1001-00006 · Ardent Capital Partners · Purchase Price Allocation & TRA

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TAX RECEIVABLE AGREEMENT

DRAFT

Prepared by Calderwood & Harkness LLP

March 20, 2024

DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO REVISION

Matter Number: 1001-00006 Engagement Number: 1001-00006

CONFIDENTIAL TREATMENT REQUESTED — DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO REVISION — This draft is being circulated for discussion purposes only and does not constitute a binding agreement or commitment by any party. All terms and conditions are subject to further negotiation and the execution of definitive documentation.

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TAX RECEIVABLE AGREEMENT

This TAX RECEIVABLE AGREEMENT (this "Agreement"), dated as of March 20, 2024 (the "Draft Date"), and effective as of May 31, 2024 (the "Effective Date" or the "Closing Date"), is entered into by and among:

(i) ARDENT HEALTHCARE HOLDINGS LLC, a Delaware limited liability company ("Holdings" or the "Corporate Taxpayer"), with its principal business address at 600 Lexington Avenue, 38th Floor, New York, New York 10022, and its registered address c/o Pemberton Industries, 251 Little Falls Drive, Wilmington, Delaware 19808 (EIN: 93-2187445);

(ii) ARDENT HEALTHCARE INTERMEDIATE INC., a Delaware C-corporation ("Intermediate" or "blocker"), with its principal business address at 600 Lexington Avenue, 38th Floor, New York, New York 10022, and its registered address c/o Pemberton Industries, 251 Little Falls Drive, Wilmington, Delaware 19808 (EIN: 93-2187512);

(iii) the TRA Holders (as defined herein), consisting of:

(a) Dr. Raymond Carvallo, an individual residing in the Commonwealth of Pennsylvania, in his capacity as Co-Founder and Chief Executive Officer of Pinnacle Health Services Group LLC, and as a rollover participant in the transactions contemplated by the Merger Agreement (as defined below);

(b) Dr. Nadia Ostrowski, an individual residing in the Commonwealth of Pennsylvania, in her capacity as Co-Founder and Chief Medical Officer of Pinnacle Health Services Group LLC, and as a rollover participant in the transactions contemplated by the Merger Agreement;

(c) Jonathan Farnsworth, an individual residing in the Commonwealth of Pennsylvania, in his capacity as Chief Financial Officer of Pinnacle Health Services Group LLC, and as a rollover participant in the transactions contemplated by the Merger Agreement; and

(d) the fourteen (14) minority physician-investors who were members of Pinnacle Health Services Group LLC immediately prior to the Closing Date, as set forth in Exhibit B attached hereto (collectively holding 27.5% of the pre-closing membership interests in Pinnacle Health Services Group LLC; no rollover); and

(iv) the TRA Representative (as defined herein), initially Dr. Raymond Carvallo, acting on behalf of the TRA Holders in the capacities set forth herein.

Each of Holdings, Intermediate, and each TRA Holder is referred to herein individually as a "Party" and collectively as the "Parties."

RECITALS

WHEREAS, reference is made to that certain Agreement and Plan of Merger, dated as of March 15, 2024 (the "Merger Agreement"), by and among Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of Ardent Healthcare Intermediate Inc. ("Merger Sub"), Pinnacle Health Services Group LLC, a Delaware limited liability company (EIN: 82-1947632) ("Pinnacle"), and the sellers named therein;

WHEREAS, Pinnacle is a Delaware limited liability company classified as a partnership for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3, and operates thirty-four (34) urgent care clinics and eight (8) ambulatory surgery centers across the Commonwealth of Pennsylvania, the Commonwealth of Virginia, the State of Maryland, the State of North Carolina, and the State of Georgia;

WHEREAS, pursuant to the Merger Agreement, Ardent Healthcare Merger Sub LLC merged with and into Pinnacle, with Pinnacle surviving as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc. (the "Merger"), at an aggregate enterprise value of Four Hundred Twelve Million Dollars ($412,000,000);

WHEREAS, Ardent Capital Partners III LP, a Delaware limited partnership ("Fund III"), serves as the sponsor and primary equity investor in the transactions contemplated by the Merger Agreement, with committed equity of One Hundred Ninety-Eight Million Five Hundred Thousand Dollars ($198,500,000);

WHEREAS, in connection with the Merger, Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and Jonathan Farnsworth aggregate rollover equity of Fifty-Nine Million Five Hundred Forty Thousand Dollars ($59,540,000) (consisting of $32,410,000 from Dr. Carvallo, $24,180,000 from Dr. Ostrowski, and $2,950,000 from Mr. Farnsworth) in exchange for Class B Units of Holdings, in each case as set forth in the Holdings LLC Operating Agreement;

WHEREAS, in connection with the transactions contemplated by the Merger Agreement, Pinnacle has made (or will make) an election under Section 754 of the Internal Revenue Code of 1986, as amended (the "Code"), resulting in a basis adjustment under Section 743(b) of the Code (the "Basis Adjustment") in favor of Ardent Healthcare Intermediate Inc. equal to the excess of its purchase price over its share of Pinnacle's inside basis, which Basis Adjustment is estimated at Two Hundred Twenty-Four Million Four Hundred Thousand Dollars ($224,400,000) (computed as $412,000,000 enterprise value minus $187,600,000 aggregate inside basis);

WHEREAS, the Basis Adjustment, when allocated among the assets of Pinnacle in accordance with Section 755 of the Code, is expected to generate amortization and depreciation deductions that will reduce the federal, state, and local income tax liability of the Corporate Taxpayer and its subsidiaries over the applicable useful lives of such assets;

WHEREAS, the Parties desire to provide for the payment by the Corporate Taxpayer to the TRA Holders of eighty-five percent (85%) of the Realized Tax Benefits (as defined below) attributable to the Basis Adjustment, in consideration of the exchange of the Pinnacle membership interests in the Merger and to incentivize the proper maintenance and utilization of such tax benefits;

WHEREAS, the entry into this Agreement is a condition precedent to the closing of the transactions contemplated by the Merger Agreement; and

WHEREAS, the Parties desire to set forth herein their mutual rights, obligations, and agreements with respect to the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE I — DEFINITIONS

Section 1.1 — Defined Terms

As used in this Agreement, the following terms shall have the meanings set forth below:

"Actual Tax Liability" means, with respect to any Taxable Year, the actual aggregate liability for Covered Taxes of the Corporate Taxpayer and its subsidiaries for such Taxable Year, computed in accordance with applicable law and taking into account all Tax Benefit Payments actually made under this Agreement, the amortization and depreciation deductions attributable to the Basis Adjustment, and all other items of income, gain, loss, deduction, and credit of the Corporate Taxpayer and its subsidiaries for such Taxable Year, as reflected on the federal, state, and local income tax returns as filed (or, if amended, as amended) by or on behalf of the Corporate Taxpayer and its subsidiaries for such Taxable Year.

"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the correlative terms "controlling," "controlled by," and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. For purposes of this Agreement, Fund III and its portfolio companies (other than Holdings and its subsidiaries) shall be deemed Affiliates of the Corporate Taxpayer.

"Agreed Rate" means a per annum rate equal to the Secured Overnight Financing Rate ("SOFR") as published by the Federal Reserve Bank of New York (or any successor administrator) on the applicable date of determination, plus one hundred (100) basis points, compounded quarterly. If SOFR is discontinued or otherwise unavailable, the Agreed Rate shall be determined by reference to the replacement benchmark rate designated by the Federal Reserve Bank of New York or, if no such replacement benchmark is designated, by reference to the prime rate as published in The Wall Street Journal on the applicable date of determination.

"Applicable Tax Rate" means, with respect to any Taxable Year, the blended federal, state, and local income tax rate applicable to the Corporate Taxpayer in such Taxable Year, computed as the sum of (a) the applicable federal corporate income tax rate (currently twenty-one percent (21%)) and (b) the weighted-average blended state and local income tax rate applicable to the Corporate Taxpayer and its subsidiaries in such Taxable Year, after giving effect to the deductibility of state and local taxes for federal income tax purposes (to the extent such deductibility is available), weighted by the allocation of EBITDA among the jurisdictions in which the Corporate Taxpayer and its subsidiaries operate (currently Pennsylvania, Virginia, Maryland, North Carolina, and Georgia). As of the date hereof, the Applicable Tax Rate is estimated at approximately twenty-five percent (25%), computed as 21% federal plus a blended state rate of approximately 6.42% (after accounting for the federal deduction of state taxes).

"Basis Adjustment" means the adjustment to the tax basis of the assets of Pinnacle Health Services Group LLC pursuant to Section 743(b) of the Code resulting from the exchange of Pinnacle membership interests in connection with the Merger, allocated among the assets of Pinnacle in accordance with Section 755 of the Code and the purchase price allocation schedule set forth in Exhibit A. The aggregate Basis Adjustment is estimated at Two Hundred Twenty-Four Million Four Hundred Thousand Dollars ($224,400,000), being the excess of the enterprise value of Four Hundred Twelve Million Dollars ($412,000,000) over Pinnacle's aggregate inside basis of One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000).

"blocker" means Ardent Healthcare Intermediate Inc., a Delaware C-corporation.

"Board" means the board of managers of Holdings or, if applicable, the board of directors of blocker, as the context may require.

"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in the City of New York, New York are authorized or required by law, regulation, or executive order to close.

"Caldwell Pratt & Moorehouse LLP" means the nationally recognized independent accounting firm engaged by the Corporate Taxpayer to review and verify the Tax Benefit Schedule computations, or any successor firm selected by the Corporate Taxpayer in accordance with Section 2.4 of this Agreement.

"Change of Control" means the occurrence of any of the following events: (a) the sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Holdings or the blocker to any Person or group of related Persons (other than to a wholly owned subsidiary of Holdings); (b) a merger, consolidation, recapitalization, or other similar transaction involving Holdings or the blocker in which the equity holders of Holdings immediately prior to such transaction cease to hold, directly or indirectly, more than fifty percent (50%) of the voting interests or economic interests of the surviving or resulting entity; (c) an initial public offering of the equity securities of Holdings, the blocker, or any successor entity (an "IPO") followed by a subsequent transaction or series of related transactions resulting in a change of majority control of such entity (measured by aggregate voting power); and (d) any sale, transfer, or other disposition (in one transaction or a series of related transactions) of all or substantially all of the equity interests of Holdings to any Person or group of related Persons (other than to an Affiliate of Holdings).

"Closing Date" means May 31, 2024, or such other date on which the closing of the transactions contemplated by the Merger Agreement occurs.

"Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. References to specific sections of the Code shall include any successor provisions thereto.

"Corporate Taxpayer" means Ardent Healthcare Holdings LLC, a Delaware limited liability company, and, where the context requires, Ardent Healthcare Intermediate Inc. and their respective subsidiaries through which Realized Tax Benefits are generated, in each case including any successor entity.

"Covered Taxes" means all federal, state, and local income taxes (including any franchise taxes measured by income or net worth to the extent attributable to income) payable by the Corporate Taxpayer and its subsidiaries, including estimated tax payments with respect thereto. For the avoidance of doubt, Covered Taxes shall not include payroll taxes, sales taxes, use taxes, property taxes, transfer taxes, or other taxes not measured by income.

"Determination" means any final determination of liability in respect of a tax that, under applicable law, is not subject to further appeal, review, or modification through proceedings or otherwise (including the expiration of a statute of limitations or a period for the filing of claims for refunds, amended returns, or appeals from adverse determinations), and shall include (a) a decision, judgment, decree, or other order by a court of competent jurisdiction that has become final and unappealable, (b) a closing agreement made under Section 7121 of the Code (or a corresponding provision of state or local law), (c) a final disposition by reason of the expiration of the applicable statute of limitations, and (d) any other event that results in a final resolution of liability for a tax under applicable law.

"discount Rate" means, for purposes of computing Early Termination Payments, the Agreed Rate in effect on the date of the notice of early termination.

"Early Termination Date" means the date on which an Early Termination Payment is made pursuant to Article V of this Agreement.

"Early Termination Payment" has the meaning set forth in Section 5.1 of this Agreement.

"Exchange Date" means the Closing Date, being the date on which the exchange of Pinnacle membership interests occurred in connection with the Merger.

"Hypothetical Tax Liability" means, with respect to any Taxable Year, the hypothetical aggregate liability for Covered Taxes of the Corporate Taxpayer and its subsidiaries for such Taxable Year, computed assuming that no Basis Adjustment existed (i.e., using the pre-transaction inside basis of One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000) rather than the stepped-up basis of Four Hundred Twelve Million Dollars ($412,000,000)) and that no Tax Benefit Payments were made under this Agreement with respect to such Taxable Year or any prior Taxable Year, but otherwise taking into account all other items of income, gain, loss, deduction, and credit of the Corporate Taxpayer and its subsidiaries for such Taxable Year, as actually reported on the applicable income tax returns.

"IRS" means the Internal Revenue Service of the United States Department of the Treasury, or any successor thereto.

"Merger" means the merger of Ardent Healthcare Merger Sub LLC with and into Pinnacle, with Pinnacle surviving as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc., pursuant to the Merger Agreement.

"Merger Agreement" means that certain Agreement and Plan of Merger, dated as of March 15, 2024, by and among Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, Pinnacle Health Services Group LLC, and the sellers named therein, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.

"Net Tax Benefit" means, for any Taxable Year, the excess, if any, of the Hypothetical Tax Liability for such Taxable Year over the Actual Tax Liability for such Taxable Year (i.e., the incremental tax savings attributable to the Basis Adjustment for such Taxable Year). If the Actual Tax Liability for any Taxable Year equals or exceeds the Hypothetical Tax Liability for such Taxable Year, the Net Tax Benefit for such Taxable Year shall be zero.

"Payment Date" means, with respect to any Taxable Year, the date that is ninety (90) days after the date on which the Corporate Taxpayer files (or causes to be filed) its federal income tax return for such Taxable Year; provided, that if the Tax Benefit Schedule for such Taxable Year is delivered to the TRA Representative later than sixty (60) days after such filing date, the Payment Date shall be the date that is thirty (30) days after the date on which the Tax Benefit Schedule is delivered to the TRA Representative.

"Person" means any individual, partnership, limited liability company, corporation, trust, estate, association, joint venture, unincorporated organization, governmental authority, or any other entity of any kind or nature.

"Pinnacle" means Pinnacle Health Services Group LLC, a Delaware limited liability company (EIN: 82-1947632), and, where applicable, any successor entity.

"Realized Tax Benefit" means, for any Taxable Year, the Net Tax Benefit for such Taxable Year that is actually realized (or deemed realized) through a reduction in Covered Taxes payable by the Corporate Taxpayer and its subsidiaries for such Taxable Year. A Net Tax Benefit shall be deemed "realized" in a Taxable Year to the extent that the amortization or depreciation deductions attributable to the Basis Adjustment are actually utilized to reduce Covered Taxes in such Taxable Year (whether through reduction of taxable income, generation of net operating loss carryforwards that are utilized in such Taxable Year, or otherwise). For the avoidance of doubt, to the extent that the Corporate Taxpayer has insufficient taxable income to utilize the full amortization or depreciation deductions in a given Taxable Year, the unused portion shall not be treated as a Realized Tax Benefit until the Taxable Year in which such unused deductions are actually utilized.

"Schedule K-1" means IRS Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., or any successor form.

"Section 743(b) Adjustment" has the same meaning as the term "Basis Adjustment."

"Section 754 Election" means the election under Section 754 of the Code to adjust the basis of partnership property, to be filed with Pinnacle's federal partnership income tax return (Form 1065) for the taxable year ending December 31, 2024.

"Sharing Percentage" means eighty-five percent (85%).

"SOFR" means the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York (or any successor administrator) on the Federal Reserve Bank of New York's website.

"Tax Benefit Payment" means, with respect to any Taxable Year, the payment due to the TRA Holders in respect of such Taxable Year, equal to the product of (a) the Sharing Percentage and (b) the Realized Tax Benefit for such Taxable Year.

"Tax Benefit Schedule" means the schedule delivered by the Corporate Taxpayer to the TRA Representative pursuant to Section 2.4 of this Agreement for each Taxable Year, substantially in the form set forth in Exhibit C attached hereto.

"Taxable Year" means a taxable year of the Corporate Taxpayer as determined for federal income tax purposes (initially, the calendar year ending December 31).

"TRA Holder" means each of Dr. Raymond Carvallo, Dr. Nadia Ostrowski, Jonathan Farnsworth, and each of the fourteen (14) minority physician-investors who were members of Pinnacle immediately prior to the Closing Date, as set forth in Exhibit B attached hereto, together with their respective permitted successors and assigns in accordance with Article IX of this Agreement.

"TRA Holder Percentage" means, with respect to each TRA Holder, such TRA Holder's pro rata share of Tax Benefit Payments, expressed as a percentage, based on such TRA Holder's proportionate share of the aggregate equity proceeds from the Merger, as set forth in Exhibit B attached hereto. The TRA Holder Percentages are as follows: Dr. Raymond Carvallo: 38.2%; Dr. Nadia Ostrowski: 28.5%; Jonathan Farnsworth: 5.8%; the minority physician-investors: 27.5% collectively (with individual percentages as set forth on the schedule referenced in Exhibit B).

"TRA Representative" means the individual designated by the TRA Holders to act on their behalf with respect to all matters arising under this Agreement, including receipt of notices, review of Tax Benefit Schedules, and exercise of the rights set forth herein. The initial TRA Representative shall be Dr. Raymond Carvallo. The TRA Representative may be replaced by the affirmative vote of TRA Holders holding a majority of the aggregate TRA Holder Percentages, with written notice to the Corporate Taxpayer.

"Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time (including corresponding provisions of any successor regulations).

"Useful Life Schedule" means the schedule of useful lives assigned to each asset class for purposes of amortizing or depreciating the Basis Adjustment, as set forth in Exhibit A attached hereto. The Useful Life Schedule reflects the following useful lives: payor contracts: fifteen (15) years; assembled workforce: three (3) years; trade name: fifteen (15) years; non-compete agreements: five (5) years; goodwill: fifteen (15) years; tangible property: per applicable Modified Accelerated Cost Recovery System ("MACRS") class life. The weighted-average useful life of the Basis Adjustment assets is approximately 11.2 years.

"Valuation Assumptions" means, for purposes of computing Early Termination Payments pursuant to Article V, the assumptions set forth in Section 5.1 of this Agreement, including the discount Rate, the remaining useful lives of the Basis Adjustment assets, the projected taxable income of the Corporate Taxpayer and its subsidiaries, and the applicable tax rates.

Section 1.2 — Interpretive Provisions

The following rules of construction shall apply to this Agreement unless the context otherwise requires:

(a) References herein to "including" (and correlative terms such as "include" and "includes") shall mean "including, without limitation," and shall not be construed to limit any general statement that precedes such term to the specific or similar items or matters immediately following such term.

(b) The headings and captions contained in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement.

(c) Words importing the singular number shall include the plural, and vice versa, and words importing any gender shall include all genders, as the context may require.

(d) Unless otherwise specified, all references herein to "Sections," "Articles," and "Exhibits" are to the corresponding Sections, Articles, and Exhibits of this Agreement.

(e) All references to currency amounts in this Agreement are in United States Dollars unless otherwise specified.

(f) References to any statute, rule, or regulation shall be deemed to refer to such statute, rule, or regulation as amended, restated, supplemented, or otherwise modified from time to time, and shall include any rules and regulations promulgated thereunder.

(g) The Parties have participated jointly in the negotiation and drafting of this Agreement, and in the event of any ambiguity or question of intent or interpretation, this Agreement shall be construed as if drafted jointly by all Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions hereof.

(h) References to "days" shall mean calendar days unless "Business Days" is expressly specified.

ARTICLE II — DETERMINATION OF REALIZED TAX BENEFITS

Section 2.1 — Basis Adjustment

(a) Section 754 Election. The Corporate Taxpayer shall cause Pinnacle to file (or confirm the filing of) an election under Section 754 of the Code with Pinnacle's federal partnership income tax return (Form 1065) for the taxable year ending December 31, 2024. The Section 754 Election shall be made in the manner and form prescribed by applicable Treasury Regulations, and shall be attached to the partnership return as a statement of election filed in accordance with Treasury Regulations Section 1.754-1(b). The Corporate Taxpayer represents that, as of the date hereof, Pinnacle has not previously filed a Section 754 Election with respect to any prior taxable year, and that the election to be filed in connection with the Merger shall be the initial Section 754 Election of Pinnacle.

(b) Amount of Basis Adjustment. The Section 743(b) basis adjustment in favor of Ardent Healthcare Intermediate Inc., as the transferee of the Pinnacle membership interests in the Merger, is estimated at Two Hundred Twenty-Four Million Four Hundred Thousand Dollars ($224,400,000), being the difference between the enterprise value of Four Hundred Twelve Million Dollars ($412,000,000) and Pinnacle's aggregate inside basis of One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000). The final amount of the Basis Adjustment shall be determined based on the actual purchase price and the actual inside basis of Pinnacle's assets as of the Closing Date, as reflected on the federal partnership income tax return of Pinnacle for the taxable year ending December 31, 2024, and shall be adjusted to the extent required by any Determination. Any adjustment to the estimated Basis Adjustment shall be reflected in the Tax Benefit Schedules for the Taxable Year in which such adjustment is determined and, to the extent appropriate, in amended Tax Benefit Schedules for prior Taxable Years.

(c) Allocation of Basis Adjustment. The Basis Adjustment shall be allocated among the assets of Pinnacle in accordance with Section 755 of the Code and the Treasury Regulations promulgated thereunder, and shall be consistent with the purchase price allocation schedule attached hereto as Exhibit A, which reflects the following allocation:

Class V Intangibles are further allocated as follows:

(d) Inside Basis. The Parties agree that the aggregate inside basis of Pinnacle's assets prior to the Basis Adjustment is One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000), as set forth on the balance sheet of Pinnacle as of the Closing Date and as reflected in the capital accounts of the members of Pinnacle immediately prior to the Merger.

(e) Consistency. The Parties agree to consistently use the purchase price allocation set forth in Exhibit A for all tax reporting purposes, including on the applicable partnership returns, Schedule K-1s, and any Form 8594 (Asset Acquisition Statement) or Form 8308 (Report of a Sale or Exchange of Certain Partnership Interests) required to be filed in connection with the Merger.

Section 2.2 — Determination of Net Tax Benefit

(a) Computation of Hypothetical and Actual Tax Liability. For each Taxable Year beginning with the Taxable Year ending December 31, 2024, the Corporate Taxpayer shall compute (i) the Hypothetical Tax Liability for such Taxable Year and (ii) the Actual Tax Liability for such Taxable Year. The Hypothetical Tax Liability shall be computed as though no Basis Adjustment existed and using the pre-transaction inside basis of $187,600,000 as the basis for computing amortization and depreciation deductions with respect to Pinnacle's assets. The Actual Tax Liability shall be computed taking into account the Basis Adjustment and the resulting amortization and depreciation deductions actually claimed on the tax returns of the Corporate Taxpayer and its subsidiaries for such Taxable Year.

(b) Net Tax Benefit. The Net Tax Benefit for any Taxable Year shall equal the excess, if any, of the Hypothetical Tax Liability for such Taxable Year over the Actual Tax Liability for such Taxable Year. The Net Tax Benefit represents the incremental federal, state, and local income tax savings attributable to the amortization and depreciation deductions arising from the Basis Adjustment.

(c) Amortization and Depreciation. Computations of the Net Tax Benefit shall reflect the amortization or depreciation of the Basis Adjustment over the applicable useful lives set forth in the Useful Life Schedule attached as Exhibit A. Based on the estimated Basis Adjustment of $224,400,000 and the weighted-average useful life of approximately 11.2 years, the estimated annual aggregate amortization deduction attributable to the Basis Adjustment is approximately Twenty Million Forty Thousand Dollars ($20,040,000) per year (for full Taxable Years). The actual amortization or depreciation for any Taxable Year may differ from such estimate based on the actual useful lives of individual asset classes, any mid-year conventions applicable to the first Taxable Year, and any changes in the Basis Adjustment resulting from a Determination.

(d) Tax Rate. Computations of the Net Tax Benefit for any Taxable Year shall reflect the actual applicable tax rates in effect for such Taxable Year, including the federal corporate income tax rate of twenty-one percent (21%) and the applicable state and local income tax rates in each jurisdiction in which the Corporate Taxpayer and its subsidiaries conduct business. As of the date hereof, the applicable state income tax rates and their anticipated changes are as follows:

(i) Pennsylvania: 8.99% for the 2024 taxable year, declining to 7.99% for the 2025 taxable year, and further declining by approximately 0.50% per year to 4.99% for the 2031 taxable year and thereafter, in accordance with Pennsylvania Act 53 of 2022;

(ii) Virginia: 6.0% (no currently scheduled changes);

(iii) Maryland: 8.25% (no currently scheduled changes);

(iv) North Carolina: 2.5% for the 2024 taxable year, with further scheduled reductions in subsequent years;

(v) Georgia: 5.75% (no currently scheduled changes).

The blended state and local income tax rate shall be weighted by the allocation of EBITDA among such jurisdictions, which weighting shall be updated annually to reflect actual operations. As of the date hereof, the blended state rate (after accounting for the federal deduction of state taxes, to the extent applicable) is estimated at approximately 6.42%, resulting in an estimated Applicable Tax Rate of approximately 25%.

(e) Estimated Annual Tax Benefit. Based on the foregoing assumptions, the estimated annual tax benefit attributable to the Basis Adjustment is approximately Five Million Ten Thousand Dollars ($5,010,000) per year (computed as $20,040,000 annual amortization multiplied by the 25% blended Applicable Tax Rate). The actual tax benefit for any Taxable Year may differ from such estimate based on actual taxable income, actual tax rates, actual apportionment factors, and other factors.

(f) No Payment if No Benefit. If the Net Tax Benefit for any Taxable Year is zero or negative (i.e., no incremental tax savings are realized in such Taxable Year), no Tax Benefit Payment shall be required for such Taxable Year. In such event, the unused amortization or depreciation deductions giving rise to the potential Net Tax Benefit shall be carried forward to subsequent Taxable Years and shall be treated as generating a Realized Tax Benefit in the first Taxable Year in which such deductions are actually utilized to reduce Covered Taxes.

Section 2.3 — Realized Tax Benefit

(a) Determination of Realized Tax Benefit. A Realized Tax Benefit for any Taxable Year shall equal the portion of the Net Tax Benefit for such Taxable Year that is actually utilized to reduce Covered Taxes payable by the Corporate Taxpayer and its subsidiaries in such Taxable Year. A Net Tax Benefit shall be deemed actually utilized in a Taxable Year to the extent that the amortization or depreciation deductions attributable to the Basis Adjustment are reflected on the Corporate Taxpayer's filed income tax returns for such Taxable Year and result in a reduction of the Corporate Taxpayer's aggregate Covered Tax liability below the Hypothetical Tax Liability for such Taxable Year.

(b) Insufficient Taxable Income. If the Corporate Taxpayer has insufficient taxable income in any Taxable Year to fully utilize the amortization or depreciation deductions attributable to the Basis Adjustment, the unused portion of such deductions shall carry forward in accordance with applicable tax law and shall be treated as a Realized Tax Benefit in the first Taxable Year in which such deductions are actually utilized to reduce Covered Taxes. The carry-forward of unused deductions shall be tracked on the Tax Benefit Schedule for each applicable Taxable Year.

(c) State-by-State Computation. For the avoidance of doubt, state and local tax benefits shall be computed on a state-by-state basis, using the apportionment and allocation rules applicable in each state in which the Corporate Taxpayer and its subsidiaries file income tax returns. As of the date hereof, the applicable apportionment methodologies are as follows: single-sales-factor apportionment in Pennsylvania, Virginia, and Georgia; three-factor apportionment with double-weighted sales factor in Maryland and North Carolina. The Corporate Taxpayer shall apply the apportionment methodology in effect in each state for the applicable Taxable Year when computing the Realized Tax Benefit attributable to each state.

(d) Adjustments. If any Basis Adjustment amount is subsequently adjusted as a result of a Determination, an audit by any taxing authority, or otherwise, the Realized Tax Benefit for the applicable Taxable Year(s) shall be recomputed to reflect such adjustment, and any overpayment or underpayment of Tax Benefit Payments shall be corrected in the next Tax Benefit Payment following such recomputation, together with interest at the Agreed Rate from the date of the original payment to the date of correction.

Section 2.4 — Tax Benefit Schedule

(a) Delivery. Within ninety (90) days after the date on which the Corporate Taxpayer files (or causes to be filed) its federal income tax return for each Taxable Year, the Corporate Taxpayer shall prepare and deliver (or cause to be prepared and delivered) to the TRA Representative a Tax Benefit Schedule for such Taxable Year, substantially in the form set forth in Exhibit C attached hereto, setting forth the following information in reasonable detail:

(i) the Basis Adjustment amounts amortized or depreciated during such Taxable Year, broken down by asset class and by jurisdiction;

(ii) the Hypothetical Tax Liability for such Taxable Year;

(iii) the Actual Tax Liability for such Taxable Year;

(iv) the Net Tax Benefit for such Taxable Year;

(v) the Realized Tax Benefit for such Taxable Year;

(vi) the aggregate Tax Benefit Payment for such Taxable Year;

(vii) each TRA Holder's share of the Tax Benefit Payment for such Taxable Year, computed based on such TRA Holder's TRA Holder Percentage as set forth in Exhibit B; and

(viii) any carry-forward amounts of unused amortization or depreciation deductions from prior Taxable Years.

(b) Preparation Standard. The Tax Benefit Schedule shall be prepared in good faith, in a manner consistent with past practice (to the extent applicable) and the terms of this Agreement, and using reasonable and customary assumptions and methodologies. The Corporate Taxpayer shall use the same accounting methods, elections, and conventions for purposes of computing the Tax Benefit Schedule as are used on the Corporate Taxpayer's actual filed income tax returns for the applicable Taxable Year.

(c) Independent Review. The Corporate Taxpayer shall retain Caldwell Pratt & Moorehouse LLP, or a successor nationally recognized accounting firm selected by the Corporate Taxpayer with the consent of the TRA Representative (such consent not to be unreasonably withheld, conditioned, or delayed), to review and verify the computations set forth in each Tax Benefit Schedule. The costs and expenses of such review shall be borne by the Corporate Taxpayer. The independent accounting firm shall issue a letter to the Corporate Taxpayer and the TRA Representative confirming that the Tax Benefit Schedule has been prepared in accordance with the terms of this Agreement and that the computations therein are mathematically accurate and consistent with the applicable tax returns. Such confirmation letter shall be delivered to the TRA Representative simultaneously with the delivery of the Tax Benefit Schedule.

(d) Supplemental Information. Upon reasonable request by the TRA Representative, the Corporate Taxpayer shall provide such additional information and documentation as may be reasonably necessary for the TRA Representative (or the TRA Representative's independent accounting advisors) to verify the accuracy of the Tax Benefit Schedule, including copies of relevant tax return schedules, depreciation and amortization schedules, apportionment factor computations, and working papers, in each case subject to the confidentiality provisions of Section 10.10.

ARTICLE III — TAX BENEFIT PAYMENTS

Section 3.1 — Timing of Payments

(a) Payment Date. Tax Benefit Payments with respect to each Taxable Year shall be made by the Corporate Taxpayer on or before the applicable Payment Date, which shall be the later of (i) the date that is ninety (90) days after the date on which the Corporate Taxpayer files (or causes to be filed) its federal income tax return for such Taxable Year and (ii) the date that is thirty (30) days after the date on which the Corporate Taxpayer delivers the Tax Benefit Schedule for such Taxable Year to the TRA Representative.

(b) Method of Payment. All Tax Benefit Payments shall be made in immediately available funds by wire transfer to one or more bank accounts designated in writing by each TRA Holder (or by the TRA Representative on behalf of all TRA Holders) at least ten (10) Business Days prior to the applicable Payment Date. The Corporate Taxpayer shall provide each TRA Holder (or the TRA Representative) with a written statement accompanying each Tax Benefit Payment, setting forth the calculation of such TRA Holder's share of the Tax Benefit Payment and the applicable Taxable Year to which such payment relates.

(c) First Payment. The first Tax Benefit Payment under this Agreement is expected to be made with respect to the Taxable Year ending December 31, 2024. Because the Closing Date is May 31, 2024, the Taxable Year ending December 31, 2024 will be a partial year for purposes of computing amortization deductions attributable to the Basis Adjustment (approximately seven (7) months of amortization, subject to any applicable mid-year conventions), and the Tax Benefit Payment for such partial year will be prorated accordingly.

Section 3.2 — Amount of Tax Benefit Payments

(a) Calculation. For each Taxable Year, the aggregate Tax Benefit Payment shall equal the product of (i) the Sharing Percentage (85%) and (ii) the Realized Tax Benefit for such Taxable Year, as determined in accordance with Article II.

(b) Estimated Payments. Based on the estimates set forth in Section 2.2, the estimated aggregate annual Tax Benefit Payment for each full Taxable Year is approximately Four Million Two Hundred Sixty Thousand Dollars ($4,260,000), computed as eighty-five percent (85%) of the estimated annual Realized Tax Benefit of $5,010,000. Actual payments may differ from such estimate for the reasons described in Article II.

(c) Allocation Among TRA Holders. Each TRA Holder's share of the aggregate Tax Benefit Payment for any Taxable Year shall be determined by multiplying such aggregate Tax Benefit Payment by such TRA Holder's TRA Holder Percentage as set forth in Exhibit B. Based on the estimated annual aggregate Tax Benefit Payment, the estimated annual payments to each TRA Holder (or group of TRA Holders) are as follows:

The foregoing estimates are for illustrative purposes only and are subject to adjustment based on actual Realized Tax Benefits, actual tax rates, and other factors described in Article II.

Section 3.3 — Late Payments; Interest

(a) Accrual of Interest. Any Tax Benefit Payment not made by the Corporate Taxpayer on or before the applicable Payment Date shall accrue interest at the Agreed Rate (SOFR plus 100 basis points per annum), compounded quarterly, from and including the Payment Date through and including the date on which actual payment is made in full.

(b) Compounding. Interest on any overdue Tax Benefit Payment shall compound quarterly on each March 31, June 30, September 30, and December 31 following the applicable Payment Date, and on the date of actual payment.

(c) No Waiver. The payment of interest on any late Tax Benefit Payment shall not constitute a waiver of any other right or remedy available to the TRA Holders under this Agreement or applicable law, including the right to seek specific performance or to elect acceleration of remaining Tax Benefit Payments pursuant to Section 5.3.

Section 3.4 — Pro Rata Allocation Among TRA Holders

All Tax Benefit Payments made under this Agreement shall be allocated among the TRA Holders in accordance with each TRA Holder's TRA Holder Percentage as set forth in Exhibit B attached hereto. No TRA Holder shall have any claim or right to a greater or lesser share of any Tax Benefit Payment than such TRA Holder's TRA Holder Percentage, except as may be adjusted to reflect permitted assignments in accordance with Article IX. In the event that any TRA Holder has transferred all or a portion of such TRA Holder's rights under this Agreement to a permitted assignee, the Corporate Taxpayer shall make payments to such permitted assignee in respect of the transferred TRA Holder Percentage, and the Corporate Taxpayer shall be entitled to rely on written notice from the transferring TRA Holder (or the TRA Representative) as to the allocation of payments between the transferring TRA Holder and the permitted assignee.

Section 3.5 — No Duplicative Payments

(a) General. No TRA Holder shall receive duplicative payments with respect to the same Realized Tax Benefit. For the avoidance of doubt, if the same Realized Tax Benefit is attributable to more than one Taxable Year (e.g., due to carry-forward or carry-back of deductions), the Corporate Taxpayer shall ensure that Tax Benefit Payments are calculated so as to avoid double-counting of any tax savings.

(b) Other Agreements. Payments under this Agreement shall be reduced, dollar-for-dollar, by any amounts otherwise payable to a TRA Holder in respect of substantially similar tax benefits arising from the Basis Adjustment under any other agreement between or among the Parties or their Affiliates, including any indemnification provisions of the Merger Agreement that relate to tax benefits. The Corporate Taxpayer shall promptly notify the TRA Representative of any payments or credits made or received under any such other agreement that may affect the computation of Tax Benefit Payments hereunder.

ARTICLE IV — PROCEDURES; DISPUTES

Section 4.1 — Cooperation; Information Rights

(a) Access to Information. The Corporate Taxpayer shall provide the TRA Representative with reasonable access to relevant tax return information, work papers, schedules, computations, and other documentation reasonably necessary to verify the accuracy of each Tax Benefit Schedule, including (i) copies of filed federal and state income tax returns of the Corporate Taxpayer and its subsidiaries (or relevant excerpts thereof), (ii) depreciation and amortization schedules reflecting the Basis Adjustment, (iii) apportionment and allocation factor computations for each applicable state, and (iv) such other information as the TRA Representative may reasonably request. Such access shall be provided during normal business hours upon reasonable advance notice, and all information provided shall be subject to the confidentiality provisions of Section 10.10.

(b) Independent Review. The TRA Representative may, at the collective expense of the TRA Holders, retain an independent nationally recognized accounting firm to review the Tax Benefit Schedule and the underlying computations for any Taxable Year; provided, that such independent accounting firm shall enter into a customary confidentiality agreement with the Corporate Taxpayer prior to receiving access to any tax return information or work papers. The Corporate Taxpayer shall cooperate with such independent accounting firm in a timely manner and shall provide access to the information described in Section 4.1(a) within fifteen (15) Business Days of a reasonable request therefor.

(c) Notification of Audits. The Corporate Taxpayer shall promptly notify the TRA Representative in writing of any audit, examination, investigation, or other proceeding by any federal, state, or local taxing authority that relates to or could reasonably be expected to affect the Basis Adjustment, the Section 754 Election, the purchase price allocation, or any Tax Benefit Payment under this Agreement. Such notice shall be provided within ten (10) Business Days of the Corporate Taxpayer's receipt of notice of such audit, examination, or proceeding. The Corporate Taxpayer shall keep the TRA Representative reasonably informed of the status and progress of any such audit, examination, or proceeding, and shall not settle, compromise, or concede any issue relating to the Basis Adjustment or any Tax Benefit Payment without the prior written consent of the TRA Representative (such consent not to be unreasonably withheld, conditioned, or delayed).

Section 4.2 — Objection Process

(a) Objection Period. The TRA Representative shall have thirty (30) days following receipt of a Tax Benefit Schedule for any Taxable Year to deliver a written objection to the Corporate Taxpayer setting forth in reasonable detail the nature of the objection, the specific items or computations to which the TRA Representative objects, and the TRA Representative's proposed alternative computation (the "Objection Notice"). If the TRA Representative does not deliver an Objection Notice within such thirty (30)-day period, the Tax Benefit Schedule as delivered shall be deemed final and binding on all Parties for purposes of computing Tax Benefit Payments for the applicable Taxable Year.

(b) Good-Faith Negotiation. If the TRA Representative timely delivers an Objection Notice, the Corporate Taxpayer and the TRA Representative shall negotiate in good faith to resolve the dispute within thirty (30) days following the delivery of the Objection Notice (the "Negotiation Period"). During the Negotiation Period, each Party shall make available appropriate personnel and information to facilitate the resolution of the dispute. Any agreed-upon adjustments resulting from the Negotiation Period shall be reflected in a revised Tax Benefit Schedule, which shall be delivered to the TRA Representative within ten (10) Business Days following the resolution of the dispute.

(c) Reconciliation Accountant. If the dispute is not resolved within the Negotiation Period, the dispute shall be submitted to an independent nationally recognized accounting firm mutually agreed upon by the Corporate Taxpayer and the TRA Representative (the "Reconciliation Accountant"). If the Corporate Taxpayer and the TRA Representative are unable to agree on the Reconciliation Accountant within ten (10) Business Days after the expiration of the Negotiation Period, each of the Corporate Taxpayer and the TRA Representative shall select one nationally recognized accounting firm, and the two firms so selected shall jointly select a third nationally recognized accounting firm to serve as the Reconciliation Accountant. The Reconciliation Accountant shall not be the firm that prepared the Tax Benefit Schedule or any firm that has been retained by the TRA Representative to review the Tax Benefit Schedule for the applicable Taxable Year.

(d) Reconciliation Process. The Reconciliation Accountant shall be engaged to determine, within sixty (60) days of its engagement, only those items in dispute as set forth in the Objection Notice and the Corporate Taxpayer's response thereto. The Reconciliation Accountant's determination shall be in writing and shall set forth in reasonable detail the basis for such determination. The determination of the Reconciliation Accountant shall be final and binding on all Parties, absent manifest error or fraud.

(e) Costs. The costs and expenses of the Reconciliation Accountant shall be borne by the non-prevailing Party. If the Reconciliation Accountant's determination falls between the respective positions of the Corporate Taxpayer and the TRA Representative, the costs of the Reconciliation Accountant shall be allocated between the Corporate Taxpayer, on the one hand, and the TRA Holders (collectively), on the other hand, in inverse proportion to the relative amounts by which each Party's position differed from the Reconciliation Accountant's determination.

(f) Payment Pending Resolution. During the pendency of any dispute under this Section 4.2, the Corporate Taxpayer shall pay to the TRA Holders the undisputed portion of the Tax Benefit Payment for the applicable Taxable Year on or before the applicable Payment Date, and shall pay the disputed portion (together with interest at the Agreed Rate from the Payment Date) within ten (10) Business Days after the resolution of the dispute.

Section 4.3 — Tax Return Filing; Section 754 Election

(a) Partnership Return Filing. The Corporate Taxpayer shall cause Pinnacle to timely file all required federal and state partnership income tax returns, including (i) IRS Form 1065 (U.S. Return of Partnership Income) for each taxable year of Pinnacle, and (ii) all applicable state partnership income tax returns and information returns.

(b) Section 754 Election Filing. The Corporate Taxpayer shall cause Pinnacle to file the Section 754 Election statement with the federal partnership income tax return (Form 1065) for the taxable year ending December 31, 2024, in compliance with Section 754 of the Code and Treasury Regulations Section 1.754-1(b). The Corporate Taxpayer shall provide the TRA Representative with a copy of the filed Section 754 Election statement promptly following the filing of Pinnacle's partnership return.

(c) No Revocation. The Corporate Taxpayer shall not revoke the Section 754 Election, and shall not permit or cause the revocation of the Section 754 Election, without the prior written consent of the TRA Representative, which consent may be withheld in the TRA Representative's sole and absolute discretion.

(d) Consistent Reporting. The Corporate Taxpayer shall prepare and file (or cause to be prepared and filed) all income tax returns of the Corporate Taxpayer and its subsidiaries in a manner consistent with the Basis Adjustment and the purchase price allocation set forth in this Agreement and in Exhibit A, except as otherwise required by a Determination. If the Corporate Taxpayer receives notice from any taxing authority proposing to disallow or adjust any portion of the Basis Adjustment or the purchase price allocation, the Corporate Taxpayer shall promptly notify the TRA Representative and shall consult with the TRA Representative before agreeing to any adjustment.

Section 4.4 — Consistency

The Parties agree that the purchase price allocation schedule set forth in Exhibit A and the TRA Holder Percentages set forth in Exhibit B shall be consistently used for all federal, state, and local income tax reporting purposes related to the Merger and the transactions contemplated hereby, including, without limitation, (a) the reporting of the Basis Adjustment on Pinnacle's federal partnership income tax return and the applicable Schedule K-1s issued to partners, (b) the filing of Form 8308 (Report of a Sale or Exchange of Certain Partnership Interests) with Pinnacle's partnership return for the taxable year including the Closing Date, (c) any Form 8594 (Asset Acquisition Statement Under Section 1060) required to be filed in connection with the Merger, and (d) any state or local equivalents of the foregoing forms or filings. No Party shall take a position on any income tax return that is inconsistent with the purchase price allocation or the TRA Holder Percentages set forth herein, except as required by a Determination.

ARTICLE V — EARLY TERMINATION

Section 5.1 — Early Termination by Corporate Taxpayer

(a) Election to Terminate. The Corporate Taxpayer may, at any time following the second anniversary of the Closing Date, elect to terminate this Agreement by delivering a written notice of early termination (the "Early Termination Notice") to the TRA Representative, specifying the proposed Early Termination Date and setting forth in reasonable detail the computation of the Early Termination Payment. The Early Termination Notice shall be delivered at least thirty (30) days prior to the proposed Early Termination Date.

(b) Computation of Early Termination Payment. Upon the delivery of an Early Termination Notice, the Corporate Taxpayer shall pay to each TRA Holder an Early Termination Payment equal to such TRA Holder's TRA Holder Percentage of the aggregate present value of all remaining Tax Benefit Payments that would be payable under this Agreement from and after the Early Termination Date through the date on which the Basis Adjustment would be fully amortized in accordance with the Useful Life Schedule. The aggregate present value of all remaining Tax Benefit Payments shall be computed using the following Valuation Assumptions:

(i) a discount rate equal to the Agreed Rate (SOFR plus 100 basis points) in effect on the date of the Early Termination Notice;

(ii) the assumption that the Corporate Taxpayer will have sufficient taxable income in each remaining Taxable Year to fully utilize all remaining amortization and depreciation deductions attributable to the Basis Adjustment (including any carry-forward amounts from prior Taxable Years);

(iii) the assumption that applicable federal, state, and local tax rates will remain at the levels in effect for the Taxable Year in which the Early Termination Notice is delivered, except that scheduled statutory rate reductions that have been enacted as of the date of the Early Termination Notice (including, without limitation, Pennsylvania's scheduled reduction of its corporate net income tax rate from 8.99% to 4.99% by the 2031 taxable year pursuant to Pennsylvania Act 53 of 2022) shall be taken into account;

(iv) the remaining useful lives of the Basis Adjustment assets as set forth in the Useful Life Schedule (Exhibit A), reduced by the number of years (or partial years) for which amortization has already been claimed; and

(v) the Sharing Percentage of 85%.

(c) Payment. The Early Termination Payment shall be made in immediately available funds by wire transfer to accounts designated by each TRA Holder (or the TRA Representative on behalf of all TRA Holders) within thirty (30) days of the date of the Early Termination Notice.

(d) Effect of Early Termination. Upon the payment in full of all Early Termination Payments to all TRA Holders in accordance with this Section 5.1, this Agreement shall terminate and be of no further force or effect, except for the provisions of Article VI (Tax Treatment of Payments), Section 10.2 (Governing Law), Section 10.3 (Jurisdiction; Venue), Section 10.4 (Waiver of Jury Trial), and Section 10.10 (Confidentiality), which shall survive any termination of this Agreement.

Section 5.2 — Early Termination upon Change of Control

(a) No Automatic Termination. Upon a Change of Control, this Agreement shall not terminate automatically. The obligations of the Corporate Taxpayer under this Agreement, including the obligation to make Tax Benefit Payments, shall be binding on the successor entity or acquiror in such Change of Control, to the same extent as if such successor entity or acquiror were the original Corporate Taxpayer hereunder.

(b) Assumption by Successor. In connection with any Change of Control, the Corporate Taxpayer shall use its commercially reasonable efforts to cause the successor entity or acquiror to expressly assume, in writing, all of the obligations of the Corporate Taxpayer under this Agreement. Any such assumption agreement shall be in form and substance reasonably satisfactory to the TRA Representative and shall be delivered to the TRA Representative prior to or simultaneously with the consummation of the Change of Control transaction.

(c) Early Termination Payment upon Non-Assumption. If the successor entity or acquiror does not assume this Agreement (whether by written assumption agreement or by operation of law), the Corporate Taxpayer shall make an Early Termination Payment to each TRA Holder, computed in accordance with Section 5.1(b), prior to or simultaneously with the consummation of the Change of Control transaction. The obligation to make such Early Termination Payment shall be a condition to the consummation of any Change of Control transaction that does not provide for assumption of this Agreement by the successor.

(d) Review by TRA Representative. In the event of a Change of Control, the Corporate Taxpayer shall deliver to the TRA Representative the computation of the Early Termination Payment at least twenty (20) Business Days prior to the anticipated consummation date of the Change of Control transaction. The TRA Representative shall have fifteen (15) Business Days following receipt of such computation to review and deliver a written objection thereto. If the TRA Representative delivers a timely objection, the dispute resolution procedures of Section 4.2 shall apply, mutatis mutandis; provided, that the Reconciliation Accountant shall be engaged on an expedited basis and shall render its determination within thirty (30) days of engagement.

Section 5.3 — Material Breach

(a) Acceleration upon Material Breach. If the Corporate Taxpayer materially breaches this Agreement, including, without limitation, (i) the failure to make any Tax Benefit Payment when due under Section 3.1 (and the continuation of such failure for a period of thirty (30) days following written notice from the TRA Representative), (ii) the failure to file the Section 754 Election in accordance with Section 4.3, (iii) the revocation of the Section 754 Election without the consent of the TRA Representative, or (iv) the intentional failure to claim or utilize amortization or depreciation deductions attributable to the Basis Adjustment in a manner that reduces or eliminates Realized Tax Benefits, then the TRA Representative may, on behalf of all TRA Holders, upon sixty (60) days' prior written notice to the Corporate Taxpayer (the "Acceleration Notice"), elect to accelerate all remaining Tax Benefit Payments that would otherwise be payable under this Agreement.

(b) Computation of Accelerated Amount. The accelerated amount shall be calculated as an Early Termination Payment under Section 5.1(b), except that no di

TAX RECEIVABLE AGREEMENT
DRAFT
Prepared by Calderwood & Harkness LLP
March 20, 2024
DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO REVISION
Matter Number: 1001-00006 Engagement Number: 1001-00006
CONFIDENTIAL TREATMENT REQUESTED — DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO REVISION — This draft is being circulated for discussion purposes only and does not constitute a binding agreement or commitment by any party. All terms and conditions are subject to further negotiation and the execution of definitive documentation.
TABLE OF CONTENTS
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TAX RECEIVABLE AGREEMENT
This TAX RECEIVABLE AGREEMENT (this "Agreement"), dated as of March 20, 2024 (the "Draft Date"), and effective as of May 31, 2024 (the "Effective Date" or the "Closing Date"), is entered into by and among:
(i) ARDENT HEALTHCARE HOLDINGS LLC, a Delaware limited liability company ("Holdings" or the "Corporate Taxpayer"), with its principal business address at 600 Lexington Avenue, 38th Floor, New York, New York 10022, and its registered address c/o Pemberton Industries, 251 Little Falls Drive, Wilmington, Delaware 19808 (EIN: 93-2187445);
(ii) ARDENT HEALTHCARE INTERMEDIATE INC., a Delaware C-corporation ("Intermediate" or "blocker"), with its principal business address at 600 Lexington Avenue, 38th Floor, New York, New York 10022, and its registered address c/o Pemberton Industries, 251 Little Falls Drive, Wilmington, Delaware 19808 (EIN: 93-2187512);
(iii) the TRA Holders (as defined herein), consisting of:
(a) Dr. Raymond Carvallo, an individual residing in the Commonwealth of Pennsylvania, in his capacity as Co-Founder and Chief Executive Officer of Pinnacle Health Services Group LLC, and as a rollover participant in the transactions contemplated by the Merger Agreement (as defined below);
(b) Dr. Nadia Ostrowski, an individual residing in the Commonwealth of Pennsylvania, in her capacity as Co-Founder and Chief Medical Officer of Pinnacle Health Services Group LLC, and as a rollover participant in the transactions contemplated by the Merger Agreement;
(c) Jonathan Farnsworth, an individual residing in the Commonwealth of Pennsylvania, in his capacity as Chief Financial Officer of Pinnacle Health Services Group LLC, and as a rollover participant in the transactions contemplated by the Merger Agreement; and
(d) the fourteen (14) minority physician-investors who were members of Pinnacle Health Services Group LLC immediately prior to the Closing Date, as set forth in Exhibit B attached hereto (collectively holding 27.5% of the pre-closing membership interests in Pinnacle Health Services Group LLC; no rollover); and
(iv) the TRA Representative (as defined herein), initially Dr. Raymond Carvallo, acting on behalf of the TRA Holders in the capacities set forth herein.
Each of Holdings, Intermediate, and each TRA Holder is referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, reference is made to that certain Agreement and Plan of Merger, dated as of March 15, 2024 (the "Merger Agreement"), by and among Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of Ardent Healthcare Intermediate Inc. ("Merger Sub"), Pinnacle Health Services Group LLC, a Delaware limited liability company (EIN: 82-1947632) ("Pinnacle"), and the sellers named therein;
WHEREAS, Pinnacle is a Delaware limited liability company classified as a partnership for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3, and operates thirty-four (34) urgent care clinics and eight (8) ambulatory surgery centers across the Commonwealth of Pennsylvania, the Commonwealth of Virginia, the State of Maryland, the State of North Carolina, and the State of Georgia;
WHEREAS, pursuant to the Merger Agreement, Ardent Healthcare Merger Sub LLC merged with and into Pinnacle, with Pinnacle surviving as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc. (the "Merger"), at an aggregate enterprise value of Four Hundred Twelve Million Dollars ($412,000,000);
WHEREAS, Ardent Capital Partners III LP, a Delaware limited partnership ("Fund III"), serves as the sponsor and primary equity investor in the transactions contemplated by the Merger Agreement, with committed equity of One Hundred Ninety-Eight Million Five Hundred Thousand Dollars ($198,500,000);
WHEREAS, in connection with the Merger, Dr. Raymond Carvallo, Dr. Nadia Ostrowski, and Jonathan Farnsworth aggregate rollover equity of Fifty-Nine Million Five Hundred Forty Thousand Dollars ($59,540,000) (consisting of $32,410,000 from Dr. Carvallo, $24,180,000 from Dr. Ostrowski, and $2,950,000 from Mr. Farnsworth) in exchange for Class B Units of Holdings, in each case as set forth in the Holdings LLC Operating Agreement;
WHEREAS, in connection with the transactions contemplated by the Merger Agreement, Pinnacle has made (or will make) an election under Section 754 of the Internal Revenue Code of 1986, as amended (the "Code"), resulting in a basis adjustment under Section 743(b) of the Code (the "Basis Adjustment") in favor of Ardent Healthcare Intermediate Inc. equal to the excess of its purchase price over its share of Pinnacle's inside basis, which Basis Adjustment is estimated at Two Hundred Twenty-Four Million Four Hundred Thousand Dollars ($224,400,000) (computed as $412,000,000 enterprise value minus $187,600,000 aggregate inside basis);
WHEREAS, the Basis Adjustment, when allocated among the assets of Pinnacle in accordance with Section 755 of the Code, is expected to generate amortization and depreciation deductions that will reduce the federal, state, and local income tax liability of the Corporate Taxpayer and its subsidiaries over the applicable useful lives of such assets;
WHEREAS, the Parties desire to provide for the payment by the Corporate Taxpayer to the TRA Holders of eighty-five percent (85%) of the Realized Tax Benefits (as defined below) attributable to the Basis Adjustment, in consideration of the exchange of the Pinnacle membership interests in the Merger and to incentivize the proper maintenance and utilization of such tax benefits;
WHEREAS, the entry into this Agreement is a condition precedent to the closing of the transactions contemplated by the Merger Agreement; and
WHEREAS, the Parties desire to set forth herein their mutual rights, obligations, and agreements with respect to the foregoing.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Actual Tax Liability" means, with respect to any Taxable Year, the actual aggregate liability for Covered Taxes of the Corporate Taxpayer and its subsidiaries for such Taxable Year, computed in accordance with applicable law and taking into account all Tax Benefit Payments actually made under this Agreement, the amortization and depreciation deductions attributable to the Basis Adjustment, and all other items of income, gain, loss, deduction, and credit of the Corporate Taxpayer and its subsidiaries for such Taxable Year, as reflected on the federal, state, and local income tax returns as filed (or, if amended, as amended) by or on behalf of the Corporate Taxpayer and its subsidiaries for such Taxable Year.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the correlative terms "controlling," "controlled by," and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. For purposes of this Agreement, Fund III and its portfolio companies (other than Holdings and its subsidiaries) shall be deemed Affiliates of the Corporate Taxpayer.
"Agreed Rate" means a per annum rate equal to the Secured Overnight Financing Rate ("SOFR") as published by the Federal Reserve Bank of New York (or any successor administrator) on the applicable date of determination, plus one hundred (100) basis points, compounded quarterly. If SOFR is discontinued or otherwise unavailable, the Agreed Rate shall be determined by reference to the replacement benchmark rate designated by the Federal Reserve Bank of New York or, if no such replacement benchmark is designated, by reference to the prime rate as published in The Wall Street Journal on the applicable date of determination.
"Applicable Tax Rate" means, with respect to any Taxable Year, the blended federal, state, and local income tax rate applicable to the Corporate Taxpayer in such Taxable Year, computed as the sum of (a) the applicable federal corporate income tax rate (currently twenty-one percent (21%)) and (b) the weighted-average blended state and local income tax rate applicable to the Corporate Taxpayer and its subsidiaries in such Taxable Year, after giving effect to the deductibility of state and local taxes for federal income tax purposes (to the extent such deductibility is available), weighted by the allocation of EBITDA among the jurisdictions in which the Corporate Taxpayer and its subsidiaries operate (currently Pennsylvania, Virginia, Maryland, North Carolina, and Georgia). As of the date hereof, the Applicable Tax Rate is estimated at approximately twenty-five percent (25%), computed as 21% federal plus a blended state rate of approximately 6.42% (after accounting for the federal deduction of state taxes).
"Basis Adjustment" means the adjustment to the tax basis of the assets of Pinnacle Health Services Group LLC pursuant to Section 743(b) of the Code resulting from the exchange of Pinnacle membership interests in connection with the Merger, allocated among the assets of Pinnacle in accordance with Section 755 of the Code and the purchase price allocation schedule set forth in Exhibit A. The aggregate Basis Adjustment is estimated at Two Hundred Twenty-Four Million Four Hundred Thousand Dollars ($224,400,000), being the excess of the enterprise value of Four Hundred Twelve Million Dollars ($412,000,000) over Pinnacle's aggregate inside basis of One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000).
"blocker" means Ardent Healthcare Intermediate Inc., a Delaware C-corporation.
"Board" means the board of managers of Holdings or, if applicable, the board of directors of blocker, as the context may require.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in the City of New York, New York are authorized or required by law, regulation, or executive order to close.
"Caldwell Pratt & Moorehouse LLP" means the nationally recognized independent accounting firm engaged by the Corporate Taxpayer to review and verify the Tax Benefit Schedule computations, or any successor firm selected by the Corporate Taxpayer in accordance with Section 2.4 of this Agreement.
"Change of Control" means the occurrence of any of the following events: (a) the sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Holdings or the blocker to any Person or group of related Persons (other than to a wholly owned subsidiary of Holdings); (b) a merger, consolidation, recapitalization, or other similar transaction involving Holdings or the blocker in which the equity holders of Holdings immediately prior to such transaction cease to hold, directly or indirectly, more than fifty percent (50%) of the voting interests or economic interests of the surviving or resulting entity; (c) an initial public offering of the equity securities of Holdings, the blocker, or any successor entity (an "IPO") followed by a subsequent transaction or series of related transactions resulting in a change of majority control of such entity (measured by aggregate voting power); and (d) any sale, transfer, or other disposition (in one transaction or a series of related transactions) of all or substantially all of the equity interests of Holdings to any Person or group of related Persons (other than to an Affiliate of Holdings).
"Closing Date" means May 31, 2024, or such other date on which the closing of the transactions contemplated by the Merger Agreement occurs.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. References to specific sections of the Code shall include any successor provisions thereto.
"Corporate Taxpayer" means Ardent Healthcare Holdings LLC, a Delaware limited liability company, and, where the context requires, Ardent Healthcare Intermediate Inc. and their respective subsidiaries through which Realized Tax Benefits are generated, in each case including any successor entity.
"Covered Taxes" means all federal, state, and local income taxes (including any franchise taxes measured by income or net worth to the extent attributable to income) payable by the Corporate Taxpayer and its subsidiaries, including estimated tax payments with respect thereto. For the avoidance of doubt, Covered Taxes shall not include payroll taxes, sales taxes, use taxes, property taxes, transfer taxes, or other taxes not measured by income.
"Determination" means any final determination of liability in respect of a tax that, under applicable law, is not subject to further appeal, review, or modification through proceedings or otherwise (including the expiration of a statute of limitations or a period for the filing of claims for refunds, amended returns, or appeals from adverse determinations), and shall include (a) a decision, judgment, decree, or other order by a court of competent jurisdiction that has become final and unappealable, (b) a closing agreement made under Section 7121 of the Code (or a corresponding provision of state or local law), (c) a final disposition by reason of the expiration of the applicable statute of limitations, and (d) any other event that results in a final resolution of liability for a tax under applicable law.
"discount Rate" means, for purposes of computing Early Termination Payments, the Agreed Rate in effect on the date of the notice of early termination.
"Early Termination Date" means the date on which an Early Termination Payment is made pursuant to Article V of this Agreement.
"Early Termination Payment" has the meaning set forth in Section 5.1 of this Agreement.
"Exchange Date" means the Closing Date, being the date on which the exchange of Pinnacle membership interests occurred in connection with the Merger.
"Hypothetical Tax Liability" means, with respect to any Taxable Year, the hypothetical aggregate liability for Covered Taxes of the Corporate Taxpayer and its subsidiaries for such Taxable Year, computed assuming that no Basis Adjustment existed (i.e., using the pre-transaction inside basis of One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000) rather than the stepped-up basis of Four Hundred Twelve Million Dollars ($412,000,000)) and that no Tax Benefit Payments were made under this Agreement with respect to such Taxable Year or any prior Taxable Year, but otherwise taking into account all other items of income, gain, loss, deduction, and credit of the Corporate Taxpayer and its subsidiaries for such Taxable Year, as actually reported on the applicable income tax returns.
"IRS" means the Internal Revenue Service of the United States Department of the Treasury, or any successor thereto.
"Merger" means the merger of Ardent Healthcare Merger Sub LLC with and into Pinnacle, with Pinnacle surviving as a wholly owned subsidiary of Ardent Healthcare Intermediate Inc., pursuant to the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger, dated as of March 15, 2024, by and among Ardent Healthcare Holdings LLC, Ardent Healthcare Intermediate Inc., Ardent Healthcare Merger Sub LLC, Pinnacle Health Services Group LLC, and the sellers named therein, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Net Tax Benefit" means, for any Taxable Year, the excess, if any, of the Hypothetical Tax Liability for such Taxable Year over the Actual Tax Liability for such Taxable Year (i.e., the incremental tax savings attributable to the Basis Adjustment for such Taxable Year). If the Actual Tax Liability for any Taxable Year equals or exceeds the Hypothetical Tax Liability for such Taxable Year, the Net Tax Benefit for such Taxable Year shall be zero.
"Payment Date" means, with respect to any Taxable Year, the date that is ninety (90) days after the date on which the Corporate Taxpayer files (or causes to be filed) its federal income tax return for such Taxable Year; provided, that if the Tax Benefit Schedule for such Taxable Year is delivered to the TRA Representative later than sixty (60) days after such filing date, the Payment Date shall be the date that is thirty (30) days after the date on which the Tax Benefit Schedule is delivered to the TRA Representative.
"Person" means any individual, partnership, limited liability company, corporation, trust, estate, association, joint venture, unincorporated organization, governmental authority, or any other entity of any kind or nature.
"Pinnacle" means Pinnacle Health Services Group LLC, a Delaware limited liability company (EIN: 82-1947632), and, where applicable, any successor entity.
"Realized Tax Benefit" means, for any Taxable Year, the Net Tax Benefit for such Taxable Year that is actually realized (or deemed realized) through a reduction in Covered Taxes payable by the Corporate Taxpayer and its subsidiaries for such Taxable Year. A Net Tax Benefit shall be deemed "realized" in a Taxable Year to the extent that the amortization or depreciation deductions attributable to the Basis Adjustment are actually utilized to reduce Covered Taxes in such Taxable Year (whether through reduction of taxable income, generation of net operating loss carryforwards that are utilized in such Taxable Year, or otherwise). For the avoidance of doubt, to the extent that the Corporate Taxpayer has insufficient taxable income to utilize the full amortization or depreciation deductions in a given Taxable Year, the unused portion shall not be treated as a Realized Tax Benefit until the Taxable Year in which such unused deductions are actually utilized.
"Schedule K-1" means IRS Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., or any successor form.
"Section 743(b) Adjustment" has the same meaning as the term "Basis Adjustment."
"Section 754 Election" means the election under Section 754 of the Code to adjust the basis of partnership property, to be filed with Pinnacle's federal partnership income tax return (Form 1065) for the taxable year ending December 31, 2024.
"Sharing Percentage" means eighty-five percent (85%).
"SOFR" means the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York (or any successor administrator) on the Federal Reserve Bank of New York's website.
"Tax Benefit Payment" means, with respect to any Taxable Year, the payment due to the TRA Holders in respect of such Taxable Year, equal to the product of (a) the Sharing Percentage and (b) the Realized Tax Benefit for such Taxable Year.
"Tax Benefit Schedule" means the schedule delivered by the Corporate Taxpayer to the TRA Representative pursuant to Section 2.4 of this Agreement for each Taxable Year, substantially in the form set forth in Exhibit C attached hereto.
"Taxable Year" means a taxable year of the Corporate Taxpayer as determined for federal income tax purposes (initially, the calendar year ending December 31).
"TRA Holder" means each of Dr. Raymond Carvallo, Dr. Nadia Ostrowski, Jonathan Farnsworth, and each of the fourteen (14) minority physician-investors who were members of Pinnacle immediately prior to the Closing Date, as set forth in Exhibit B attached hereto, together with their respective permitted successors and assigns in accordance with Article IX of this Agreement.
"TRA Holder Percentage" means, with respect to each TRA Holder, such TRA Holder's pro rata share of Tax Benefit Payments, expressed as a percentage, based on such TRA Holder's proportionate share of the aggregate equity proceeds from the Merger, as set forth in Exhibit B attached hereto. The TRA Holder Percentages are as follows: Dr. Raymond Carvallo: 38.2%; Dr. Nadia Ostrowski: 28.5%; Jonathan Farnsworth: 5.8%; the minority physician-investors: 27.5% collectively (with individual percentages as set forth on the schedule referenced in Exhibit B).
"TRA Representative" means the individual designated by the TRA Holders to act on their behalf with respect to all matters arising under this Agreement, including receipt of notices, review of Tax Benefit Schedules, and exercise of the rights set forth herein. The initial TRA Representative shall be Dr. Raymond Carvallo. The TRA Representative may be replaced by the affirmative vote of TRA Holders holding a majority of the aggregate TRA Holder Percentages, with written notice to the Corporate Taxpayer.
"Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time (including corresponding provisions of any successor regulations).
"Useful Life Schedule" means the schedule of useful lives assigned to each asset class for purposes of amortizing or depreciating the Basis Adjustment, as set forth in Exhibit A attached hereto. The Useful Life Schedule reflects the following useful lives: payor contracts: fifteen (15) years; assembled workforce: three (3) years; trade name: fifteen (15) years; non-compete agreements: five (5) years; goodwill: fifteen (15) years; tangible property: per applicable Modified Accelerated Cost Recovery System ("MACRS") class life. The weighted-average useful life of the Basis Adjustment assets is approximately 11.2 years.
"Valuation Assumptions" means, for purposes of computing Early Termination Payments pursuant to Article V, the assumptions set forth in Section 5.1 of this Agreement, including the discount Rate, the remaining useful lives of the Basis Adjustment assets, the projected taxable income of the Corporate Taxpayer and its subsidiaries, and the applicable tax rates.
Section 1.2 — Interpretive Provisions
The following rules of construction shall apply to this Agreement unless the context otherwise requires:
(a) References herein to "including" (and correlative terms such as "include" and "includes") shall mean "including, without limitation," and shall not be construed to limit any general statement that precedes such term to the specific or similar items or matters immediately following such term.
(b) The headings and captions contained in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement.
(c) Words importing the singular number shall include the plural, and vice versa, and words importing any gender shall include all genders, as the context may require.
(d) Unless otherwise specified, all references herein to "Sections," "Articles," and "Exhibits" are to the corresponding Sections, Articles, and Exhibits of this Agreement.
(e) All references to currency amounts in this Agreement are in United States Dollars unless otherwise specified.
(f) References to any statute, rule, or regulation shall be deemed to refer to such statute, rule, or regulation as amended, restated, supplemented, or otherwise modified from time to time, and shall include any rules and regulations promulgated thereunder.
(g) The Parties have participated jointly in the negotiation and drafting of this Agreement, and in the event of any ambiguity or question of intent or interpretation, this Agreement shall be construed as if drafted jointly by all Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions hereof.
(h) References to "days" shall mean calendar days unless "Business Days" is expressly specified.
ARTICLE II — DETERMINATION OF REALIZED TAX BENEFITS
Section 2.1 — Basis Adjustment
(a) Section 754 Election. The Corporate Taxpayer shall cause Pinnacle to file (or confirm the filing of) an election under Section 754 of the Code with Pinnacle's federal partnership income tax return (Form 1065) for the taxable year ending December 31, 2024. The Section 754 Election shall be made in the manner and form prescribed by applicable Treasury Regulations, and shall be attached to the partnership return as a statement of election filed in accordance with Treasury Regulations Section 1.754-1(b). The Corporate Taxpayer represents that, as of the date hereof, Pinnacle has not previously filed a Section 754 Election with respect to any prior taxable year, and that the election to be filed in connection with the Merger shall be the initial Section 754 Election of Pinnacle.
(b) Amount of Basis Adjustment. The Section 743(b) basis adjustment in favor of Ardent Healthcare Intermediate Inc., as the transferee of the Pinnacle membership interests in the Merger, is estimated at Two Hundred Twenty-Four Million Four Hundred Thousand Dollars ($224,400,000), being the difference between the enterprise value of Four Hundred Twelve Million Dollars ($412,000,000) and Pinnacle's aggregate inside basis of One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000). The final amount of the Basis Adjustment shall be determined based on the actual purchase price and the actual inside basis of Pinnacle's assets as of the Closing Date, as reflected on the federal partnership income tax return of Pinnacle for the taxable year ending December 31, 2024, and shall be adjusted to the extent required by any Determination. Any adjustment to the estimated Basis Adjustment shall be reflected in the Tax Benefit Schedules for the Taxable Year in which such adjustment is determined and, to the extent appropriate, in amended Tax Benefit Schedules for prior Taxable Years.
(c) Allocation of Basis Adjustment. The Basis Adjustment shall be allocated among the assets of Pinnacle in accordance with Section 755 of the Code and the Treasury Regulations promulgated thereunder, and shall be consistent with the purchase price allocation schedule attached hereto as Exhibit A, which reflects the following allocation:
Class V Intangibles are further allocated as follows:
(d) Inside Basis. The Parties agree that the aggregate inside basis of Pinnacle's assets prior to the Basis Adjustment is One Hundred Eighty-Seven Million Six Hundred Thousand Dollars ($187,600,000), as set forth on the balance sheet of Pinnacle as of the Closing Date and as reflected in the capital accounts of the members of Pinnacle immediately prior to the Merger.
(e) Consistency. The Parties agree to consistently use the purchase price allocation set forth in Exhibit A for all tax reporting purposes, including on the applicable partnership returns, Schedule K-1s, and any Form 8594 (Asset Acquisition Statement) or Form 8308 (Report of a Sale or Exchange of Certain Partnership Interests) required to be filed in connection with the Merger.
Section 2.2 — Determination of Net Tax Benefit
(a) Computation of Hypothetical and Actual Tax Liability. For each Taxable Year beginning with the Taxable Year ending December 31, 2024, the Corporate Taxpayer shall compute (i) the Hypothetical Tax Liability for such Taxable Year and (ii) the Actual Tax Liability for such Taxable Year. The Hypothetical Tax Liability shall be computed as though no Basis Adjustment existed and using the pre-transaction inside basis of $187,600,000 as the basis for computing amortization and depreciation deductions with respect to Pinnacle's assets. The Actual Tax Liability shall be computed taking into account the Basis Adjustment and the resulting amortization and depreciation deductions actually claimed on the tax returns of the Corporate Taxpayer and its subsidiaries for such Taxable Year.
(b) Net Tax Benefit. The Net Tax Benefit for any Taxable Year shall equal the excess, if any, of the Hypothetical Tax Liability for such Taxable Year over the Actual Tax Liability for such Taxable Year. The Net Tax Benefit represents the incremental federal, state, and local income tax savings attributable to the amortization and depreciation deductions arising from the Basis Adjustment.
(c) Amortization and Depreciation. Computations of the Net Tax Benefit shall reflect the amortization or depreciation of the Basis Adjustment over the applicable useful lives set forth in the Useful Life Schedule attached as Exhibit A. Based on the estimated Basis Adjustment of $224,400,000 and the weighted-average useful life of approximately 11.2 years, the estimated annual aggregate amortization deduction attributable to the Basis Adjustment is approximately Twenty Million Forty Thousand Dollars ($20,040,000) per year (for full Taxable Years). The actual amortization or depreciation for any Taxable Year may differ from such estimate based on the actual useful lives of individual asset classes, any mid-year conventions applicable to the first Taxable Year, and any changes in the Basis Adjustment resulting from a Determination.
(d) Tax Rate. Computations of the Net Tax Benefit for any Taxable Year shall reflect the actual applicable tax rates in effect for such Taxable Year, including the federal corporate income tax rate of twenty-one percent (21%) and the applicable state and local income tax rates in each jurisdiction in which the Corporate Taxpayer and its subsidiaries conduct business. As of the date hereof, the applicable state income tax rates and their anticipated changes are as follows:
(i) Pennsylvania: 8.99% for the 2024 taxable year, declining to 7.99% for the 2025 taxable year, and further declining by approximately 0.50% per year to 4.99% for the 2031 taxable year and thereafter, in accordance with Pennsylvania Act 53 of 2022;
(ii) Virginia: 6.0% (no currently scheduled changes);
(iii) Maryland: 8.25% (no currently scheduled changes);
(iv) North Carolina: 2.5% for the 2024 taxable year, with further scheduled reductions in subsequent years;
(v) Georgia: 5.75% (no currently scheduled changes).
The blended state and local income tax rate shall be weighted by the allocation of EBITDA among such jurisdictions, which weighting shall be updated annually to reflect actual operations. As of the date hereof, the blended state rate (after accounting for the federal deduction of state taxes, to the extent applicable) is estimated at approximately 6.42%, resulting in an estimated Applicable Tax Rate of approximately 25%.
(e) Estimated Annual Tax Benefit. Based on the foregoing assumptions, the estimated annual tax benefit attributable to the Basis Adjustment is approximately Five Million Ten Thousand Dollars ($5,010,000) per year (computed as $20,040,000 annual amortization multiplied by the 25% blended Applicable Tax Rate). The actual tax benefit for any Taxable Year may differ from such estimate based on actual taxable income, actual tax rates, actual apportionment factors, and other factors.
(f) No Payment if No Benefit. If the Net Tax Benefit for any Taxable Year is zero or negative (i.e., no incremental tax savings are realized in such Taxable Year), no Tax Benefit Payment shall be required for such Taxable Year. In such event, the unused amortization or depreciation deductions giving rise to the potential Net Tax Benefit shall be carried forward to subsequent Taxable Years and shall be treated as generating a Realized Tax Benefit in the first Taxable Year in which such deductions are actually utilized to reduce Covered Taxes.
Section 2.3 — Realized Tax Benefit
(a) Determination of Realized Tax Benefit. A Realized Tax Benefit for any Taxable Year shall equal the portion of the Net Tax Benefit for such Taxable Year that is actually utilized to reduce Covered Taxes payable by the Corporate Taxpayer and its subsidiaries in such Taxable Year. A Net Tax Benefit shall be deemed actually utilized in a Taxable Year to the extent that the amortization or depreciation deductions attributable to the Basis Adjustment are reflected on the Corporate Taxpayer's filed income tax returns for such Taxable Year and result in a reduction of the Corporate Taxpayer's aggregate Covered Tax liability below the Hypothetical Tax Liability for such Taxable Year.
(b) Insufficient Taxable Income. If the Corporate Taxpayer has insufficient taxable income in any Taxable Year to fully utilize the amortization or depreciation deductions attributable to the Basis Adjustment, the unused portion of such deductions shall carry forward in accordance with applicable tax law and shall be treated as a Realized Tax Benefit in the first Taxable Year in which such deductions are actually utilized to reduce Covered Taxes. The carry-forward of unused deductions shall be tracked on the Tax Benefit Schedule for each applicable Taxable Year.
(c) State-by-State Computation. For the avoidance of doubt, state and local tax benefits shall be computed on a state-by-state basis, using the apportionment and allocation rules applicable in each state in which the Corporate Taxpayer and its subsidiaries file income tax returns. As of the date hereof, the applicable apportionment methodologies are as follows: single-sales-factor apportionment in Pennsylvania, Virginia, and Georgia; three-factor apportionment with double-weighted sales factor in Maryland and North Carolina. The Corporate Taxpayer shall apply the apportionment methodology in effect in each state for the applicable Taxable Year when computing the Realized Tax Benefit attributable to each state.
(d) Adjustments. If any Basis Adjustment amount is subsequently adjusted as a result of a Determination, an audit by any taxing authority, or otherwise, the Realized Tax Benefit for the applicable Taxable Year(s) shall be recomputed to reflect such adjustment, and any overpayment or underpayment of Tax Benefit Payments shall be corrected in the next Tax Benefit Payment following such recomputation, together with interest at the Agreed Rate from the date of the original payment to the date of correction.
Section 2.4 — Tax Benefit Schedule
(a) Delivery. Within ninety (90) days after the date on which the Corporate Taxpayer files (or causes to be filed) its federal income tax return for each Taxable Year, the Corporate Taxpayer shall prepare and deliver (or cause to be prepared and delivered) to the TRA Representative a Tax Benefit Schedule for such Taxable Year, substantially in the form set forth in Exhibit C attached hereto, setting forth the following information in reasonable detail:
(i) the Basis Adjustment amounts amortized or depreciated during such Taxable Year, broken down by asset class and by jurisdiction;
(ii) the Hypothetical Tax Liability for such Taxable Year;
(iii) the Actual Tax Liability for such Taxable Year;
(iv) the Net Tax Benefit for such Taxable Year;
(v) the Realized Tax Benefit for such Taxable Year;
(vi) the aggregate Tax Benefit Payment for such Taxable Year;
(vii) each TRA Holder's share of the Tax Benefit Payment for such Taxable Year, computed based on such TRA Holder's TRA Holder Percentage as set forth in Exhibit B; and
(viii) any carry-forward amounts of unused amortization or depreciation deductions from prior Taxable Years.
(b) Preparation Standard. The Tax Benefit Schedule shall be prepared in good faith, in a manner consistent with past practice (to the extent applicable) and the terms of this Agreement, and using reasonable and customary assumptions and methodologies. The Corporate Taxpayer shall use the same accounting methods, elections, and conventions for purposes of computing the Tax Benefit Schedule as are used on the Corporate Taxpayer's actual filed income tax returns for the applicable Taxable Year.
(c) Independent Review. The Corporate Taxpayer shall retain Caldwell Pratt & Moorehouse LLP, or a successor nationally recognized accounting firm selected by the Corporate Taxpayer with the consent of the TRA Representative (such consent not to be unreasonably withheld, conditioned, or delayed), to review and verify the computations set forth in each Tax Benefit Schedule. The costs and expenses of such review shall be borne by the Corporate Taxpayer. The independent accounting firm shall issue a letter to the Corporate Taxpayer and the TRA Representative confirming that the Tax Benefit Schedule has been prepared in accordance with the terms of this Agreement and that the computations therein are mathematically accurate and consistent with the applicable tax returns. Such confirmation letter shall be delivered to the TRA Representative simultaneously with the delivery of the Tax Benefit Schedule.
(d) Supplemental Information. Upon reasonable request by the TRA Representative, the Corporate Taxpayer shall provide such additional information and documentation as may be reasonably necessary for the TRA Representative (or the TRA Representative's independent accounting advisors) to verify the accuracy of the Tax Benefit Schedule, including copies of relevant tax return schedules, depreciation and amortization schedules, apportionment factor computations, and working papers, in each case subject to the confidentiality provisions of Section 10.10.
ARTICLE III — TAX BENEFIT PAYMENTS
Section 3.1 — Timing of Payments
(a) Payment Date. Tax Benefit Payments with respect to each Taxable Year shall be made by the Corporate Taxpayer on or before the applicable Payment Date, which shall be the later of (i) the date that is ninety (90) days after the date on which the Corporate Taxpayer files (or causes to be filed) its federal income tax return for such Taxable Year and (ii) the date that is thirty (30) days after the date on which the Corporate Taxpayer delivers the Tax Benefit Schedule for such Taxable Year to the TRA Representative.
(b) Method of Payment. All Tax Benefit Payments shall be made in immediately available funds by wire transfer to one or more bank accounts designated in writing by each TRA Holder (or by the TRA Representative on behalf of all TRA Holders) at least ten (10) Business Days prior to the applicable Payment Date. The Corporate Taxpayer shall provide each TRA Holder (or the TRA Representative) with a written statement accompanying each Tax Benefit Payment, setting forth the calculation of such TRA Holder's share of the Tax Benefit Payment and the applicable Taxable Year to which such payment relates.
(c) First Payment. The first Tax Benefit Payment under this Agreement is expected to be made with respect to the Taxable Year ending December 31, 2024. Because the Closing Date is May 31, 2024, the Taxable Year ending December 31, 2024 will be a partial year for purposes of computing amortization deductions attributable to the Basis Adjustment (approximately seven (7) months of amortization, subject to any applicable mid-year conventions), and the Tax Benefit Payment for such partial year will be prorated accordingly.
Section 3.2 — Amount of Tax Benefit Payments
(a) Calculation. For each Taxable Year, the aggregate Tax Benefit Payment shall equal the product of (i) the Sharing Percentage (85%) and (ii) the Realized Tax Benefit for such Taxable Year, as determined in accordance with Article II.
(b) Estimated Payments. Based on the estimates set forth in Section 2.2, the estimated aggregate annual Tax Benefit Payment for each full Taxable Year is approximately Four Million Two Hundred Sixty Thousand Dollars ($4,260,000), computed as eighty-five percent (85%) of the estimated annual Realized Tax Benefit of $5,010,000. Actual payments may differ from such estimate for the reasons described in Article II.
(c) Allocation Among TRA Holders. Each TRA Holder's share of the aggregate Tax Benefit Payment for any Taxable Year shall be determined by multiplying such aggregate Tax Benefit Payment by such TRA Holder's TRA Holder Percentage as set forth in Exhibit B. Based on the estimated annual aggregate Tax Benefit Payment, the estimated annual payments to each TRA Holder (or group of TRA Holders) are as follows:
The foregoing estimates are for illustrative purposes only and are subject to adjustment based on actual Realized Tax Benefits, actual tax rates, and other factors described in Article II.
Section 3.3 — Late Payments; Interest
(a) Accrual of Interest. Any Tax Benefit Payment not made by the Corporate Taxpayer on or before the applicable Payment Date shall accrue interest at the Agreed Rate (SOFR plus 100 basis points per annum), compounded quarterly, from and including the Payment Date through and including the date on which actual payment is made in full.
(b) Compounding. Interest on any overdue Tax Benefit Payment shall compound quarterly on each March 31, June 30, September 30, and December 31 following the applicable Payment Date, and on the date of actual payment.
(c) No Waiver. The payment of interest on any late Tax Benefit Payment shall not constitute a waiver of any other right or remedy available to the TRA Holders under this Agreement or applicable law, including the right to seek specific performance or to elect acceleration of remaining Tax Benefit Payments pursuant to Section 5.3.
Section 3.4 — Pro Rata Allocation Among TRA Holders
All Tax Benefit Payments made under this Agreement shall be allocated among the TRA Holders in accordance with each TRA Holder's TRA Holder Percentage as set forth in Exhibit B attached hereto. No TRA Holder shall have any claim or right to a greater or lesser share of any Tax Benefit Payment than such TRA Holder's TRA Holder Percentage, except as may be adjusted to reflect permitted assignments in accordance with Article IX. In the event that any TRA Holder has transferred all or a portion of such TRA Holder's rights under this Agreement to a permitted assignee, the Corporate Taxpayer shall make payments to such permitted assignee in respect of the transferred TRA Holder Percentage, and the Corporate Taxpayer shall be entitled to rely on written notice from the transferring TRA Holder (or the TRA Representative) as to the allocation of payments between the transferring TRA Holder and the permitted assignee.
Section 3.5 — No Duplicative Payments
(a) General. No TRA Holder shall receive duplicative payments with respect to the same Realized Tax Benefit. For the avoidance of doubt, if the same Realized Tax Benefit is attributable to more than one Taxable Year (e.g., due to carry-forward or carry-back of deductions), the Corporate Taxpayer shall ensure that Tax Benefit Payments are calculated so as to avoid double-counting of any tax savings.
(b) Other Agreements. Payments under this Agreement shall be reduced, dollar-for-dollar, by any amounts otherwise payable to a TRA Holder in respect of substantially similar tax benefits arising from the Basis Adjustment under any other agreement between or among the Parties or their Affiliates, including any indemnification provisions of the Merger Agreement that relate to tax benefits. The Corporate Taxpayer shall promptly notify the TRA Representative of any payments or credits made or received under any such other agreement that may affect the computation of Tax Benefit Payments hereunder.
ARTICLE IV — PROCEDURES; DISPUTES
Section 4.1 — Cooperation; Information Rights
(a) Access to Information. The Corporate Taxpayer shall provide the TRA Representative with reasonable access to relevant tax return information, work papers, schedules, computations, and other documentation reasonably necessary to verify the accuracy of each Tax Benefit Schedule, including (i) copies of filed federal and state income tax returns of the Corporate Taxpayer and its subsidiaries (or relevant excerpts thereof), (ii) depreciation and amortization schedules reflecting the Basis Adjustment, (iii) apportionment and allocation factor computations for each applicable state, and (iv) such other information as the TRA Representative may reasonably request. Such access shall be provided during normal business hours upon reasonable advance notice, and all information provided shall be subject to the confidentiality provisions of Section 10.10.
(b) Independent Review. The TRA Representative may, at the collective expense of the TRA Holders, retain an independent nationally recognized accounting firm to review the Tax Benefit Schedule and the underlying computations for any Taxable Year; provided, that such independent accounting firm shall enter into a customary confidentiality agreement with the Corporate Taxpayer prior to receiving access to any tax return information or work papers. The Corporate Taxpayer shall cooperate with such independent accounting firm in a timely manner and shall provide access to the information described in Section 4.1(a) within fifteen (15) Business Days of a reasonable request therefor.
(c) Notification of Audits. The Corporate Taxpayer shall promptly notify the TRA Representative in writing of any audit, examination, investigation, or other proceeding by any federal, state, or local taxing authority that relates to or could reasonably be expected to affect the Basis Adjustment, the Section 754 Election, the purchase price allocation, or any Tax Benefit Payment under this Agreement. Such notice shall be provided within ten (10) Business Days of the Corporate Taxpayer's receipt of notice of such audit, examination, or proceeding. The Corporate Taxpayer shall keep the TRA Representative reasonably informed of the status and progress of any such audit, examination, or proceeding, and shall not settle, compromise, or concede any issue relating to the Basis Adjustment or any Tax Benefit Payment without the prior written consent of the TRA Representative (such consent not to be unreasonably withheld, conditioned, or delayed).
Section 4.2 — Objection Process
(a) Objection Period. The TRA Representative shall have thirty (30) days following receipt of a Tax Benefit Schedule for any Taxable Year to deliver a written objection to the Corporate Taxpayer setting forth in reasonable detail the nature of the objection, the specific items or computations to which the TRA Representative objects, and the TRA Representative's proposed alternative computation (the "Objection Notice"). If the TRA Representative does not deliver an Objection Notice within such thirty (30)-day period, the Tax Benefit Schedule as delivered shall be deemed final and binding on all Parties for purposes of computing Tax Benefit Payments for the applicable Taxable Year.
(b) Good-Faith Negotiation. If the TRA Representative timely delivers an Objection Notice, the Corporate Taxpayer and the TRA Representative shall negotiate in good faith to resolve the dispute within thirty (30) days following the delivery of the Objection Notice (the "Negotiation Period"). During the Negotiation Period, each Party shall make available appropriate personnel and information to facilitate the resolution of the dispute. Any agreed-upon adjustments resulting from the Negotiation Period shall be reflected in a revised Tax Benefit Schedule, which shall be delivered to the TRA Representative within ten (10) Business Days following the resolution of the dispute.
(c) Reconciliation Accountant. If the dispute is not resolved within the Negotiation Period, the dispute shall be submitted to an independent nationally recognized accounting firm mutually agreed upon by the Corporate Taxpayer and the TRA Representative (the "Reconciliation Accountant"). If the Corporate Taxpayer and the TRA Representative are unable to agree on the Reconciliation Accountant within ten (10) Business Days after the expiration of the Negotiation Period, each of the Corporate Taxpayer and the TRA Representative shall select one nationally recognized accounting firm, and the two firms so selected shall jointly select a third nationally recognized accounting firm to serve as the Reconciliation Accountant. The Reconciliation Accountant shall not be the firm that prepared the Tax Benefit Schedule or any firm that has been retained by the TRA Representative to review the Tax Benefit Schedule for the applicable Taxable Year.
(d) Reconciliation Process. The Reconciliation Accountant shall be engaged to determine, within sixty (60) days of its engagement, only those items in dispute as set forth in the Objection Notice and the Corporate Taxpayer's response thereto. The Reconciliation Accountant's determination shall be in writing and shall set forth in reasonable detail the basis for such determination. The determination of the Reconciliation Accountant shall be final and binding on all Parties, absent manifest error or fraud.
(e) Costs. The costs and expenses of the Reconciliation Accountant shall be borne by the non-prevailing Party. If the Reconciliation Accountant's determination falls between the respective positions of the Corporate Taxpayer and the TRA Representative, the costs of the Reconciliation Accountant shall be allocated between the Corporate Taxpayer, on the one hand, and the TRA Holders (collectively), on the other hand, in inverse proportion to the relative amounts by which each Party's position differed from the Reconciliation Accountant's determination.
(f) Payment Pending Resolution. During the pendency of any dispute under this Section 4.2, the Corporate Taxpayer shall pay to the TRA Holders the undisputed portion of the Tax Benefit Payment for the applicable Taxable Year on or before the applicable Payment Date, and shall pay the disputed portion (together with interest at the Agreed Rate from the Payment Date) within ten (10) Business Days after the resolution of the dispute.
Section 4.3 — Tax Return Filing; Section 754 Election
(a) Partnership Return Filing. The Corporate Taxpayer shall cause Pinnacle to timely file all required federal and state partnership income tax returns, including (i) IRS Form 1065 (U.S. Return of Partnership Income) for each taxable year of Pinnacle, and (ii) all applicable state partnership income tax returns and information returns.
(b) Section 754 Election Filing. The Corporate Taxpayer shall cause Pinnacle to file the Section 754 Election statement with the federal partnership income tax return (Form 1065) for the taxable year ending December 31, 2024, in compliance with Section 754 of the Code and Treasury Regulations Section 1.754-1(b). The Corporate Taxpayer shall provide the TRA Representative with a copy of the filed Section 754 Election statement promptly following the filing of Pinnacle's partnership return.
(c) No Revocation. The Corporate Taxpayer shall not revoke the Section 754 Election, and shall not permit or cause the revocation of the Section 754 Election, without the prior written consent of the TRA Representative, which consent may be withheld in the TRA Representative's sole and absolute discretion.
(d) Consistent Reporting. The Corporate Taxpayer shall prepare and file (or cause to be prepared and filed) all income tax returns of the Corporate Taxpayer and its subsidiaries in a manner consistent with the Basis Adjustment and the purchase price allocation set forth in this Agreement and in Exhibit A, except as otherwise required by a Determination. If the Corporate Taxpayer receives notice from any taxing authority proposing to disallow or adjust any portion of the Basis Adjustment or the purchase price allocation, the Corporate Taxpayer shall promptly notify the TRA Representative and shall consult with the TRA Representative before agreeing to any adjustment.
Section 4.4 — Consistency
The Parties agree that the purchase price allocation schedule set forth in Exhibit A and the TRA Holder Percentages set forth in Exhibit B shall be consistently used for all federal, state, and local income tax reporting purposes related to the Merger and the transactions contemplated hereby, including, without limitation, (a) the reporting of the Basis Adjustment on Pinnacle's federal partnership income tax return and the applicable Schedule K-1s issued to partners, (b) the filing of Form 8308 (Report of a Sale or Exchange of Certain Partnership Interests) with Pinnacle's partnership return for the taxable year including the Closing Date, (c) any Form 8594 (Asset Acquisition Statement Under Section 1060) required to be filed in connection with the Merger, and (d) any state or local equivalents of the foregoing forms or filings. No Party shall take a position on any income tax return that is inconsistent with the purchase price allocation or the TRA Holder Percentages set forth herein, except as required by a Determination.
ARTICLE V — EARLY TERMINATION
Section 5.1 — Early Termination by Corporate Taxpayer
(a) Election to Terminate. The Corporate Taxpayer may, at any time following the second anniversary of the Closing Date, elect to terminate this Agreement by delivering a written notice of early termination (the "Early Termination Notice") to the TRA Representative, specifying the proposed Early Termination Date and setting forth in reasonable detail the computation of the Early Termination Payment. The Early Termination Notice shall be delivered at least thirty (30) days prior to the proposed Early Termination Date.
(b) Computation of Early Termination Payment. Upon the delivery of an Early Termination Notice, the Corporate Taxpayer shall pay to each TRA Holder an Early Termination Payment equal to such TRA Holder's TRA Holder Percentage of the aggregate present value of all remaining Tax Benefit Payments that would be payable under this Agreement from and after the Early Termination Date through the date on which the Basis Adjustment would be fully amortized in accordance with the Useful Life Schedule. The aggregate present value of all remaining Tax Benefit Payments shall be computed using the following Valuation Assumptions:
(i) a discount rate equal to the Agreed Rate (SOFR plus 100 basis points) in effect on the date of the Early Termination Notice;
(ii) the assumption that the Corporate Taxpayer will have sufficient taxable income in each remaining Taxable Year to fully utilize all remaining amortization and depreciation deductions attributable to the Basis Adjustment (including any carry-forward amounts from prior Taxable Years);
(iii) the assumption that applicable federal, state, and local tax rates will remain at the levels in effect for the Taxable Year in which the Early Termination Notice is delivered, except that scheduled statutory rate reductions that have been enacted as of the date of the Early Termination Notice (including, without limitation, Pennsylvania's scheduled reduction of its corporate net income tax rate from 8.99% to 4.99% by the 2031 taxable year pursuant to Pennsylvania Act 53 of 2022) shall be taken into account;
(iv) the remaining useful lives of the Basis Adjustment assets as set forth in the Useful Life Schedule (Exhibit A), reduced by the number of years (or partial years) for which amortization has already been claimed; and
(v) the Sharing Percentage of 85%.
(c) Payment. The Early Termination Payment shall be made in immediately available funds by wire transfer to accounts designated by each TRA Holder (or the TRA Representative on behalf of all TRA Holders) within thirty (30) days of the date of the Early Termination Notice.
(d) Effect of Early Termination. Upon the payment in full of all Early Termination Payments to all TRA Holders in accordance with this Section 5.1, this Agreement shall terminate and be of no further force or effect, except for the provisions of Article VI (Tax Treatment of Payments), Section 10.2 (Governing Law), Section 10.3 (Jurisdiction; Venue), Section 10.4 (Waiver of Jury Trial), and Section 10.10 (Confidentiality), which shall survive any termination of this Agreement.
Section 5.2 — Early Termination upon Change of Control
(a) No Automatic Termination. Upon a Change of Control, this Agreement shall not terminate automatically. The obligations of the Corporate Taxpayer under this Agreement, including the obligation to make Tax Benefit Payments, shall be binding on the successor entity or acquiror in such Change of Control, to the same extent as if such successor entity or acquiror were the original Corporate Taxpayer hereunder.
(b) Assumption by Successor. In connection with any Change of Control, the Corporate Taxpayer shall use its commercially reasonable efforts to cause the successor entity or acquiror to expressly assume, in writing, all of the obligations of the Corporate Taxpayer under this Agreement. Any such assumption agreement shall be in form and substance reasonably satisfactory to the TRA Representative and shall be delivered to the TRA Representative prior to or simultaneously with the consummation of the Change of Control transaction.
(c) Early Termination Payment upon Non-Assumption. If the successor entity or acquiror does not assume this Agreement (whether by written assumption agreement or by operation of law), the Corporate Taxpayer shall make an Early Termination Payment to each TRA Holder, computed in accordance with Section 5.1(b), prior to or simultaneously with the consummation of the Change of Control transaction. The obligation to make such Early Termination Payment shall be a condition to the consummation of any Change of Control transaction that does not provide for assumption of this Agreement by the successor.
(d) Review by TRA Representative. In the event of a Change of Control, the Corporate Taxpayer shall deliver to the TRA Representative the computation of the Early Termination Payment at least twenty (20) Business Days prior to the anticipated consummation date of the Change of Control transaction. The TRA Representative shall have fifteen (15) Business Days following receipt of such computation to review and deliver a written objection thereto. If the TRA Representative delivers a timely objection, the dispute resolution procedures of Section 4.2 shall apply, mutatis mutandis; provided, that the Reconciliation Accountant shall be engaged on an expedited basis and shall render its determination within thirty (30) days of engagement.
Section 5.3 — Material Breach
(a) Acceleration upon Material Breach. If the Corporate Taxpayer materially breaches this Agreement, including, without limitation, (i) the failure to make any Tax Benefit Payment when due under Section 3.1 (and the continuation of such failure for a period of thirty (30) days following written notice from the TRA Representative), (ii) the failure to file the Section 754 Election in accordance with Section 4.3, (iii) the revocation of the Section 754 Election without the consent of the TRA Representative, or (iv) the intentional failure to claim or utilize amortization or depreciation deductions attributable to the Basis Adjustment in a manner that reduces or eliminates Realized Tax Benefits, then the TRA Representative may, on behalf of all TRA Holders, upon sixty (60) days' prior written notice to the Corporate Taxpayer (the "Acceleration Notice"), elect to accelerate all remaining Tax Benefit Payments that would otherwise be payable under this Agreement.
(b) Computation of Accelerated Amount. The accelerated amount shall be calculated as an Early Termination Payment under Section 5.1(b), except that no di

TAX RECEIVABLE AGREEMENT

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TAX RECEIVABLE AGREEMENT

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