Contract analysis

I. Executive Summary This joint memorandum has been prepared by Hargrove, Sinclair & Demarest LLP, healthcare regulatory counsel, in coordination with Calderwood & Harkness LLP, M&A transaction counsel, to analyze the material healthcare regulatory compliance issues arising in connection with the proposed acquisition by Ardent Healthcare Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of Ardent Capital

II. Background and Transaction Overview A. The Parties The Purchaser. Ardent Healthcare Acquisition Corp. is a Delaware corporation formed on January 22, 2024, for the purpose of consummating the Transaction. The Purchaser is a wholly owned subsidiary of Ardent Capital Partners III LP ("Fund III"), a Delaware limited partnership. The general partner of Fund III is Ardent Capital Management LLC, a Delaware limited lia

III. State Change-of-Ownership Filing Requirements A. Overview of State CHOW Frameworks In the healthcare regulatory context, a "change of ownership" (commonly referred to as a "CHOW") occurs when there is a transfer of operational control of a licensed healthcare facility or provider from one legal entity to another. State healthcare facility licensing agencies, as well as CMS for purposes of Medicare enrollment, re

I. Summary Table — State CHOW Filing Status The following table summarizes the CHOW filing status for each of the seven states in which CPI operates: J. Recommendations Regarding CHOW Filings Based on the foregoing analysis, we make the following recommendations regarding CHOW filings:

1. Virginia filings are the most time-sensitive. The Virginia CHOW applications for CPI's two Virginia locations should be filed no later than April 1, 2024, to comply with VDH's 60-day recommended advance notice period and to avoid any risk of delay in the Purchaser's ability to operate the Virginia locations upon closing. Hargrove, Sinclair & Demarest is prepared to finalize and submit these filings upon receipt of

2. Remaining state filings (SC, AL, KY) should be filed by April 15, 2024. The South Carolina, Alabama, and Kentucky CHOW applications should be filed no later than April 15, 2024. This timeline provides ample lead time relative to each state's advance notice requirements and estimated processing timelines.

3. Hargrove, Sinclair & Demarest will prepare and file all remaining applications. Our firm will prepare and submit all remaining CHOW applications for the four states in which filings have not yet been made, in coordination with CPI and the Purchaser.

4. APA closing condition should address CHOW filings. Calderwood & Harkness should include as a condition to closing in the APA a provision requiring that all required CHOW filings have been made and that no state regulatory agency has issued a denial of or formal objection to any such application. It is important that the closing condition be structured to require only the filing of all CHOW applications and the abs

IV. Federal Anti-Kickback Statute Analysis A. Overview of the Anti-Kickback Statute (AKS) The federal Anti-Kickback Statute ("AKS"), codified at 42 U.S.C. § 1320a-7b(b), prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward the referral of an individ

V. Stark Law (Physician Self-Referral) Analysis A. Overview of the Stark Law The federal Physician Self-Referral Law (commonly known as the "Stark Law"), codified at 42 U.S.C. § 1395nn, prohibits a physician from making a referral for certain "designated health services" ("DHS") payable by Medicare to an entity with which the physician (or an immediate family member of the physician) has a financial relationship — ei

1. Employment Agreements. The post-closing employment agreements for Dr. Whitfield (and, to the extent relevant for AKS purposes, Ms. Whitfield-Torres) must be structured to satisfy the Bona Fide Employment Exception under the Stark Law. Specifically, the agreements must: (a) identify the specific services to be performed; (b) set compensation at a level consistent with fair market value, as documented by a compensat

2. APA Representations. The APA should include specific representations by the Seller regarding CPI's historical compliance with the Stark Law, including representations that: (a) CPI has not made or caused to be made any referral that violates the Stark Law; (b) all financial relationships between CPI and referring physicians satisfy applicable Stark Law exceptions; and (c) CPI has not filed, and does not have any o

3. Post-Closing Compliance Program. The Purchaser should implement a post-closing compliance program that includes Stark Law monitoring for all physician compensation arrangements, including Dr. Whitfield's employment agreement. The compliance program should include periodic review of referral patterns, compensation levels, and documentation to ensure ongoing compliance with applicable Stark exceptions.

4. Purchase Price Allocation. The purchase price allocation under IRC § 1060 should be reviewed to ensure that no allocation inadvertently creates an arrangement that could be construed as physician remuneration. For example, if any portion of the purchase price is allocated to a non-compete covenant or consulting agreement with Dr. Whitfield, such arrangement must independently satisfy a Stark Law exception.

VI. Medicare and Medicaid Enrollment Implications A. Medicare Enrollment CPI is currently enrolled as a Medicare supplier for outpatient rehabilitation and behavioral health services through the CMS-855B enrollment process. CPI holds Medicare provider transaction access numbers ("PTANs") and National Provider Identifiers ("NPIs") for its 37 clinic locations. CPI bills Medicare for outpatient physical therapy, occupat