individual federal income tax return. For participants residing in Pennsylvania (as we understand is the case for Dr. Carvallo and Dr. Ostrowski), the appropriate IRS Service Center is currently the Internal Revenue Service Center, Kansas City, MO 64999 (though this may be confirmed at the time of fili

3. Copy to Transferor. A copy of the filed election must be provided to the transferor — in this case, Ardent Healthcare Holdings LLC (c/o Ardent Capital Partners III LP, 600 Lexington Avenue, 38th Floor, New York, NY 10022). We recommend that each participant provide this copy promptly after filing, and that Holdings LLC acknowledge receipt in writing.

4. Attachment to Tax Return. A copy of the election must be attached to the participant's federal income tax return for the taxable year in which the property was transferred — in this case, the participant's 2024 federal income tax return (due April 15, 2025, or as extended). Although failure to attach the election to the tax return does not, by itself, invalidate the election (under Treasury Regulation Section 1.83

5. Content of Election. The election must contain the following information, as specified by Treasury Regulation Section 1.83-2(e): (i) the name, address, and taxpayer identification number of the person making the election; (ii) a description of each property with respect to which the election is being made; (iii) the date on which the property was transferred and the taxable year for which the election is made; (iv

VI. Unvested Component Allocation by Participant A. Summary Table The following table summarizes the rollover equity, vesting allocation, and unvested profits interest component for each of the three rollover participants: B. Notes on Vesting Mechanics The vesting of the unvested Class B Units operates as follows: Monthly Ratable Vesting. One thirty-sixth (1/36th) of each participant's unvested Class B Units will ves

VII. Partnership Tax Treatment of Class B Holders During Vesting Period A. Allocation of Income and Loss As discussed in Section III.B.2 above, Revenue Procedure 2001-43 requires that Holdings LLC treat each Class B holder as a partner from the grant date (the closing date, May 31, 2024) and allocate distributive share items of partnership income, gain, loss, deduction, and credit to each such holder during the entir