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SECTION 754 ELECTION STATEMENT

PINNACLE HEALTH SERVICES GROUP LLC EIN: 82-1947632

Prepared by Calderwood & Harkness LLP One Liberty Plaza, 45th Floor New York, NY 10006

Engagement No. 1001-00006 Matter No. 1001-00006

May 31, 2024

For Attachment to Form 1065, U.S. Return of Partnership Income, for the Taxable Year Ending December 31, 2024

I. COVER MEMORANDUM

MEMORANDUM

TO: Marcus Pellegrino, Partner, Healthcare Ardent Capital Partners III LP 600 Lexington Avenue, 38th Floor New York, NY 10022

FROM: Leonard Cross, Partner, Tax Robert Jansen, Senior Associate, Tax Calderwood & Harkness LLP One Liberty Plaza, 45th Floor New York, NY 10006

DATE: May 31, 2024

RE: Draft Section 754 Election Statement — Pinnacle Health Services Group LLC (EIN 82-1947632)

Dear Marcus:

Enclosed for your review is a draft election statement under Section 754 of the Internal Revenue Code of 1986, as amended (the "Code"), to be attached to the federal partnership income tax return (Form 1065) of Pinnacle Health Services Group LLC ("Pinnacle" or the "Partnership") for the taxable year ending December 31, 2024. This memorandum provides a summary of the enclosed draft, identifies certain procedural requirements, and outlines the coordination steps necessary to ensure the election is properly filed.

Nature and Irrevocability of the Election. As you are aware, a Section 754 election, once validly made and filed with the Partnership's timely filed return (including extensions), is irrevocable and will apply to all future transfers of partnership interests and all future distributions of partnership property unless and until the election is revoked with the prior consent of the Commissioner of Internal Revenue in accordance with Treasury Regulations Section 1.754-1(c). Given the irrevocable nature of this election, we strongly recommend that the final version of this statement be carefully reviewed by each of the relevant parties and their advisors before execution and filing.

Transaction Context. This election is being made in connection with the acquisition of 100% of the membership interests in Pinnacle by Ardent Healthcare Intermediate Inc. (EIN 93-2187512), a Delaware C-corporation and a wholly owned subsidiary of Ardent Healthcare Holdings LLC (EIN 93-2187445), which acquisition was effectuated through the reverse merger of Ardent Healthcare Merger Sub LLC (Delaware File No. 7834227) with and into Pinnacle, with Pinnacle surviving as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc. The transaction closed on May 31, 2024, pursuant to that certain Agreement and Plan of Merger, dated as of March 15, 2024 (the "Merger Agreement"), by and among Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, Pinnacle, and the pre-closing members of Pinnacle named therein.

Execution and Filing Instructions. The final version of this election statement should be reviewed and signed by the partnership representative (or, if applicable, the partnership's designated individual under the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015) and attached to the timely filed (including extensions) Form 1065 for the taxable year ending December 31, 2024. The Partnership's 2024 Form 1065 must be filed by March 15, 2025 (or by September 15, 2025 if the Partnership obtains a six-month extension by timely filing Form 7004). We anticipate that the Partnership will request the automatic six-month extension and therefore the filing deadline, inclusive of such extension, will be September 15, 2025.

Coordination with Advisors. We request that this draft be shared, at your direction, with the following firms for coordination purposes:

(a) Caldwell Pratt & Moorehouse LLP (New York, NY), Ardent Capital Partners III LP's accounting and audit firm, which we understand will be responsible for the preparation and filing of the Partnership's 2024 Form 1065 for the post-closing period and for ensuring the election statement is properly included as an attachment thereto; and

(b) Brewer Stanfield & Associates LLP (Philadelphia, PA), Pinnacle's historical accounting and audit firm, which may be called upon to provide supporting documentation and workpapers relating to the pre-closing tax basis of partnership assets and the preparation of the short-period Schedules K-1 for the pre-closing members for the period ending May 31, 2024.

We remain available to discuss any aspect of this election statement at your convenience. Please do not hesitate to contact Leonard Cross at (212) 555-4100 or Robert Jansen at (212) 555-4138 with any questions or comments.

Very truly yours,

CALDERWOOD & HARKNESS LLP

II. ELECTION STATEMENT — SECTION 754

A. Formal Caption

ELECTION UNDER SECTION 754 OF THE INTERNAL REVENUE CODE

Partnership Name: Pinnacle Health Services Group LLC

Employer Identification Number: 82-1947632

Principal Office Address: 2200 Renaissance Boulevard, Suite 400, King of Prussia, Pennsylvania 19406

Taxable Year for Which Election is Made: Taxable year ending December 31, 2024

Entity Type: Delaware limited liability company classified as a partnership for federal income tax purposes. Pinnacle Health Services Group LLC has at all times since its formation been treated as a partnership for federal income tax purposes and has never elected to be classified as an association taxable as a corporation under Treasury Regulations Section 301.7701-3. Pinnacle has two or more members and, accordingly, its default classification under the check-the-box regulations is as a partnership.

Date of Formation: Pinnacle Health Services Group LLC was formed under the Delaware Limited Liability Company Act on August 12, 2016, and has been governed by its Limited Liability Company Operating Agreement dated August 12, 2016 (as amended by that certain First Amendment to the Limited Liability Company Operating Agreement, dated March 3, 2020). In connection with the closing of the transaction described herein, the Operating Agreement was amended and restated in its entirety, effective as of May 31, 2024.

Registered Agent: Pemberton Industries, 251 Little Falls Drive, Wilmington, Delaware 19808

B. Statement of Election

Pinnacle Health Services Group LLC (the "Partnership"), acting through the undersigned authorized partner, hereby elects, pursuant to Section 754 of the Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations Section 1.754-1(b)(1), to adjust the basis of partnership property in the manner provided in:

(i) Section 734(b) of the Code, with respect to distributions of partnership property to a partner, whereby the basis of partnership property shall be adjusted in the case of a distribution of partnership property to reflect any gain or loss recognized by the distributee partner and the difference, if any, between the distributee partner's basis in property received in the distribution and the partnership's adjusted basis in such property immediately before such distribution; and

(ii) Section 743(b) of the Code, with respect to transfers of partnership interests by sale or exchange or upon the death of a partner, whereby the basis of partnership property shall be adjusted, with respect to the transferee partner only, to reflect the difference between the transferee partner's proportionate share of the adjusted basis of partnership property (inside basis) and the transferee partner's adjusted basis in the transferred partnership interest (outside basis).

This election shall be effective for the taxable year ending December 31, 2024, and for all subsequent taxable years of the Partnership unless revoked with the prior written consent of the Commissioner of Internal Revenue, in accordance with Treasury Regulations Section 1.754-1(c), upon application made by the Partnership to the Internal Revenue Service.

The Partnership acknowledges that the making of this election is irrevocable absent such consent and that the election, once made, will apply to all transfers of partnership interests and all distributions of partnership property occurring in the election year and in all subsequent taxable years of the Partnership.

C. Triggering Transfer

The transfer giving rise to the need for this Section 754 election and the corresponding Section 743(b) basis adjustment is described as follows:

Transaction Description. On May 31, 2024, 100% of the membership interests (the "Interests") in Pinnacle Health Services Group LLC were acquired by Ardent Healthcare Intermediate Inc. (EIN 93-2187512), a Delaware C-corporation (the "Transferee" or "Ardent Intermediate"), pursuant to the reverse merger (the "Merger") of Ardent Healthcare Merger Sub LLC (Delaware File No. 7834227), a Delaware limited liability company formed solely for purposes of effectuating the Merger (the "Merger Sub"), with and into Pinnacle, with Pinnacle surviving the Merger as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc. In the Merger, each pre-closing member of Pinnacle received cash consideration, rollover equity interests in Ardent Healthcare Holdings LLC, or a combination thereof, in exchange for such member's membership interests in Pinnacle, and all membership interests in Pinnacle outstanding immediately prior to the effective time of the Merger were cancelled and converted into the right to receive such consideration.

Transaction Structure. The ownership structure following the closing of the Merger is as follows:

• Ardent Capital Partners III LP (EIN 87-3491520), a Delaware limited partnership, together with certain rollover equity participants, is the direct or indirect owner of 100% of the equity interests in Ardent Healthcare Holdings LLC (EIN 93-2187445), a Delaware limited liability company classified as a partnership for federal income tax purposes.

• Ardent Healthcare Holdings LLC is the sole owner of 100% of the outstanding capital stock of Ardent Healthcare Intermediate Inc. (EIN 93-2187512), a Delaware C-corporation.

• Ardent Healthcare Intermediate Inc. is the sole member of Pinnacle Health Services Group LLC (EIN 82-1947632), a Delaware limited liability company classified as a partnership for federal income tax purposes, which survived the Merger.

For federal income tax purposes, the Merger is treated as a purchase by Ardent Healthcare Intermediate Inc. of 100% of the membership interests in Pinnacle from the pre-closing members, resulting in a transfer of a partnership interest within the meaning of Section 743(b) of the Code. Because Pinnacle has only one member following the Merger, it is disregarded as an entity separate from its owner for federal income tax purposes under Treasury Regulations Section 301.7701-3(b)(1)(ii), effective as of the date of the Merger. Notwithstanding such disregarded entity status, the Section 754 election and the corresponding Section 743(b) adjustment are made with respect to the final taxable year of Pinnacle as a partnership — the taxable year ending on May 31, 2024 (the date of the Merger) — and reported on the Form 1065 filed for the taxable year ending December 31, 2024 (as the Partnership's taxable year for its final return).

Enterprise Value and Equity Value.

• Enterprise Value: $412,000,000

• Equity Value: $339,400,000, calculated as follows:

Key Dates.

• Merger Agreement Date: March 15, 2024

• Closing Date / Effective Tax Date: May 31, 2024

The Merger Agreement, including the schedules and exhibits thereto, is on file with the Partnership and available for review by the Internal Revenue Service upon request.

D. Section 743(b) Basis Adjustment — Summary Computation

In accordance with Section 743(b) of the Code, the basis of partnership property is adjusted, with respect to the Transferee, by the amount equal to the excess of the Transferee's cost basis in the acquired partnership interest (outside basis) over the Transferee's proportionate share of the Partnership's adjusted basis in its assets (inside basis). The computation of the Section 743(b) basis adjustment is summarized as follows:

Transferee's Cost Basis in Partnership Interest (Outside Basis): $412,000,000

The Transferee's outside basis in the Partnership interest is equal to the enterprise value of $412,000,000, reflecting the total consideration attributable to Ardent Healthcare Intermediate Inc.'s acquisition of 100% of the partnership interests in Pinnacle, inclusive of the assumption of all partnership-level liabilities. For purposes of computing outside basis, the Transferee's basis in its partnership interest includes its share of partnership liabilities under Section 752 of the Code, which liabilities are reflected in the enterprise value.

Transferee's Share of Partnership's Inside Basis (Adjusted Basis of Partnership Assets): $187,600,000

The Transferee's proportionate share of the adjusted basis of the Partnership's assets is $187,600,000, determined as of the date of the transfer (May 31, 2024), in accordance with the Partnership's books and records and the balance sheet delivered at closing pursuant to Section 2.06 of the Merger Agreement.

Section 743(b) Basis Adjustment:

The Section 743(b) adjustment of $224,400,000 is a transferee-specific adjustment that is personal to Ardent Healthcare Intermediate Inc. and is allocated among the Partnership's assets in accordance with Section 755 of the Code and Treasury Regulations Section 1.755-1, as described in Section E below. This adjustment does not affect the common basis of the Partnership's assets; rather, it creates a special basis adjustment that is taken into account solely for purposes of computing the Transferee's distributive share of items of income, gain, loss, and deduction from the Partnership.

E. Allocation of Section 743(b) Adjustment Under Section 755

The Section 743(b) basis adjustment of $224,400,000 is allocated among the Partnership's assets in accordance with Section 755 of the Code and Treasury Regulations Section 1.755-1. The allocation follows the residual method, applied analogously to the methodology set forth in Section 1060 of the Code and Treasury Regulations Section 1.1060-1(c) for applicable asset acquisitions, as is customary for purposes of allocating a Section 743(b) adjustment under Section 755 in connection with the acquisition of a partnership interest.

A detailed asset-by-asset allocation is set forth in the Purchase Price Allocation Schedule dated April 18, 2024, and the Purchase Price Allocation Memorandum dated April 18, 2024, each prepared by Calderwood & Harkness LLP (collectively, the "PPA Materials"), which are referenced herein as Appendix A and Appendix B, respectively. The PPA Materials reflect a preliminary allocation based on information available as of the date thereof and are subject to adjustment upon finalization of the independent third-party valuation currently being prepared by Westmark Consulting Group (now Sundial Advisors) at the direction of Ardent Capital Partners III LP. The summary allocation across residual method asset classes is as follows:

The Class V intangible assets are further broken down as follows:

Weighted-Average Useful Life of Section 743(b) Adjustment. Based on the allocation set forth above, the weighted-average useful life of the aggregate Section 743(b) basis adjustment of $224,400,000 is approximately 11.2 years, computed on a weighted-average basis across all asset classes using the fair market value allocation as weights and applying the applicable recovery periods or useful lives for each asset class.

Estimated Annual Amortization Deduction. The estimated annual amortization and depreciation deductions attributable to the Section 743(b) basis adjustment, assuming straight-line recovery and a mid-year convention (or mid-month convention where applicable), are approximately:

$224,400,000 ÷ 11.2 years ≈ $20,040,000 per year

This estimate is provided for illustrative purposes and is subject to refinement upon completion of the final purchase price allocation and determination of the applicable depreciation and amortization methods and conventions for each asset class.

Estimated Annual Tax Benefit. At a blended effective income tax rate of approximately 25%, the estimated annual tax benefit attributable to the Section 743(b) basis step-up is approximately:

$20,040,000 × 25% ≈ $5,010,000 per year

The 25% blended effective rate reflects the federal corporate income tax rate of 21% applicable to Ardent Healthcare Intermediate Inc. (the entity through which the tax benefits flow) and an estimated blended state effective income tax rate of approximately 6.42%, weighted by EBITDA allocation across the jurisdictions in which Pinnacle operates (Pennsylvania, Virginia, Maryland, North Carolina, and Georgia), net of the federal deduction for state income taxes paid. The blended state rate is preliminary and will be updated as the post-closing operations of Pinnacle are finalized for the 2024 taxable year.

III. FILING INSTRUCTIONS AND PROCEDURAL REQUIREMENTS

A. Filing Requirements

The Section 754 election statement set forth in Section II above must be filed in compliance with the following procedural requirements:

1. Attachment to Timely Filed Return. The election statement must be attached to a timely filed Form 1065, U.S. Return of Partnership Income, for the taxable year ending December 31, 2024. For this purpose, a return is considered timely filed if it is filed on or before the due date of the return (March 15, 2025) or, if the Partnership has obtained an automatic six-month extension of time to file by timely filing Form 7004, on or before the extended due date (September 15, 2025). It is anticipated that the Partnership will file Form 7004 to obtain the six-month extension, and accordingly the election statement should be attached to the Form 1065 filed on or before September 15, 2025.

2. Signature by Authorized Partner. The election statement must be signed by any one of the partners of the Partnership who is authorized to sign the Partnership's return. Under the Amended and Restated Operating Agreement of Pinnacle, effective as of May 31, 2024, Ardent Healthcare Intermediate Inc. is the sole member and managing member of Pinnacle. Accordingly, the election statement should be signed by a duly authorized officer of Ardent Healthcare Intermediate Inc. acting in its capacity as the sole member of the Partnership.

3. Partnership Representative. For purposes of the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015 (the "BBA"), the Partnership must designate a partnership representative for the taxable year ending December 31, 2024, on its Form 1065. It is expected that the partnership representative will be Ardent Healthcare Intermediate Inc., acting through a designated individual to be named on the return. The designation of the partnership representative should be coordinated with Caldwell Pratt & Moorehouse LLP in connection with the preparation of the 2024 Form 1065.

B. Irrevocability

Once validly filed with the Partnership's timely filed Form 1065 for the taxable year ending December 31, 2024, the Section 754 election is effective for that taxable year and for all subsequent taxable years of the Partnership. The election cannot be unilaterally revoked by the Partnership.

Revocation of a Section 754 election requires the Partnership to submit a written application to the IRS District Director (or the appropriate IRS office) requesting consent to revoke the election. Under Treasury Regulations Section 1.754-1(c), such consent will not be granted unless the Partnership demonstrates that there has been a change in the nature of the Partnership's business or a substantial increase in the assets of the Partnership, and the application must set forth the grounds upon which the revocation is desired. A revocation, if approved, is effective only for the taxable year specified in the IRS's consent letter and all subsequent taxable years; it does not operate retroactively.

The Partnership and its advisors should bear in mind that the irrevocable nature of the Section 754 election means that the election will apply not only to the May 31, 2024 transfer that is the subject of this election statement, but also to any and all future transfers of partnership interests and distributions of partnership property, including transfers that may result in a negative (downward) basis adjustment under Section 743(b) if the transferee's outside basis is less than the transferee's share of inside basis.

C. Related Filing Obligations

In connection with the Section 754 election and the underlying transaction, the following related filing obligations should be noted:

Form 8308 — Report of a Sale or Exchange of Certain Partnership Interests. Pinnacle Health Services Group LLC is required to file Form 8308 with its 2024 Form 1065 to report the sale or exchange of 100% of the partnership interests in Pinnacle that occurred on May 31, 2024, in connection with the Merger. Form 8308 must identify the transferor (the pre-closing members of Pinnacle) and the transferee (Ardent Healthcare Intermediate Inc.) and must be filed for any exchange of a partnership interest that involves unrealized receivables or inventory items (within the meaning of Section 751(a) of the Code). Given the nature of Pinnacle's business as a healthcare services provider, it is likely that certain of its assets constitute unrealized receivables or inventory items within the meaning of Section 751, and accordingly Form 8308 is required. A copy of Form 8308 must also be furnished to each transferor and transferee.

Schedule K-1 Reporting. In connection with the closing of the Merger and the resulting change in the Partnership's membership during the 2024 taxable year, Pinnacle must issue Schedules K-1 (Form 1065) as follows:

(a) Pre-Closing Members: A Schedule K-1 must be issued to each pre-closing member of Pinnacle for the short period beginning January 1, 2024 and ending May 31, 2024, reflecting each such member's allocable share of partnership income, gain, loss, deduction, and credit for the pre-closing period, determined in accordance with the interim closing of the books method (or the proration method, as agreed among the parties pursuant to the Merger Agreement).

(b) Post-Closing Member: A Schedule K-1 must be issued to Ardent Healthcare Intermediate Inc. for the period beginning June 1, 2024 and ending December 31, 2024, reflecting the Transferee's allocable share of partnership income, gain, loss, deduction, and credit for the post-closing period and reflecting the Section 743(b) basis adjustment allocable to the Transferee. The Section 743(b) adjustment should be reported on the Transferee's Schedule K-1 in accordance with the instructions to Form 1065, including the attachment of a statement identifying the amount and allocation of the Section 743(b) adjustment.

Section 83(b) Elections. Separate and apart from the Section 754 election addressed herein, certain rollover equity participants in the transaction — specifically, Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and Jonathan Farnsworth (collectively, the "Rollover Participants") — are required to file elections under Section 83(b) of the Code with the Internal Revenue Service on or before June 30, 2024 (within 30 days after the closing date of May 31, 2024) in connection with their receipt of unvested Class B Units of Ardent Healthcare Holdings LLC. These Section 83(b) elections are personal to the Rollover Participants, are filed directly with the IRS by each individual, and are not part of the Partnership's Form 1065. Calderwood & Harkness LLP is separately preparing drafts of the Section 83(b) election statements for each Rollover Participant under separate engagement letters.

Coordination with Tax Receivable Agreement. The Section 743(b) basis step-up of $224,400,000 generated by this election gives rise to tax benefits (in the form of future amortization and depreciation deductions) that are subject to sharing under that certain Tax Receivable Agreement, dated as of May 28, 2024 (the "TRA"), by and among Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., and the TRA Holders (as defined therein). Under the TRA, the TRA Holders are entitled to receive 85% of the cash tax savings realized by Ardent Healthcare Intermediate Inc. (and its consolidated group) attributable to the tax attributes covered by the TRA, including the Section 743(b) basis step-up. Based on the estimated annual tax benefit of approximately $5,010,000, the estimated annual TRA payment is approximately:

$5,010,000 × 85% ≈ $4,260,000 per year

The TRA payment is subject to the actual realization of tax benefits by Ardent Healthcare Intermediate Inc. and is computed on an annual basis following the filing of the applicable tax return. The TRA and its terms are administered separately from this election and are not part of the Partnership's Form 1065 filing.

IV. SIGNATURE BLOCK

[To be executed in connection with the filing of the Form 1065 for the taxable year ending December 31, 2024.]

The undersigned, being duly authorized to sign the federal income tax return of Pinnacle Health Services Group LLC (EIN 82-1947632) for the taxable year ending December 31, 2024, hereby certifies that Pinnacle Health Services Group LLC elects, pursuant to Section 754 of the Internal Revenue Code of 1986, as amended, and Treasury Regulations Section 1.754-1(b), to adjust the basis of partnership property in the manner provided in Sections 734(b) and 743(b) of the Code, effective for the taxable year ending December 31, 2024, and for all subsequent taxable years of the Partnership.

PINNACLE HEALTH SERVICES GROUP LLC

By: Ardent Healthcare Intermediate Inc., its Sole Member

By: ________

Name: ________

Title: ________

Date: ________

EIN: 82-1947632

V. APPENDICES / ATTACHMENTS REFERENCED

The following appendices and attachments are referenced in this election statement and should be attached to or maintained with the Partnership's records in support of the Section 754 election and the Section 743(b) basis adjustment:

Appendix A — Purchase Price Allocation Schedule (dated April 18, 2024) A detailed asset-by-asset allocation of the Section 743(b) basis adjustment of $224,400,000 among the Partnership's assets, prepared in accordance with Section 755 of the Code and Treasury Regulations Section 1.755-1, using the residual method described herein. The Purchase Price Allocation Schedule sets forth the fair market value, existing inside basis, and Section 743(b) adjustment for each individual asset or category of assets of the Partnership. This schedule is preliminary and subject to adjustment upon finalization of the independent third-party valuation. To be attached as a supporting schedule to the Form 1065.

Appendix B — Purchase Price Allocation Memorandum (dated April 18, 2024) A narrative memorandum setting forth the methodology used in preparing the Purchase Price Allocation Schedule, including the valuation approaches applied to each asset class (income approach, market approach, and/or cost approach), the key assumptions and inputs used in the valuation models, and the legal authorities supporting the allocation methodology. Prepared by Calderwood & Harkness LLP. To be maintained in the Partnership's permanent tax files.

Appendix C — Summary of Merger Agreement Terms Relevant to the Section 754 Election A summary of the material terms of the Agreement and Plan of Merger dated March 15, 2024, among Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, Pinnacle Health Services Group LLC, and the pre-closing members, to the extent relevant to the Section 754 election, including the consideration paid, the treatment of liabilities, the representations and warranties regarding tax matters, and the parties' agreement regarding the making of the Section 754 election. To be maintained in the Partnership's permanent tax files.

Appendix D — Post-Closing Organizational Chart An organizational chart depicting the ownership structure following the closing of the Merger, showing the chain of ownership from Ardent Capital Partners III LP through Ardent Healthcare Holdings LLC through Ardent Healthcare Intermediate Inc. to Pinnacle Health Services Group LLC (surviving entity), including the rollover equity participants and their respective interests in Ardent Healthcare Holdings LLC. To be attached as a supporting schedule to the Form 1065.

VI. DISCLAIMER AND PRIVILEGE NOTICE

This draft election statement and the accompanying cover memorandum have been prepared by Calderwood & Harkness LLP, One Liberty Plaza, 45th Floor, New York, New York 10006 (Engagement No. 1001-00006; Matter No. 1001-00006), by Robert Jansen, Senior Associate, Tax Department, under the supervision of Leonard Cross, Partner, Tax Department.

ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL. This document constitutes a draft prepared for discussion purposes only and is protected by the attorney-client privilege, the work product doctrine, and any other applicable privileges. This draft is not to be filed with the Internal Revenue Service or any other taxing authority without final review, revision, and written authorization by Calderwood & Harkness LLP and the authorized representative of the Partnership. Any distribution, copying, or disclosure of this document, or any portion thereof, to any person other than the intended recipients is strictly prohibited.

This draft election statement and the accompanying memorandum do not constitute tax advice to any party other than Ardent Capital Partners III LP and its controlled affiliates, including Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., and Pinnacle Health Services Group LLC. No other person or entity should rely upon the analysis, conclusions, or computations set forth herein without obtaining independent tax advice from such person's own tax advisors. Calderwood & Harkness LLP assumes no liability to any third party in connection with this draft.

The computations and allocations set forth herein are preliminary and are based upon information made available to Calderwood & Harkness LLP as of the date hereof. Actual amounts may differ upon finalization of the purchase price allocation, completion of the independent third-party valuation, and preparation of the Partnership's 2024 financial statements and tax return. Calderwood & Harkness LLP reserves the right to revise or supplement this draft election statement in light of any additional information or changes in applicable law.

— END OF DRAFT —

Component	Amount
Enterprise Value	$412,000,000
Less: Funded Debt at Closing	($81,300,000)
Plus: Cash on Balance Sheet at Closing	$8,700,000
Net Debt at Closing	($72,600,000)
Equity Value	$339,400,000

Amount

Transferee's Outside Basis	$412,000,000
Less: Transferee's Share of Inside Basis	($187,600,000)
Section 743(b) Basis Adjustment	$224,400,000
Asset Class	Description	Fair Market Value	Existing Inside Basis	Section 743(b) Adjustment	Useful Life
Class I	Cash and Cash Equivalents, Bank Deposits	$8,700,000	$8,700,000	$0	N/A
Class III	Accounts Receivable, Accrued Revenue, Inventory and Supplies	$32,400,000	$32,400,000	$0	Short-term
Class IV	Tangible Depreciable Personal Property (medical equipment, diagnostic equipment, leasehold improvements, furniture, fixtures, and office equipment)	$67,500,000	$47,200,000	$20,300,000	Various (5–15 years)
Class V	Section 197 Intangibles (other than goodwill and going concern value)	$146,200,000	$62,100,000	$84,100,000	Various (see below)
Class VI	Section 197 Intangibles — Goodwill and Going Concern Value	$157,200,000	$37,200,000	$120,000,000	15 years
Total	$412,000,000	$187,600,000	$224,400,000
Class V Sub-Category	Fair Market Value	Useful Life
Payor contracts (managed care and government program agreements)	$78,300,000	15 years (amortizable under Section 197)
Assembled workforce (physicians, nurses, and administrative staff)	$12,100,000	3 years (not a Section 197 intangible; amortizable under general principles)
Trade name ("Pinnacle Health Services" and related marks)	$38,400,000	15 years (amortizable under Section 197)
Non-compete agreements (physician non-compete covenants)	$17,400,000	5 years (amortizable under Section 197)
Total Class V	$146,200,000

SECTION 754 ELECTION STATEMENT
PINNACLE HEALTH SERVICES GROUP LLC EIN: 82-1947632
Prepared by Calderwood & Harkness LLP One Liberty Plaza, 45th Floor New York, NY 10006
Engagement No. 1001-00006 Matter No. 1001-00006
May 31, 2024
For Attachment to Form 1065, U.S. Return of Partnership Income, for the Taxable Year Ending December 31, 2024
I. COVER MEMORANDUM
MEMORANDUM
TO: Marcus Pellegrino, Partner, Healthcare Ardent Capital Partners III LP 600 Lexington Avenue, 38th Floor New York, NY 10022
FROM: Leonard Cross, Partner, Tax Robert Jansen, Senior Associate, Tax Calderwood & Harkness LLP One Liberty Plaza, 45th Floor New York, NY 10006
DATE: May 31, 2024
RE: Draft Section 754 Election Statement — Pinnacle Health Services Group LLC (EIN 82-1947632)
Dear Marcus:
Enclosed for your review is a draft election statement under Section 754 of the Internal Revenue Code of 1986, as amended (the "Code"), to be attached to the federal partnership income tax return (Form 1065) of Pinnacle Health Services Group LLC ("Pinnacle" or the "Partnership") for the taxable year ending December 31, 2024. This memorandum provides a summary of the enclosed draft, identifies certain procedural requirements, and outlines the coordination steps necessary to ensure the election is properly filed.
Nature and Irrevocability of the Election. As you are aware, a Section 754 election, once validly made and filed with the Partnership's timely filed return (including extensions), is irrevocable and will apply to all future transfers of partnership interests and all future distributions of partnership property unless and until the election is revoked with the prior consent of the Commissioner of Internal Revenue in accordance with Treasury Regulations Section 1.754-1(c). Given the irrevocable nature of this election, we strongly recommend that the final version of this statement be carefully reviewed by each of the relevant parties and their advisors before execution and filing.
Transaction Context. This election is being made in connection with the acquisition of 100% of the membership interests in Pinnacle by Ardent Healthcare Intermediate Inc. (EIN 93-2187512), a Delaware C-corporation and a wholly owned subsidiary of Ardent Healthcare Holdings LLC (EIN 93-2187445), which acquisition was effectuated through the reverse merger of Ardent Healthcare Merger Sub LLC (Delaware File No. 7834227) with and into Pinnacle, with Pinnacle surviving as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc. The transaction closed on May 31, 2024, pursuant to that certain Agreement and Plan of Merger, dated as of March 15, 2024 (the "Merger Agreement"), by and among Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, Pinnacle, and the pre-closing members of Pinnacle named therein.
Execution and Filing Instructions. The final version of this election statement should be reviewed and signed by the partnership representative (or, if applicable, the partnership's designated individual under the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015) and attached to the timely filed (including extensions) Form 1065 for the taxable year ending December 31, 2024. The Partnership's 2024 Form 1065 must be filed by March 15, 2025 (or by September 15, 2025 if the Partnership obtains a six-month extension by timely filing Form 7004). We anticipate that the Partnership will request the automatic six-month extension and therefore the filing deadline, inclusive of such extension, will be September 15, 2025.
Coordination with Advisors. We request that this draft be shared, at your direction, with the following firms for coordination purposes:
(a) Caldwell Pratt & Moorehouse LLP (New York, NY), Ardent Capital Partners III LP's accounting and audit firm, which we understand will be responsible for the preparation and filing of the Partnership's 2024 Form 1065 for the post-closing period and for ensuring the election statement is properly included as an attachment thereto; and
(b) Brewer Stanfield & Associates LLP (Philadelphia, PA), Pinnacle's historical accounting and audit firm, which may be called upon to provide supporting documentation and workpapers relating to the pre-closing tax basis of partnership assets and the preparation of the short-period Schedules K-1 for the pre-closing members for the period ending May 31, 2024.
We remain available to discuss any aspect of this election statement at your convenience. Please do not hesitate to contact Leonard Cross at (212) 555-4100 or Robert Jansen at (212) 555-4138 with any questions or comments.
Very truly yours,
CALDERWOOD & HARKNESS LLP
II. ELECTION STATEMENT — SECTION 754
A. Formal Caption
ELECTION UNDER SECTION 754 OF THE INTERNAL REVENUE CODE
Partnership Name: Pinnacle Health Services Group LLC
Employer Identification Number: 82-1947632
Principal Office Address: 2200 Renaissance Boulevard, Suite 400, King of Prussia, Pennsylvania 19406
Taxable Year for Which Election is Made: Taxable year ending December 31, 2024
Entity Type: Delaware limited liability company classified as a partnership for federal income tax purposes. Pinnacle Health Services Group LLC has at all times since its formation been treated as a partnership for federal income tax purposes and has never elected to be classified as an association taxable as a corporation under Treasury Regulations Section 301.7701-3. Pinnacle has two or more members and, accordingly, its default classification under the check-the-box regulations is as a partnership.
Date of Formation: Pinnacle Health Services Group LLC was formed under the Delaware Limited Liability Company Act on August 12, 2016, and has been governed by its Limited Liability Company Operating Agreement dated August 12, 2016 (as amended by that certain First Amendment to the Limited Liability Company Operating Agreement, dated March 3, 2020). In connection with the closing of the transaction described herein, the Operating Agreement was amended and restated in its entirety, effective as of May 31, 2024.
Registered Agent: Pemberton Industries, 251 Little Falls Drive, Wilmington, Delaware 19808
B. Statement of Election
Pinnacle Health Services Group LLC (the "Partnership"), acting through the undersigned authorized partner, hereby elects, pursuant to Section 754 of the Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations Section 1.754-1(b)(1), to adjust the basis of partnership property in the manner provided in:
(i) Section 734(b) of the Code, with respect to distributions of partnership property to a partner, whereby the basis of partnership property shall be adjusted in the case of a distribution of partnership property to reflect any gain or loss recognized by the distributee partner and the difference, if any, between the distributee partner's basis in property received in the distribution and the partnership's adjusted basis in such property immediately before such distribution; and
(ii) Section 743(b) of the Code, with respect to transfers of partnership interests by sale or exchange or upon the death of a partner, whereby the basis of partnership property shall be adjusted, with respect to the transferee partner only, to reflect the difference between the transferee partner's proportionate share of the adjusted basis of partnership property (inside basis) and the transferee partner's adjusted basis in the transferred partnership interest (outside basis).
This election shall be effective for the taxable year ending December 31, 2024, and for all subsequent taxable years of the Partnership unless revoked with the prior written consent of the Commissioner of Internal Revenue, in accordance with Treasury Regulations Section 1.754-1(c), upon application made by the Partnership to the Internal Revenue Service.
The Partnership acknowledges that the making of this election is irrevocable absent such consent and that the election, once made, will apply to all transfers of partnership interests and all distributions of partnership property occurring in the election year and in all subsequent taxable years of the Partnership.
C. Triggering Transfer
The transfer giving rise to the need for this Section 754 election and the corresponding Section 743(b) basis adjustment is described as follows:
Transaction Description. On May 31, 2024, 100% of the membership interests (the "Interests") in Pinnacle Health Services Group LLC were acquired by Ardent Healthcare Intermediate Inc. (EIN 93-2187512), a Delaware C-corporation (the "Transferee" or "Ardent Intermediate"), pursuant to the reverse merger (the "Merger") of Ardent Healthcare Merger Sub LLC (Delaware File No. 7834227), a Delaware limited liability company formed solely for purposes of effectuating the Merger (the "Merger Sub"), with and into Pinnacle, with Pinnacle surviving the Merger as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc. In the Merger, each pre-closing member of Pinnacle received cash consideration, rollover equity interests in Ardent Healthcare Holdings LLC, or a combination thereof, in exchange for such member's membership interests in Pinnacle, and all membership interests in Pinnacle outstanding immediately prior to the effective time of the Merger were cancelled and converted into the right to receive such consideration.
Transaction Structure. The ownership structure following the closing of the Merger is as follows:
•  Ardent Capital Partners III LP (EIN 87-3491520), a Delaware limited partnership, together with certain rollover equity participants, is the direct or indirect owner of 100% of the equity interests in Ardent Healthcare Holdings LLC (EIN 93-2187445), a Delaware limited liability company classified as a partnership for federal income tax purposes.
•  Ardent Healthcare Holdings LLC is the sole owner of 100% of the outstanding capital stock of Ardent Healthcare Intermediate Inc. (EIN 93-2187512), a Delaware C-corporation.
•  Ardent Healthcare Intermediate Inc. is the sole member of Pinnacle Health Services Group LLC (EIN 82-1947632), a Delaware limited liability company classified as a partnership for federal income tax purposes, which survived the Merger.
For federal income tax purposes, the Merger is treated as a purchase by Ardent Healthcare Intermediate Inc. of 100% of the membership interests in Pinnacle from the pre-closing members, resulting in a transfer of a partnership interest within the meaning of Section 743(b) of the Code. Because Pinnacle has only one member following the Merger, it is disregarded as an entity separate from its owner for federal income tax purposes under Treasury Regulations Section 301.7701-3(b)(1)(ii), effective as of the date of the Merger. Notwithstanding such disregarded entity status, the Section 754 election and the corresponding Section 743(b) adjustment are made with respect to the final taxable year of Pinnacle as a partnership — the taxable year ending on May 31, 2024 (the date of the Merger) — and reported on the Form 1065 filed for the taxable year ending December 31, 2024 (as the Partnership's taxable year for its final return).
Enterprise Value and Equity Value.
•  Enterprise Value: $412,000,000
•  Equity Value: $339,400,000, calculated as follows:
Key Dates.
•  Merger Agreement Date: March 15, 2024
•  Closing Date / Effective Tax Date: May 31, 2024
The Merger Agreement, including the schedules and exhibits thereto, is on file with the Partnership and available for review by the Internal Revenue Service upon request.
D. Section 743(b) Basis Adjustment — Summary Computation
In accordance with Section 743(b) of the Code, the basis of partnership property is adjusted, with respect to the Transferee, by the amount equal to the excess of the Transferee's cost basis in the acquired partnership interest (outside basis) over the Transferee's proportionate share of the Partnership's adjusted basis in its assets (inside basis). The computation of the Section 743(b) basis adjustment is summarized as follows:
Transferee's Cost Basis in Partnership Interest (Outside Basis): $412,000,000
The Transferee's outside basis in the Partnership interest is equal to the enterprise value of $412,000,000, reflecting the total consideration attributable to Ardent Healthcare Intermediate Inc.'s acquisition of 100% of the partnership interests in Pinnacle, inclusive of the assumption of all partnership-level liabilities. For purposes of computing outside basis, the Transferee's basis in its partnership interest includes its share of partnership liabilities under Section 752 of the Code, which liabilities are reflected in the enterprise value.
Transferee's Share of Partnership's Inside Basis (Adjusted Basis of Partnership Assets): $187,600,000
The Transferee's proportionate share of the adjusted basis of the Partnership's assets is $187,600,000, determined as of the date of the transfer (May 31, 2024), in accordance with the Partnership's books and records and the balance sheet delivered at closing pursuant to Section 2.06 of the Merger Agreement.
Section 743(b) Basis Adjustment:
The Section 743(b) adjustment of $224,400,000 is a transferee-specific adjustment that is personal to Ardent Healthcare Intermediate Inc. and is allocated among the Partnership's assets in accordance with Section 755 of the Code and Treasury Regulations Section 1.755-1, as described in Section E below. This adjustment does not affect the common basis of the Partnership's assets; rather, it creates a special basis adjustment that is taken into account solely for purposes of computing the Transferee's distributive share of items of income, gain, loss, and deduction from the Partnership.
E. Allocation of Section 743(b) Adjustment Under Section 755
The Section 743(b) basis adjustment of $224,400,000 is allocated among the Partnership's assets in accordance with Section 755 of the Code and Treasury Regulations Section 1.755-1. The allocation follows the residual method, applied analogously to the methodology set forth in Section 1060 of the Code and Treasury Regulations Section 1.1060-1(c) for applicable asset acquisitions, as is customary for purposes of allocating a Section 743(b) adjustment under Section 755 in connection with the acquisition of a partnership interest.
A detailed asset-by-asset allocation is set forth in the Purchase Price Allocation Schedule dated April 18, 2024, and the Purchase Price Allocation Memorandum dated April 18, 2024, each prepared by Calderwood & Harkness LLP (collectively, the "PPA Materials"), which are referenced herein as Appendix A and Appendix B, respectively. The PPA Materials reflect a preliminary allocation based on information available as of the date thereof and are subject to adjustment upon finalization of the independent third-party valuation currently being prepared by Westmark Consulting Group (now Sundial Advisors) at the direction of Ardent Capital Partners III LP. The summary allocation across residual method asset classes is as follows:
The Class V intangible assets are further broken down as follows:
Weighted-Average Useful Life of Section 743(b) Adjustment. Based on the allocation set forth above, the weighted-average useful life of the aggregate Section 743(b) basis adjustment of $224,400,000 is approximately 11.2 years, computed on a weighted-average basis across all asset classes using the fair market value allocation as weights and applying the applicable recovery periods or useful lives for each asset class.
Estimated Annual Amortization Deduction. The estimated annual amortization and depreciation deductions attributable to the Section 743(b) basis adjustment, assuming straight-line recovery and a mid-year convention (or mid-month convention where applicable), are approximately:
$224,400,000 ÷ 11.2 years ≈ $20,040,000 per year
This estimate is provided for illustrative purposes and is subject to refinement upon completion of the final purchase price allocation and determination of the applicable depreciation and amortization methods and conventions for each asset class.
Estimated Annual Tax Benefit. At a blended effective income tax rate of approximately 25%, the estimated annual tax benefit attributable to the Section 743(b) basis step-up is approximately:
$20,040,000 × 25% ≈ $5,010,000 per year
The 25% blended effective rate reflects the federal corporate income tax rate of 21% applicable to Ardent Healthcare Intermediate Inc. (the entity through which the tax benefits flow) and an estimated blended state effective income tax rate of approximately 6.42%, weighted by EBITDA allocation across the jurisdictions in which Pinnacle operates (Pennsylvania, Virginia, Maryland, North Carolina, and Georgia), net of the federal deduction for state income taxes paid. The blended state rate is preliminary and will be updated as the post-closing operations of Pinnacle are finalized for the 2024 taxable year.
III. FILING INSTRUCTIONS AND PROCEDURAL REQUIREMENTS
A. Filing Requirements
The Section 754 election statement set forth in Section II above must be filed in compliance with the following procedural requirements:
1.  Attachment to Timely Filed Return. The election statement must be attached to a timely filed Form 1065, U.S. Return of Partnership Income, for the taxable year ending December 31, 2024. For this purpose, a return is considered timely filed if it is filed on or before the due date of the return (March 15, 2025) or, if the Partnership has obtained an automatic six-month extension of time to file by timely filing Form 7004, on or before the extended due date (September 15, 2025). It is anticipated that the Partnership will file Form 7004 to obtain the six-month extension, and accordingly the election statement should be attached to the Form 1065 filed on or before September 15, 2025.
2.  Signature by Authorized Partner. The election statement must be signed by any one of the partners of the Partnership who is authorized to sign the Partnership's return. Under the Amended and Restated Operating Agreement of Pinnacle, effective as of May 31, 2024, Ardent Healthcare Intermediate Inc. is the sole member and managing member of Pinnacle. Accordingly, the election statement should be signed by a duly authorized officer of Ardent Healthcare Intermediate Inc. acting in its capacity as the sole member of the Partnership.
3.  Partnership Representative. For purposes of the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015 (the "BBA"), the Partnership must designate a partnership representative for the taxable year ending December 31, 2024, on its Form 1065. It is expected that the partnership representative will be Ardent Healthcare Intermediate Inc., acting through a designated individual to be named on the return. The designation of the partnership representative should be coordinated with Caldwell Pratt & Moorehouse LLP in connection with the preparation of the 2024 Form 1065.
B. Irrevocability
Once validly filed with the Partnership's timely filed Form 1065 for the taxable year ending December 31, 2024, the Section 754 election is effective for that taxable year and for all subsequent taxable years of the Partnership. The election cannot be unilaterally revoked by the Partnership.
Revocation of a Section 754 election requires the Partnership to submit a written application to the IRS District Director (or the appropriate IRS office) requesting consent to revoke the election. Under Treasury Regulations Section 1.754-1(c), such consent will not be granted unless the Partnership demonstrates that there has been a change in the nature of the Partnership's business or a substantial increase in the assets of the Partnership, and the application must set forth the grounds upon which the revocation is desired. A revocation, if approved, is effective only for the taxable year specified in the IRS's consent letter and all subsequent taxable years; it does not operate retroactively.
The Partnership and its advisors should bear in mind that the irrevocable nature of the Section 754 election means that the election will apply not only to the May 31, 2024 transfer that is the subject of this election statement, but also to any and all future transfers of partnership interests and distributions of partnership property, including transfers that may result in a negative (downward) basis adjustment under Section 743(b) if the transferee's outside basis is less than the transferee's share of inside basis.
C. Related Filing Obligations
In connection with the Section 754 election and the underlying transaction, the following related filing obligations should be noted:
Form 8308 — Report of a Sale or Exchange of Certain Partnership Interests. Pinnacle Health Services Group LLC is required to file Form 8308 with its 2024 Form 1065 to report the sale or exchange of 100% of the partnership interests in Pinnacle that occurred on May 31, 2024, in connection with the Merger. Form 8308 must identify the transferor (the pre-closing members of Pinnacle) and the transferee (Ardent Healthcare Intermediate Inc.) and must be filed for any exchange of a partnership interest that involves unrealized receivables or inventory items (within the meaning of Section 751(a) of the Code). Given the nature of Pinnacle's business as a healthcare services provider, it is likely that certain of its assets constitute unrealized receivables or inventory items within the meaning of Section 751, and accordingly Form 8308 is required. A copy of Form 8308 must also be furnished to each transferor and transferee.
Schedule K-1 Reporting. In connection with the closing of the Merger and the resulting change in the Partnership's membership during the 2024 taxable year, Pinnacle must issue Schedules K-1 (Form 1065) as follows:
(a) Pre-Closing Members: A Schedule K-1 must be issued to each pre-closing member of Pinnacle for the short period beginning January 1, 2024 and ending May 31, 2024, reflecting each such member's allocable share of partnership income, gain, loss, deduction, and credit for the pre-closing period, determined in accordance with the interim closing of the books method (or the proration method, as agreed among the parties pursuant to the Merger Agreement).
(b) Post-Closing Member: A Schedule K-1 must be issued to Ardent Healthcare Intermediate Inc. for the period beginning June 1, 2024 and ending December 31, 2024, reflecting the Transferee's allocable share of partnership income, gain, loss, deduction, and credit for the post-closing period and reflecting the Section 743(b) basis adjustment allocable to the Transferee. The Section 743(b) adjustment should be reported on the Transferee's Schedule K-1 in accordance with the instructions to Form 1065, including the attachment of a statement identifying the amount and allocation of the Section 743(b) adjustment.
Section 83(b) Elections. Separate and apart from the Section 754 election addressed herein, certain rollover equity participants in the transaction — specifically, Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and Jonathan Farnsworth (collectively, the "Rollover Participants") — are required to file elections under Section 83(b) of the Code with the Internal Revenue Service on or before June 30, 2024 (within 30 days after the closing date of May 31, 2024) in connection with their receipt of unvested Class B Units of Ardent Healthcare Holdings LLC. These Section 83(b) elections are personal to the Rollover Participants, are filed directly with the IRS by each individual, and are not part of the Partnership's Form 1065. Calderwood & Harkness LLP is separately preparing drafts of the Section 83(b) election statements for each Rollover Participant under separate engagement letters.
Coordination with Tax Receivable Agreement. The Section 743(b) basis step-up of $224,400,000 generated by this election gives rise to tax benefits (in the form of future amortization and depreciation deductions) that are subject to sharing under that certain Tax Receivable Agreement, dated as of May 28, 2024 (the "TRA"), by and among Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., and the TRA Holders (as defined therein). Under the TRA, the TRA Holders are entitled to receive 85% of the cash tax savings realized by Ardent Healthcare Intermediate Inc. (and its consolidated group) attributable to the tax attributes covered by the TRA, including the Section 743(b) basis step-up. Based on the estimated annual tax benefit of approximately $5,010,000, the estimated annual TRA payment is approximately:
$5,010,000 × 85% ≈ $4,260,000 per year
The TRA payment is subject to the actual realization of tax benefits by Ardent Healthcare Intermediate Inc. and is computed on an annual basis following the filing of the applicable tax return. The TRA and its terms are administered separately from this election and are not part of the Partnership's Form 1065 filing.
IV. SIGNATURE BLOCK
[To be executed in connection with the filing of the Form 1065 for the taxable year ending December 31, 2024.]
The undersigned, being duly authorized to sign the federal income tax return of Pinnacle Health Services Group LLC (EIN 82-1947632) for the taxable year ending December 31, 2024, hereby certifies that Pinnacle Health Services Group LLC elects, pursuant to Section 754 of the Internal Revenue Code of 1986, as amended, and Treasury Regulations Section 1.754-1(b), to adjust the basis of partnership property in the manner provided in Sections 734(b) and 743(b) of the Code, effective for the taxable year ending December 31, 2024, and for all subsequent taxable years of the Partnership.
PINNACLE HEALTH SERVICES GROUP LLC
By: Ardent Healthcare Intermediate Inc., its Sole Member
By: ________
Name: ________
Title: ________
Date: ________
EIN: 82-1947632
V. APPENDICES / ATTACHMENTS REFERENCED
The following appendices and attachments are referenced in this election statement and should be attached to or maintained with the Partnership's records in support of the Section 754 election and the Section 743(b) basis adjustment:
Appendix A — Purchase Price Allocation Schedule (dated April 18, 2024) A detailed asset-by-asset allocation of the Section 743(b) basis adjustment of $224,400,000 among the Partnership's assets, prepared in accordance with Section 755 of the Code and Treasury Regulations Section 1.755-1, using the residual method described herein. The Purchase Price Allocation Schedule sets forth the fair market value, existing inside basis, and Section 743(b) adjustment for each individual asset or category of assets of the Partnership. This schedule is preliminary and subject to adjustment upon finalization of the independent third-party valuation. To be attached as a supporting schedule to the Form 1065.
Appendix B — Purchase Price Allocation Memorandum (dated April 18, 2024) A narrative memorandum setting forth the methodology used in preparing the Purchase Price Allocation Schedule, including the valuation approaches applied to each asset class (income approach, market approach, and/or cost approach), the key assumptions and inputs used in the valuation models, and the legal authorities supporting the allocation methodology. Prepared by Calderwood & Harkness LLP. To be maintained in the Partnership's permanent tax files.
Appendix C — Summary of Merger Agreement Terms Relevant to the Section 754 Election A summary of the material terms of the Agreement and Plan of Merger dated March 15, 2024, among Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, Pinnacle Health Services Group LLC, and the pre-closing members, to the extent relevant to the Section 754 election, including the consideration paid, the treatment of liabilities, the representations and warranties regarding tax matters, and the parties' agreement regarding the making of the Section 754 election. To be maintained in the Partnership's permanent tax files.
Appendix D — Post-Closing Organizational Chart An organizational chart depicting the ownership structure following the closing of the Merger, showing the chain of ownership from Ardent Capital Partners III LP through Ardent Healthcare Holdings LLC through Ardent Healthcare Intermediate Inc. to Pinnacle Health Services Group LLC (surviving entity), including the rollover equity participants and their respective interests in Ardent Healthcare Holdings LLC. To be attached as a supporting schedule to the Form 1065.
VI. DISCLAIMER AND PRIVILEGE NOTICE
This draft election statement and the accompanying cover memorandum have been prepared by Calderwood & Harkness LLP, One Liberty Plaza, 45th Floor, New York, New York 10006 (Engagement No. 1001-00006; Matter No. 1001-00006), by Robert Jansen, Senior Associate, Tax Department, under the supervision of Leonard Cross, Partner, Tax Department.
ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL. This document constitutes a draft prepared for discussion purposes only and is protected by the attorney-client privilege, the work product doctrine, and any other applicable privileges. This draft is not to be filed with the Internal Revenue Service or any other taxing authority without final review, revision, and written authorization by Calderwood & Harkness LLP and the authorized representative of the Partnership. Any distribution, copying, or disclosure of this document, or any portion thereof, to any person other than the intended recipients is strictly prohibited.
This draft election statement and the accompanying memorandum do not constitute tax advice to any party other than Ardent Capital Partners III LP and its controlled affiliates, including Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., and Pinnacle Health Services Group LLC. No other person or entity should rely upon the analysis, conclusions, or computations set forth herein without obtaining independent tax advice from such person's own tax advisors. Calderwood & Harkness LLP assumes no liability to any third party in connection with this draft.
The computations and allocations set forth herein are preliminary and are based upon information made available to Calderwood & Harkness LLP as of the date hereof. Actual amounts may differ upon finalization of the purchase price allocation, completion of the independent third-party valuation, and preparation of the Partnership's 2024 financial statements and tax return. Calderwood & Harkness LLP reserves the right to revise or supplement this draft election statement in light of any additional information or changes in applicable law.
— END OF DRAFT —
Component | Amount
Enterprise Value | $412,000,000
Less: Funded Debt at Closing | ($81,300,000)
Plus: Cash on Balance Sheet at Closing | $8,700,000
Net Debt at Closing | ($72,600,000)
Equity Value | $339,400,000
Amount
Transferee's Outside Basis | $412,000,000
Less: Transferee's Share of Inside Basis | ($187,600,000)
Section 743(b) Basis Adjustment | $224,400,000
Asset Class | Description | Fair Market Value | Existing Inside Basis | Section 743(b) Adjustment | Useful Life
Class I | Cash and Cash Equivalents, Bank Deposits | $8,700,000 | $8,700,000 | $0 | N/A
Class III | Accounts Receivable, Accrued Revenue, Inventory and Supplies | $32,400,000 | $32,400,000 | $0 | Short-term
Class IV | Tangible Depreciable Personal Property (medical equipment, diagnostic equipment, leasehold improvements, furniture, fixtures, and office equipment) | $67,500,000 | $47,200,000 | $20,300,000 | Various (5–15 years)
Class V | Section 197 Intangibles (other than goodwill and going concern value) | $146,200,000 | $62,100,000 | $84,100,000 | Various (see below)
Class VI | Section 197 Intangibles — Goodwill and Going Concern Value | $157,200,000 | $37,200,000 | $120,000,000 | 15 years
Total | $412,000,000 | $187,600,000 | $224,400,000
Class V Sub-Category | Fair Market Value | Useful Life
Payor contracts (managed care and government program agreements) | $78,300,000 | 15 years (amortizable under Section 197)
Assembled workforce (physicians, nurses, and administrative staff) | $12,100,000 | 3 years (not a Section 197 intangible; amortizable under general principles)
Trade name ("Pinnacle Health Services" and related marks) | $38,400,000 | 15 years (amortizable under Section 197)
Non-compete agreements (physician non-compete covenants) | $17,400,000 | 5 years (amortizable under Section 197)
Total Class V | $146,200,000