[sheet: Cover]

[sheet: Cover]
Field | Value
Document Title | Nonresident Withholding Computation Schedule
Date Prepared | May 15, 2024
Prepared By | Calderwood & Harkness LLP (Robert Jansen, Garrett Simmons)
Reviewed By | Leonard Cross, Partner; Sylvia Hartwell, Partner
Matter Number | 1001-00006
Engagement Number | 1001-00006
Client | Ardent Capital Partners III LP
Target | Pinnacle Health Services Group LLC (EIN: 82-1947632)
Transaction | Acquisition of 100% of the membership interests in Pinnacle Health Services Group LLC via reverse merger
Enterprise Value | $412,000,000
Equity Value | $339,400,000
Closing Date | May 31, 2024
Purpose | Computation of estimated nonresident withholding obligations on individual sellers of Pinnacle membership interests in Virginia, Maryland, and Georgia for integration into closing funds flow
Withholding States | Virginia, Maryland, Georgia
Aggregate Estimated Withholding | $4,740,000
Buyer's M&A Counsel | Harcourt Shaw & DeVries LLP (Thomas Kundra)
Seller's Counsel | Whitford & Gaines LLP (Patricia Engelman)
Escrow Agent | Ironbridge Trust Company, N.A., Wilmington, DE
Tax Indemnity Escrow | $4,120,000 (Ref: ITC-ESC-2024-05312)
[sheet: Seller Summary]
Seller Name | Role | Ownership % | Gross Equity Proceeds | Rollover % | Rollover Amount | Cash-Out % | Cash-Out Amount | Residency State | Nonresident in VA? | Nonresident in MD? | Nonresident in GA?
Dr. Raymond Carvallo | Co-Founder, CEO | 38.20% | $129,650,800 | 25% | $32,412,700 | 75% | $97,238,100 | Pennsylvania | Y | Y | Y
Dr. Nadia Ostrowski | Co-Founder, CMO | 28.50% | $96,729,000 | 25% | $24,182,250 | 75% | $72,546,750 | Pennsylvania | Y | Y | Y
Jonathan Farnsworth | CFO | 5.80% | $19,685,200 | 15% | $2,952,780 | 85% | $16,732,420 | Pennsylvania | Y | Y | Y
14 Minority Physician-Investors (aggregate) | Minority Members | 27.50% | $93,335,000 | 0% | $0 | 100% | $93,335,000 | Various (see detail) | Y | Y | Y
TOTAL | 100.00% | $339,400,000 | $59,547,730 | $279,852,270
[sheet: State Rate Summary]
State | Withholding Rate | Statutory / Regulatory Citation | Applicable Tax Type | Apportionment Method | Notes
Virginia | 5.00% | Va. Code § 58.1-486.2; 23 VAC 10-120-360 | Individual income tax withholding on nonresident members | Single-sales-factor apportionment | Withholding required on nonresident individual members' share of Virginia-source income from sale of partnership interests; rate equals top individual income tax rate
Maryland | 8.25% | Md. Code, Tax-Gen. § 10-102.1; COMAR 03.04.07 | Nonresident member withholding / pass-through entity tax | Three-factor apportionment (double-weighted sales) | Maryland imposes withholding on nonresident members at the highest marginal rate; PTE election analyzed but not elected for sale transaction withholding purposes
Georgia | 5.75% | O.C.G.A. § 48-7-129; Ga. Comp. R. & Regs. 560-7-8-.34 | Individual income tax withholding on nonresident members | Single-sales-factor apportionment | Georgia requires withholding on distributive share of Georgia-source gain to nonresident partners at 5.75%
[sheet: VA Withholding]
Seller Name | Cash-Out Amount | Estimated Tax Basis in Pinnacle Interest | Total Gain on Sale | Virginia Apportionment Factor | Virginia-Apportioned Gain | Virginia Withholding Rate | Estimated Virginia Withholding
Dr. Raymond Carvallo | $97,238,100 | $49,561,666 | $47,676,434 | 16.10% | $7,675,906 | 5.00% | $383,795
Dr. Nadia Ostrowski | $72,546,750 | $36,987,735 | $35,559,015 | 16.10% | $5,725,001 | 5.00% | $286,250
Jonathan Farnsworth | $16,732,420 | $8,531,234 | $8,201,186 | 16.10% | $1,320,391 | 5.00% | $66,020
14 Minority Physician-Investors (aggregate) | $93,335,000 | $47,587,855 | $45,747,145 | 16.10% | $7,365,290 | 5.00% | $368,265
TOTAL | $279,852,270 | $142,668,490 | $137,183,780 | 16.10% | $22,086,588 | 5.00% | $1,104,330
[sheet: MD Withholding]
Seller Name | Cash-Out Amount | Estimated Tax Basis in Pinnacle Interest | Total Gain on Sale | Maryland Apportionment Factor | Maryland-Apportioned Gain | Maryland Withholding Rate | Estimated Maryland Withholding
Dr. Raymond Carvallo | $97,238,100 | $49,561,666 | $47,676,434 | 21.30% | $10,155,081 | 8.25% | $837,794
Dr. Nadia Ostrowski | $72,546,750 | $36,987,735 | $35,559,015 | 21.30% | $7,574,070 | 8.25% | $624,861
Jonathan Farnsworth | $16,732,420 | $8,531,234 | $8,201,186 | 21.30% | $1,746,853 | 8.25% | $144,115
14 Minority Physician-Investors (aggregate) | $93,335,000 | $47,587,855 | $45,747,145 | 21.30% | $9,744,142 | 8.25% | $803,892
TOTAL | $279,852,270 | $142,668,490 | $137,183,780 | 21.30% | $29,220,146 | 8.25% | $2,410,662
[sheet: GA Withholding]
Seller Name | Cash-Out Amount | Estimated Tax Basis in Pinnacle Interest | Total Gain on Sale | Georgia Apportionment Factor | Georgia-Apportioned Gain | Georgia Withholding Rate | Estimated Georgia Withholding
Dr. Raymond Carvallo | $97,238,100 | $49,561,666 | $47,676,434 | 11.03% | $5,258,693 | 5.75% | $302,375
Dr. Nadia Ostrowski | $72,546,750 | $36,987,735 | $35,559,015 | 11.03% | $3,923,159 | 5.75% | $225,582
Jonathan Farnsworth | $16,732,420 | $8,531,234 | $8,201,186 | 11.03% | $904,591 | 5.75% | $52,014
14 Minority Physician-Investors (aggregate) | $93,335,000 | $47,587,855 | $45,747,145 | 11.03% | $5,045,910 | 5.75% | $290,140
TOTAL | $279,852,270 | $142,668,490 | $137,183,780 | 11.03% | $15,132,353 | 5.75% | $870,111