Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the state and local tax ("SALT") implications arising from Ardent Capital Partners III LP's ("Fund III" or "Ardent") proposed acquisition of one hundred percent (100%) of the membership interests in Pinnacle Health Services Group LLC ("Pinnacle" or the "Company") (EIN 82-1947632) at an enterprise value of approximately $412 million and an equity value

II. Transaction Structure — SALT Implications Overview A. Proposed Acquisition Structure The proposed acquisition employs a three-tier structure designed to accomplish several objectives, including the provision of a blocker entity for the benefit of Fund III's tax-exempt and non-U.S. limited partners, the facilitation of a Section 754 election and resulting Section 743(b) step-up in the inside basis of Pinnacle's as

III. Pennsylvania A. Corporate Net Income Tax Pennsylvania imposes a corporate net income tax ("CNIT") on the taxable income of corporations doing business in the Commonwealth. For tax year 2024, the CNIT rate is 8.99%. However, pursuant to Act 53 of 2022, Pennsylvania has enacted a multi-year phase-down of the CNIT rate that will significantly reduce the rate applicable to Intermediate Inc.'s Pennsylvania-sourced in

IV. Virginia A. Corporate Income Tax Virginia imposes a corporate income tax at a flat rate of 6.0% on Virginia taxable income of corporations doing business in the Commonwealth. Intermediate Inc. will be subject to Virginia corporate income tax on the portion of Pinnacle's income that is apportioned to Virginia. Apportionment. Effective for tax years beginning on or after January 1, 2021, Virginia adopted a single-s

V. Maryland A. Corporate Income Tax Maryland imposes a corporate income tax at a rate of 8.25% on the Maryland taxable income of corporations doing business in the State. This rate is one of the higher state corporate income tax rates among Pinnacle's operating states and will be a meaningful contributor to the blended effective state tax rate applicable to Intermediate Inc.'s share of Pinnacle's income. Intermediate

VI. North Carolina A. Corporate Income Tax North Carolina imposes a corporate income tax on corporations doing business in the State. The current rate for tax year 2024 is 2.5%, which represents the culmination of a multi-year phase-down from 6.9% in 2013. North Carolina has the lowest corporate income tax rate among Pinnacle's five operating states, and there is pending legislation that would potentially reduce the

VII. Georgia A. Corporate Income Tax Georgia imposes a corporate income tax at a rate of 5.75% on the Georgia taxable income of corporations doing business in the State. Intermediate Inc. will be subject to Georgia corporate income tax on the portion of Pinnacle's income apportioned to Georgia. Apportionment. Georgia offers taxpayers the option of electing single-sales-factor apportionment for tax years beginning on

VIII. New York Nexus Analysis A. Risk Identification Although Pinnacle does not operate any facilities in New York and has no patients, employees, or tangible property located in the State, we have identified a potential New York nexus risk arising from the management activities of Holdings LLC. Specifically, Holdings LLC's business address is 600 Lexington Avenue, 38th Floor, New York, NY 10022, which is the same ad

IX. Apportionment Methodology Summary A. Comparative Table of Apportionment Methods by State The following table summarizes the apportionment methodology applicable in each of Pinnacle's five operating states: As reflected in the table, three of the five operating states (Pennsylvania, Virginia, and Georgia) employ a pure single-sales-factor formula, while two states (Maryland and North Carolina) retain a three-facto