Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the federal and state income tax, transfer tax, and structural implications of the proposed acquisition of one hundred percent (100%) of the outstanding equity of MedVance Health Systems, Inc. ("MedVance" or the "Target") by Ardent Healthcare Holdings Inc. (the "Purchaser"), a newly formed Delaware acquisition vehicle, for a total purchase price of Six Hundred Twenty Mill

1. Recommended Acquisition Structure — Stock Purchase. A straight stock purchase is recommended as the most tax-efficient acquisition structure for the Transaction. The Purchaser should acquire 100% of MedVance's issued and outstanding common stock directly from the selling stockholders. A stock purchase avoids entity-level gain recognition by MedVance, eliminates the risk of double taxation that would arise in an as

2. Section 338(h)(10) Election — Not Recommended. Based on the detailed analysis set forth in Section IV of this memorandum, a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code"), is not recommended. Even assuming that such an election is available (which presents threshold issues given that MedVance is a stand-alone C corporation rather than a member of a selling con

3. State Transfer Taxes — Manageable. State transfer taxes across the four states in which MedVance operates — Tennessee, Alabama, Georgia, and Kentucky — are estimated to be minimal in the aggregate, as a stock acquisition does not trigger real estate transfer taxes (legal title to real property does not change) and none of these jurisdictions impose a stock transfer tax applicable to this Transaction. The estimated

4. Management Rollover Equity — Tax-Deferred Under Section 351. The management rollover equity (approximately $18,600,000 in value) can be structured on a tax-deferred basis under Section 351 of the Code, subject to satisfaction of the "control immediately after" requirement and the conditions described in Section VI herein. We recommend structuring the rollover as a concurrent Section 351 contribution to the Purchas

5. Foregone Basis Step-Up. In a stock purchase without a Section 338 election, the Purchaser will not achieve a step-up in the tax basis of MedVance's underlying assets. The assets will retain their historical (inside) tax bases. The estimated value of the foregone step-up and related depreciation and amortization tax shield is quantified in Section VII and Exhibit B, confirming that the net present value of the step

II. BACKGROUND AND FACTUAL ASSUMPTIONS A. Transaction Overview The proposed Transaction contemplates that Ardent Capital Partners III LP, acting through its general partner Ardent Capital Management III LLC, will cause Ardent Healthcare Holdings Inc., a newly formed Delaware corporation (the "Purchaser"), to acquire one hundred percent (100%) of the issued and outstanding shares of common stock of MedVance Health Sys

III. STOCK PURCHASE vs. ASSET PURCHASE ANALYSIS A. Overview of Structural Alternatives In connection with the proposed acquisition of MedVance, two primary acquisition structures have been evaluated: (1) Stock Purchase. Under a stock purchase structure, the Purchaser acquires one hundred percent (100%) of MedVance's issued and outstanding common stock directly from the selling stockholders (Crestline, Ryland Holdings

IV. SECTION 338(h)(10) ELECTION ANALYSIS A. Overview of Section 338(h)(10)

Section 338(h)(10) of the Code, together with Treasury Regulation Section 1.338(h)(10)-1, permits the acquiring corporation and the selling shareholder(s) in a "qualified stock purchase" to jointly elect to treat the stock acquisition as if it were an asset acquisition for federal income tax purposes. If the election is made, the Target is deemed to have sold all of its assets at fair market value in a single transac

Section 338(g) Election. As an alternative, the Purchaser could make a unilateral election under Section 338(g) of the Code. A Section 338(g) election treats the Target as having sold all of its assets and repurchased them at fair market value on the day after the acquisition date, but — unlike a Section 338(h)(10) election — it does not eliminate the shareholder-level gain on the actual stock sale. Instead, a Sectio

V. STATE TAX NEXUS AND TRANSFER TAX ANALYSIS A. State Income Tax Nexus — MedVance Operations MedVance currently files state income and/or franchise tax returns in Tennessee, Alabama, Georgia, and Kentucky, the four states in which it operates healthcare facilities. Below, we summarize the corporate income/franchise tax regime in each state and MedVance's estimated apportionment methodology.

1. Tennessee. Tennessee imposes two principal business taxes on corporations doing business in the state: (a) Corporate Excise Tax. Tennessee's corporate excise tax is imposed at a rate of 6.5% on net earnings (taxable income) apportioned to Tennessee. Tennessee uses a single-factor (gross receipts) apportionment formula for tax years beginning on or after January 1, 2016, though certain taxpayers may use alternative

2. Alabama. (a) Corporate Income Tax. Alabama imposes a corporate income tax at a rate of 6.5% on net income apportioned to Alabama. Alabama uses a single-factor (sales) apportionment formula for tax years beginning on or after January 1, 2021. MedVance's Alabama apportionment factor is estimated at approximately 25%, reflecting the significant presence of MedVance's facilities in Birmingham and Huntsville. (b) Busin

3. Georgia. (a) Corporate Income Tax. Georgia imposes a corporate income tax at a rate of 5.75% on net income apportioned to Georgia. Georgia uses a single-factor (sales) apportionment formula. MedVance's Georgia apportionment factor is estimated at approximately 15%, reflecting MedVance's smaller but significant operations in the Atlanta metropolitan area and other Georgia locations. (b) Intangibles Tax. Georgia his

4. Kentucky. (a) Corporate Income Tax. Kentucky imposes a flat corporate income tax at a rate of 5.0% on net income apportioned to Kentucky. Kentucky uses a single-factor (sales) apportionment formula for tax years beginning on or after January 1, 2018. MedVance's Kentucky apportionment factor is estimated at approximately 10%, reflecting MedVance's smaller operations in the Lexington and Louisville areas. (b) Limite

VI. TREATMENT OF MANAGEMENT ROLLOVER EQUITY A. Overview of Rollover Structure As described in Section II.A, certain members of MedVance's management team will roll over a portion of their equity in MedVance into equity of the Purchaser, rather than receiving cash for 100% of their MedVance shares. The key terms of the proposed rollover are as follows: • Aggregate Management Equity in MedVance: The management holders

Section 351(a) of the Code provides that no gain or loss shall be recognized if one or more persons transfer property to a corporation solely in exchange for stock of such corporation, and immediately after the exchange, the transferors are in "control" of the corporation. "Control" is defined in Section 368(c) as the ownership of stock possessing at least 80% of the total combined voting power of all classes of stoc