[sheet: Summary]

[sheet: Summary]
Item | Description | Amount / Value | Notes
Prepared By | Calderwood & Harkness LLP | One Liberty Plaza, 45th Floor, New York, NY 10006
Prepared For | Ardent Capital Partners III LP | 600 Lexington Avenue, 38th Floor, New York, NY 10022
Date | April 18, 2024
Matter Number | 1001-00006 | Engagement No. 1001-00006
Target Entity | Pinnacle Health Services Group LLC | EIN: 82-1947632; Delaware LLC taxed as partnership
Acquirer Entity | Ardent Healthcare Intermediate Inc. | EIN: 93-2187512; Delaware C-Corporation (Blocker)
Holding Company | Ardent Healthcare Holdings LLC | EIN: 93-2187445; Delaware LLC taxed as partnership
Buyer / Sponsor | Ardent Capital Partners III LP | EIN: 87-3491520
Transaction Type | Reverse merger — Ardent Healthcare Merger Sub LLC merging with and into Pinnacle; Pinnacle surviving as wholly owned subsidiary | Acquisition of 100% of membership interests
Merger Agreement Date | March 15, 2024 | Signing date
Closing Date | May 31, 2024 | Effective tax date
Enterprise Value (EV) | $412,000,000 | Fixed per Merger Agreement
Net Debt at Closing | $72,600,000 | $81.3M funded debt less $8.7M cash on balance sheet
Equity Value | $339,400,000 | EV minus Net Debt
Pinnacle Inside Basis (Estimated) | $187,600,000 | Aggregate inside basis of Pinnacle assets
Section 743(b) Step-Up | $224,400,000 | $412.0M EV minus $187.6M inside basis
Allocation Methodology | Residual method under IRC Section 1060; consistent with Section 743(b) step-up methodology | Asset-level allocation despite equity acquisition
Total Allocated | $412,000,000 | Equals Enterprise Value
Section 1060 Class Summary:
Class I — Cash and Cash Equivalents | $8,700,000
Class II — Actively Traded Securities | $0 | None held
Class III — Accounts Receivable, Inventory & Similar | $32,400,000
Class IV — Tangible Property | $67,500,000 | Medical equipment, leasehold improvements, furniture
Class V — Intangibles (Other than Goodwill/Going Concern) | $146,200,000 | See Detail sheet
Class VI — Section 197 Intangibles (Goodwill) | $157,200,000 | Residual; 15-year amortization
Class VII — N/A | $0 | Not applicable
Grand Total | $412,000,000 | = Sum of all classes; reconciles to EV
[sheet: Class I - Cash]
Asset Description | Fair Market Value | Pinnacle Book Basis | Step-Up Amount | Useful Life | Annual Amortization / Depreciation | Notes
Cash on hand and bank deposits | $8,700,000 | $8,700,000 | $0 | N/A | N/A | No step-up; FMV equals book value
Total Class I | $8,700,000 | $8,700,000 | $0
[sheet: Class II - Securities]
Asset Description | Fair Market Value | Notes
None | $0 | Pinnacle does not hold actively traded securities
Total Class II | $0
[sheet: Class III - Receivables & Inven]
Asset Description | Fair Market Value | Pinnacle Book Basis | Step-Up Amount | Useful Life | Annual Amortization / Depreciation | Notes
Accounts receivable — patient and payor | $26,800,000 | $26,800,000 | $0 | N/A | N/A | Net of allowance for doubtful accounts; FMV approximates book
Medical supplies inventory | $3,200,000 | $3,200,000 | $0 | N/A | N/A | Pharmaceuticals, surgical supplies
Prepaid expenses and other current assets | $2,400,000 | $2,400,000 | $0 | N/A | N/A | Insurance premiums, rent deposits
Total Class III | $32,400,000 | $32,400,000 | $0
[sheet: Class IV - Tangible Property]
Asset Description | Fair Market Value | Pinnacle Book Basis (Net) | Step-Up Amount | Useful Life (years) | Annual Depreciation on Step-Up | Depreciation Method | Notes
Medical and diagnostic equipment | $31,500,000 | $18,200,000 | $13,300,000 | 7 | $1,900,000 | MACRS 7-year | Imaging, lab equipment, surgical instruments across 42 facilities
Leasehold improvements | $22,800,000 | $14,600,000 | $8,200,000 | 15 | $546,667 | Straight-line over lease term / 15 yrs | Build-outs at clinic and ASC locations in PA, VA, MD, NC, GA
Furniture, fixtures and office equipment | $7,400,000 | $4,100,000 | $3,300,000 | 5 | $660,000 | MACRS 5-year | Waiting room, office, and clinical furniture
Computer hardware and IT infrastructure | $4,200,000 | $2,500,000 | $1,700,000 | 5 | $340,000 | MACRS 5-year | Servers, workstations, networking equipment
Vehicles | $1,600,000 | $900,000 | $700,000 | 5 | $140,000 | MACRS 5-year | Mobile health and supply delivery vehicles
Total Class IV | $67,500,000 | $40,300,000 | $27,200,000 | $3,586,667 | Weighted-average remaining useful life ~7.5 years on step-up
[sheet: Class V - Intangibles (ex Goodw]
Asset Description | Fair Market Value | Pinnacle Book Basis | Step-Up Amount | Useful Life (years) | Annual Amortization (Total FMV Basis) | Annual Amortization (Step-Up Only) | Amortization Method | Notes
Payor contracts and relationships | $78,300,000 | $0 | $78,300,000 | 15 | $5,220,000 | $5,220,000 | Straight-line / Section 197 | Contracts with commercial and government payors across all facilities; includes managed care agreements
Assembled workforce | $12,100,000 | $0 | $12,100,000 | 3 | $4,033,333 | $4,033,333 | Straight-line | ~1,620 employees including 142 employed physicians; valued based on replacement cost methodology
Trade name — Pinnacle Health Services | $38,400,000 | $0 | $38,400,000 | 15 | $2,560,000 | $2,560,000 | Straight-line / Section 197 | Brand recognition in Mid-Atlantic and Southeast markets
Non-compete agreements | $17,400,000 | $0 | $17,400,000 | 5 | $3,480,000 | $3,480,000 | Straight-line / Section 197 | Non-competes with Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and key physicians
Total Class V | $146,200,000 | $0 | $146,200,000 | $15,293,333 | $15,293,333 | Weighted-average useful life ~9.6 years