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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP

MEMORANDUM

TO: Beatrice Holloway; Megan Chu

FROM: Derek Okonkwo

DATE: January 20, 2025

RE: Employee Benefits and ERISA Diligence Review — MedVance Health Systems, Inc. (Project Ascend)

Matter No.: 0478231.0001

I. Executive Summary

This memorandum summarizes the findings of the employee benefits and ERISA diligence review conducted by Calderwood & Harkness LLP in connection with the proposed acquisition (the "Transaction") of MedVance Health Systems, Inc. (the "Company" or "Target") by Ardent Healthcare Holdings Inc. (the "Purchaser"), a portfolio company of Ardent Capital Partners III LP ("Ardent GP"). The Transaction contemplates the acquisition of 100% of the outstanding equity of the Company for an aggregate purchase price of approximately $620 million, to be effectuated through a Stock Purchase Agreement (the "SPA").

Our review encompasses all Company Benefit Plans as disclosed in the virtual data room maintained by Blackwell Thornton Capital Partners and supplemental document productions provided in response to our diligence request lists. The scope of our review includes the Company's 401(k) profit sharing plan, group health and welfare plans, executive employment agreements, equity compensation arrangements, supplemental executive retirement arrangements, and all other compensation and benefit programs maintained by the Company for the benefit of its current and former employees, officers, directors, and independent contractors.

Our principal findings are as follows:

• No Defined Benefit Pension Liability. The Company does not sponsor, maintain, or contribute to any defined benefit pension plan, and accordingly there is no underfunded pension liability exposure, no Pension Benefit Guaranty Corporation ("PBGC") obligations, and no Title IV of ERISA concerns.

• 401(k) Plan Generally Well-Administered. The Company's 401(k) Profit Sharing Plan (the "401(k) Plan") is generally well-administered and has received a favorable IRS determination letter. We identified certain discrete compliance items — specifically, a historical late deposit of employee deferrals (self-corrected through the Department of Labor Voluntary Fiduciary Correction Program) and a missing participant issue — that are remediable and do not present material risk to the Transaction.

• Health and Welfare Plans Typical for Industry. The Company's group health and welfare plans are typical for a mid-market healthcare services company with approximately 4,800 employees across Tennessee, Alabama, Georgia, and Kentucky. All medical plans are fully insured. The Company appears to be in compliance with its obligations under the Affordable Care Act ("ACA"), COBRA, and HIPAA.

• Executive Compensation Arrangements Require Close Attention. Executive compensation arrangements for the five named executives contain change-of-control provisions that will be triggered by the Transaction. Most significantly, the Company's 2018 Equity Incentive Plan contains a single-trigger acceleration provision that will cause all unvested equity awards to vest immediately upon closing, with an estimated aggregate cost of approximately $36.3 million. The named executive employment agreements contain double-trigger enhanced severance provisions that will be triggered only upon a qualifying termination within 24 months following the change of control. These provisions require close attention in purchase price modeling and SPA drafting.

• No Multiemployer Plan Exposure. No multiemployer plan (Title IV) exposure was identified. The Company does not contribute to, and has no obligation to contribute to, any multiemployer plan within the meaning of ERISA § 3(37).

• SPA Representations and Warranties Recommended. We have identified specific ERISA and employee benefits representations and warranties that we recommend for inclusion in the SPA, as set forth in detail in Section X of this memorandum.

Our review is based on approximately 74 documents produced by the Company in the virtual data room in response to the initial benefits diligence request list dated October 28, 2024 and the supplemental benefits diligence request list dated December 5, 2024 (referenced throughout this memorandum by data room index numbers). Our review was supplemented by a management call conducted on January 9, 2025 with Angela Moretti, the Company's Chief Financial Officer, and Jonathan Garrett of Whitaker, Poole & Simms LLP ("WPS"), the Company's outside benefits counsel. Follow-up written questions were submitted on January 12, 2025, and Company responses were received on January 17, 2025.

II. Scope and Methodology

A. Documents Reviewed

The following is a summary of the principal categories of documents reviewed in connection with this diligence engagement. Individual documents are referenced by their data room index numbers where appropriate throughout this memorandum.

• MedVance Health Systems, Inc. 401(k) Profit Sharing Plan document (as amended and restated effective January 1, 2022) and all subsequent amendments thereto (Data Room Index Nos. 6.1.001–6.1.008)

• IRS Determination Letter dated March 14, 2022 confirming the qualified status of the 401(k) Plan under Internal Revenue Code ("IRC" or "Code") § 401(a) (Data Room Index No. 6.1.009)

• Summary Plan Descriptions for all Company Benefit Plans, including the 401(k) Plan, group health plans, dental plan, life and disability plans, cafeteria plan, and severance plan (Data Room Index Nos. 6.2.001–6.2.015)

• Annual Return/Report of Employee Benefit Plan (Form 5500) filings for the 401(k) Plan for plan years ending December 31, 2021, December 31, 2022, and December 31, 2023, including all schedules and attachments thereto (Data Room Index Nos. 6.3.001–6.3.009)

• Brightwater Capital Management custodial agreement and recordkeeping services agreement for the 401(k) Plan (Data Room Index Nos. 6.4.001–6.4.003)

• Trust agreement for the MedVance Health Systems, Inc. 401(k) Profit Sharing Plan Trust (Data Room Index No. 6.4.004)

• Annual nondiscrimination testing results for the 401(k) Plan, including ADP/ACP testing and top-heavy testing, for the 2022 and 2023 plan years (Data Room Index Nos. 6.5.001–6.5.004)

• Group health insurance policies issued by BlueLine Health Plan of Tennessee and SouthPoint Insurance Co., including all riders, endorsements, and amendments (Data Room Index Nos. 6.6.001–6.6.012)

• Self-insured dental plan document and related stop-loss insurance policy (Data Room Index Nos. 6.7.001–6.7.003)

• Group term life insurance, accidental death and dismemberment ("AD&D"), short-term disability, and long-term disability insurance certificates and policies (Data Room Index Nos. 6.8.001–6.8.008)

• Section 125 cafeteria plan document, including health flexible spending account and dependent care flexible spending account components (Data Room Index No. 6.9.001)

• COBRA continuation coverage administration records, including sample qualifying event notices, election forms, and third-party administrator agreement (Data Room Index Nos. 6.10.001–6.10.005)

• HIPAA privacy and security policies and procedures, including business associate agreements with third-party administrators and service providers (Data Room Index Nos. 6.11.001–6.11.009)

• Executive Employment Agreements for Daniel Burch (President and Chief Executive Officer), Angela Moretti (Chief Financial Officer), Dr. Samir Patel (Chief Medical Officer), and Karen Tolliver (Chief Operating Officer), including all amendments thereto (Data Room Index Nos. 7.1.001–7.1.012)

• MedVance Health Systems, Inc. 2018 Equity Incentive Plan, as amended in 2021, together with the form of stock option agreement, form of restricted stock agreement, and all individual equity award agreements for each of the approximately 28 plan participants (Data Room Index Nos. 7.2.001–7.2.038)

• Management rollover term sheets and letters of intent exchanged between Ardent GP and each of Daniel Burch, Angela Moretti, Dr. Samir Patel, and Karen Tolliver (Data Room Index Nos. 7.3.001–7.3.004)

• MedVance Health Systems, Inc. Severance Plan for Director-Level and Above Employees, including plan document and summary plan description (Data Room Index Nos. 7.4.001–7.4.002)

• Board resolution and summary memorandum establishing the supplemental executive retirement arrangement for Dr. Catherine Ryland (Data Room Index Nos. 7.5.001–7.5.002)

• Board resolutions authorizing the adoption, amendment, or modification of each Company Benefit Plan (Data Room Index Nos. 7.6.001–7.6.014)

• Summary of workers' compensation program, including carrier information and claims history for calendar years 2021 through 2024 (Data Room Index Nos. 8.1.001–8.1.004)

• ACA compliance filings, including Forms 1094-C and 1095-C for the 2022 and 2023 tax years (Data Room Index Nos. 6.12.001–6.12.006)

B. Supplemental Inquiries

In addition to the documents reviewed in the virtual data room, our diligence was supplemented by the following:

Management Call (January 9, 2025). We participated in a management diligence call with Angela Moretti, CFO of MedVance, and Jonathan Garrett of Whitaker, Poole & Simms LLP, the Company's outside benefits counsel. During this call, we discussed the administration and operational history of the 401(k) Plan, the status of 2024 nondiscrimination testing, the structure and intent of the Ryland supplemental retirement arrangement, the Company's ACA compliance methodology for PRN/per diem employees, and various other benefits-related topics.

Written Follow-Up Questions (January 12, 2025). Following the management call, we submitted a supplemental written diligence questionnaire consisting of 23 questions to Ms. Moretti and Mr. Garrett, addressing, among other things, the history and resolution of the late deferral deposit issue, the status of the DOL top hat plan filing for the Ryland arrangement, the methodology and supporting documentation for 409A valuations used in connection with equity grants, and confirmation of controlled group and affiliated service group status.

Company Responses (January 17, 2025). The Company's written responses to our supplemental diligence questionnaire were received on January 17, 2025. The responses are referenced throughout this memorandum where relevant. Certain items remain outstanding and are identified in Section IX (Summary of Open Diligence Items) below.

C. Limitations. This memorandum is based solely on the documents provided to us in the virtual data room, the supplemental materials described above, and the oral and written representations of Company management and its outside counsel. No independent audit or examination of plan operations, fiduciary processes, financial records, or administrative procedures was conducted. We have relied on the accuracy and completeness of the information provided and have not independently verified the factual representations made by the Company or its advisors.

We note that the Company's Form 5500 for the 401(k) Plan for the plan year ending December 31, 2024 has not yet been filed (the filing deadline, with extension, is October 15, 2025). Additionally, the Company's 2024 nondiscrimination testing (ADP/ACP and top-heavy) is currently in process and results have not yet been provided. These items are identified as open diligence items requiring follow-up prior to execution of the SPA.

III. Company Workforce Overview

The following workforce statistics are relevant to the employee benefits analysis and provide necessary context for evaluating the Company's plan eligibility requirements, ACA obligations, and overall benefits cost structure.

• Total Employees. The Company employs approximately 4,800 individuals across four states: Tennessee (principal operations and corporate headquarters in Nashville), Alabama, Georgia, and Kentucky. The Company operates a network of outpatient healthcare facilities, urgent care centers, and ancillary healthcare service locations across these states.

• Full-Time Employees. Approximately 3,200 employees are classified as full-time (defined as employees regularly scheduled to work 30 or more hours per week) and are eligible for the Company's health and welfare benefit plans, subject to applicable waiting periods.

• 401(k) Plan Eligible Employees. Approximately 4,100 employees are eligible to participate in the 401(k) Plan after satisfaction of the Plan's age and service requirements (age 21 with 90 days of service). The Plan excludes PRN/per diem employees from eligibility.

• Employee Classifications. The Company utilizes three employee classifications relevant to benefits eligibility: (i) full-time employees (30 or more hours per week), (ii) part-time employees (fewer than 30 hours per week on a regularly scheduled basis), and (iii) PRN/per diem employees (employees who work on an as-needed basis without a regular schedule). Benefits eligibility varies by classification, with full-time employees generally eligible for the full suite of health, welfare, and retirement benefits, part-time employees eligible for the 401(k) Plan but not health and welfare benefits, and PRN/per diem employees excluded from most benefit plans.

• No Collective Bargaining Agreements. The Company has confirmed that there are no collective bargaining agreements in effect, and no employees of the Company are represented by a labor union or similar collective bargaining organization. Accordingly, no benefit obligations arise under any collective bargaining agreement, and no "multiemployer plan" contributions are required by reason of any such agreement.

• No Leased Employees or Co-Employment Arrangements. The Company has represented that it does not use leased employees (within the meaning of IRC § 414(n)) or maintain any co-employment or professional employer organization ("PEO") arrangements. All benefits-eligible individuals are common-law employees of the Company.

IV. Qualified Retirement Plans

A. MedVance Health Systems, Inc. 401(k) Profit Sharing Plan

1. Plan Design and Terms. The Company sponsors and maintains the MedVance Health Systems, Inc. 401(k) Profit Sharing Plan (the "401(k) Plan" or the "Plan"), a tax-qualified defined contribution plan under IRC § 401(a) that includes a cash-or-deferred arrangement under IRC § 401(k). The material terms of the Plan are as follows:

Plan Type. The Plan is a Section 401(k) profit sharing plan with participant-directed investments. The Plan is maintained pursuant to a pre-approved plan document platform administered by Brightwater Capital Management (the Fidelity prototype document), which facilitates ongoing compliance with changes in applicable law.

Adoption and Restatement History. The Plan was originally adopted effective January 1, 2012 by MedVance Health Systems, Inc. The Plan was subsequently amended and restated in its entirety effective January 1, 2022, incorporating all required amendments through that date, including amendments required by the Tax Cuts and Jobs Act of 2017, the Setting Every Community Up for Retirement Enhancement Act of 2019 (the "SECURE Act"), and the Bipartisan American Miners Act of 2019. The 2022 restatement also incorporated the Company's election to add a Roth deferral feature. Subsequent amendments have been adopted to incorporate provisions required by the SECURE 2.0 Act of 2022 that became effective in 2023 and 2024.

Eligibility. Employees of the Company are eligible to participate in the Plan upon attaining age 21 and completing 90 days of service with the Company. Employees classified as PRN/per diem are excluded from Plan eligibility. No other classes of employees are excluded. As of the most recent plan year, approximately 4,100 employees satisfy the eligibility requirements, and approximately 3,412 employees are active participants.

Employee Elective Deferrals. Participants may elect to defer a percentage of their eligible compensation to the Plan on a pre-tax basis, up to the applicable annual limit under IRC § 402(g) ($23,000 for 2024; $23,500 for 2025). Participants who have attained age 50 or older may make additional catch-up contributions under IRC § 414(v) ($7,500 for 2024 and 2025). Effective with the 2022 amendment and restatement, participants may also designate all or a portion of their elective deferrals as Roth contributions under IRC § 402A.

Employer Matching Contributions. The Company makes matching contributions equal to 50% of the first 6% of compensation deferred by each participant — that is, a maximum employer match of 3% of eligible compensation. Matching contributions are made on a per-payroll-period basis and are subject to a true-up at the end of each plan year to ensure that participants who increase their deferral rates during the year receive the full match to which they are entitled.

Discretionary Profit-Sharing Contributions. The Plan permits the Company to make discretionary profit-sharing contributions in such amounts as the Board of Directors (or its designee) may determine from time to time. The Company has made profit-sharing contributions in four of the last five plan years. The most recent profit-sharing contribution, for the 2023 plan year, was equal to 1.5% of eligible compensation for each eligible participant, representing an aggregate contribution of approximately $2.1 million. No profit-sharing contribution was made for the 2020 plan year, which coincided with the COVID-19 pandemic. There is no obligation to make a profit-sharing contribution in any given year.

Vesting. Employee elective deferrals (including Roth contributions) and any rollover contributions are 100% vested at all times. Employer matching contributions are subject to a three-year cliff vesting schedule (0% vested until the participant completes three years of vesting service, at which point the participant becomes 100% vested). Discretionary profit-sharing contributions are subject to a six-year graded vesting schedule (20% after two years, 40% after three years, 60% after four years, 80% after five years, and 100% after six years). Participants also become 100% vested in all employer contributions upon attainment of normal retirement age, death, or total and permanent disability while employed by the Company.

Compensation Definition. For purposes of all contribution calculations, "compensation" is defined as W-2 compensation (as reported in box 1 of Form W-2), which includes base salary, bonuses, commissions, and overtime, but excludes reimbursements, fringe benefits, and other items not includible in gross income. Compensation is subject to the annual limit under IRC § 401(a)(17) ($345,000 for 2025).

Normal Retirement Age. The Plan's normal retirement age is 65.

Distributions. The Plan permits distributions upon separation from service, attainment of age 59½, death, or total and permanent disability. The Plan also permits hardship withdrawals in accordance with the safe harbor standards of Treasury Regulation § 1.401(k)-1(d)(3)(iii) and plan loans, subject to IRC § 72(p) limitations (maximum loan of the lesser of $50,000 or 50% of the participant's vested account balance).

2. Determination Letter and Plan Document Compliance. The 401(k) Plan received a favorable IRS Determination Letter dated March 14, 2022, which confirmed the Plan's qualified status under IRC § 401(a) and the tax-exempt status of the Plan's trust under IRC § 501(a). The determination letter was issued in connection with the Plan's amendment and restatement effective January 1, 2022.

Because the Plan is maintained on a pre-approved document platform (the Fidelity prototype plan), the Plan's ongoing tax-qualified status is also supported by the favorable opinion letter issued by the IRS to the plan sponsor (Fidelity) for the pre-approved document. WPS has confirmed that the 2022 restatement incorporated all amendments required under applicable law through that date, and that subsequent amendments have been timely adopted to incorporate mandatory provisions of the SECURE 2.0 Act of 2022, including provisions relating to the increased catch-up contribution limits for participants ages 60–63 (effective for plan years beginning after December 31, 2024), the mandatory Roth treatment of catch-up contributions for higher-compensated employees (effective for plan years beginning after December 31, 2025, as extended by IRS Notice 2023-62 and subsequent guidance), and other required and optional SECURE 2.0 provisions.

Based on our review of the Plan document and amendments, we believe the Plan document is in substantial compliance with current law. We note, however, that the ongoing adoption of SECURE 2.0 amendments is a multi-year process, and we recommend that the Purchaser confirm with WPS or its own benefits counsel that all required amendments continue to be adopted on a timely basis following the closing.

3. Form 5500 Filings. We reviewed the Form 5500 Annual Return/Report of Employee Benefit Plan filings for the 401(k) Plan for the three most recent plan years. A summary of key data from these filings is set forth below:

All three filings were submitted on a timely basis with no extensions noted. As a "large plan filer" (more than 100 participants at the beginning of the plan year), the 401(k) Plan is subject to the requirement that the annual report include the report of an independent qualified public accountant. The Plan's independent auditor for each of the three years reviewed was Prumvane & Reese LLP, which issued unqualified (clean) audit opinions for all three plan years. We reviewed the auditor's reports and noted no material findings, qualified opinions, or reportable conditions.

We note that the Plan Year 2024 Form 5500 has not yet been filed, as the filing deadline (with the automatic extension available for plans that file on a calendar-year basis) is October 15, 2025. This is identified as an open item for purposes of ongoing monitoring.

4. Nondiscrimination Testing. The 401(k) Plan does not utilize a safe harbor contribution formula (i.e., it does not satisfy the requirements of IRC § 401(k)(12) or § 401(k)(13)), and accordingly, the Plan is required to satisfy the annual nondiscrimination testing requirements under IRC §§ 401(k)(3) and 401(m)(2), commonly referred to as the Actual Deferral Percentage ("ADP") test and the Actual Contribution Percentage ("ACP") test, respectively. The Plan is also subject to annual top-heavy testing under IRC § 416.

We reviewed the nondiscrimination testing results for the 2022 and 2023 plan years, which were prepared by WPS. The Plan passed both the ADP and ACP tests for each year using the current-year testing method. Specifically:

• 2023 Plan Year: ADP test passed (HCE ADP: 6.12%; NHCE ratio: 4.87%; margin within permissible limits). ACP test passed (HCE ACP: 3.01%; NHCE ACP: 2.44%). Top-heavy test: Plan was not top-heavy (key employee account balances represented approximately 3.2% of total Plan assets, well below the 60% threshold).

• 2022 Plan Year: ADP test passed (HCE ADP: 5.98%; NHCE ratio: 4.71%). ACP test passed (HCE ACP: 2.88%; NHCE ACP: 2.31%). Top-heavy test: Plan was not top-heavy (key employee account balances represented approximately 3.5% of total Plan assets).

The 2024 plan year nondiscrimination testing is currently in process. During the January 9, 2025 management call, Ms. Moretti and Mr. Garrett indicated that the Company expects the Plan to pass all nondiscrimination tests for the 2024 plan year based on preliminary data, and that no corrective distributions or other remedial actions are anticipated. We have requested that the completed 2024 testing results be provided when available, and this remains an open diligence item.

We note that the Plan's reliance on annual nondiscrimination testing (rather than a safe harbor design) creates an ongoing compliance obligation and a degree of year-to-year uncertainty regarding whether the Plan will satisfy the ADP and ACP tests. We recommend that the Purchaser consider converting the Plan to a safe harbor contribution formula following the closing, which would eliminate the requirement for annual ADP and ACP testing, reduce ongoing compliance risk, and simplify plan administration. A safe harbor match of 100% of the first 3% of compensation deferred plus 50% of the next 2% of compensation deferred would satisfy the safe harbor requirements and would represent a modest increase in employer matching costs relative to the current formula.

5. Fiduciary and Service Provider Matters. Trustee and Recordkeeper. Brightwater Capital Management serves as both the trustee and the recordkeeper for the 401(k) Plan. The Plan's assets are held in trust by Westvale Solutions. The custodial and recordkeeping services agreement between the Company and Fidelity was entered into in connection with the 2022 Plan restatement and is terminable by either party upon 90 days' written notice. We reviewed the agreement and noted no unusual provisions or material concerns.

Named Fiduciary. The Plan's named fiduciary is the MedVance Benefits Committee (the "Committee"), which consists of three members: Angela Moretti (CFO), Karen Tolliver (COO), and one non-executive Human Resources director (currently identified as Sarah Mitchell, VP of Human Resources). The Committee is responsible for the administration and operation of the Plan, including the selection and monitoring of Plan investments, the interpretation of Plan provisions, and the adjudication of claims and appeals. The Committee operates pursuant to a written charter adopted by the Board of Directors. We reviewed the charter and noted that it includes standard provisions regarding committee governance, delegation of duties, and indemnification.

Investment Lineup. The Plan offers participants a diversified investment menu consisting of 22 mutual fund options across various asset classes (domestic equity, international equity, fixed income, and money market), plus a suite of target-date funds (Fidelity Freedom Funds) designed to provide age-appropriate asset allocation. The Plan does not include any Company stock (MedVance common stock) as an investment option, and the Plan does not maintain an employee stock ownership plan ("ESOP") component. The absence of Company stock from the Plan eliminates any concerns regarding employer stock concentration, insider trading restrictions in connection with the Transaction, or the duty of prudence issues that have been the subject of extensive ERISA stock-drop litigation.

Fee Disclosures. The Plan has on file the required fee disclosures from Fidelity under ERISA § 408(b)(2) and the regulations thereunder (29 C.F.R. § 2550.408b-2), as well as annual participant-level fee disclosures under 29 C.F.R. § 2550.404a-5. Based on our review, these disclosures appear to have been provided on a timely basis for the plan years under review. We did not conduct an independent assessment of the reasonableness of Plan fees, which would be outside the scope of this diligence review.

No Examination History. Based on the Company's representations and our review of available documents, no audit, examination, or investigation of the 401(k) Plan has been initiated or conducted by the IRS, the Department of Labor ("DOL"), or any other governmental authority. No determination letter audit or compliance check has been conducted during the period under review.

No Pending Claims or Litigation. Based on the Company's representations, there are no pending or threatened claims, lawsuits, arbitrations, or administrative proceedings relating to the 401(k) Plan (other than routine claims for benefits in the ordinary course of plan administration). No participant or beneficiary has filed a claim for benefits that has been denied and is the subject of an appeal or administrative review.

6. Identified Issues. Our review identified the following discrete compliance items relating to the 401(k) Plan. While neither issue presents a material risk to the Transaction, we note them for completeness and recommend that they be addressed prior to or promptly following the closing.

Late Deposit of Employee Deferrals. During the second quarter of 2023 (specifically, the payroll cycles ending April 14, 2023 and April 28, 2023), employee elective deferral contributions were deposited into the Plan trust four to six business days after the earliest date the contributions could reasonably have been segregated from the Company's general assets. Under DOL regulations (29 C.F.R. § 2510.3-102), employee contributions must be deposited into the plan trust as soon as they can reasonably be segregated from the employer's general assets, but in no event later than the 15th business day of the month following the month in which the contributions are received or withheld. For small plans, a seven-business-day safe harbor applies, but this safe harbor is not available to plans with more than 100 participants. The DOL has taken the position that the outer boundary of the 15th business day is not a safe harbor for large plans, and that contributions must be deposited as of the earliest date they can reasonably be segregated — typically within one to three business days of payroll.

The Company identified the late deposits through its internal monitoring procedures and self-corrected the issue using the DOL Voluntary Fiduciary Correction Program ("VFCP") procedures. Specifically, the Company calculated the lost earnings attributable to the late deposits (using the DOL's Online Calculator) and deposited the lost earnings into the affected participants' accounts. The VFCP correction was documented and the required Prohibited Transaction Exemption ("PTE") 2002-51 notice was filed. The Company has represented that it implemented improved payroll procedures following the incident, including the establishment of a dedicated payroll-to-trust transfer protocol and enhanced monitoring by the Benefits Committee, to prevent recurrence. No subsequent late deposits have been identified.

We assess this issue as presenting low residual risk. The self-correction through the VFCP, combined with the implementation of improved procedures, should be sufficient to address any DOL concern regarding the historical late deposits.

Missing Participants. Approximately 14 terminated participants with account balances under $5,000 have had uncashed distribution checks outstanding for more than 180 days. Under the terms of the Plan document, participants with account balances of $5,000 or less upon separation from service are subject to mandatory distribution. The Plan provides that accounts of $1,000 or less are distributed in a lump sum, and accounts between $1,000 and $5,000 are rolled over to an individual retirement account ("IRA") designated by the Plan administrator if the participant does not affirmatively elect a distribution. The uncashed checks suggest that the mandatory distribution process was initiated but not completed, likely because the participants did not cash the checks and the Company was unable to locate the participants to effectuate the distributions.

We recommend that the Company take steps to resolve this issue prior to the closing of the Transaction. Appropriate remedial steps include: (i) conducting a diligent search for the missing participants using commercially available locator services, certified mail, and other reasonable methods; (ii) for participants who cannot be located, rolling over uncashed distribution amounts to individual retirement accounts established on behalf of the participants, or utilizing the DOL's Missing Participants Program (to the extent applicable) or a state unclaimed property process; and (iii) documenting all search efforts and remedial actions taken. The aggregate account balances at issue are modest (estimated at less than $45,000 in total), and resolution of this issue should be straightforward.

B. Absence of Defined Benefit Plans

We confirm, based on the documents reviewed and the Company's representations, that the Company does not sponsor, maintain, or contribute to, and has never sponsored, maintained, or contributed to, any defined benefit pension plan subject to Title IV of ERISA or IRC § 412. The Company has no obligations to the Pension Benefit Guaranty Corporation, and no PBGC premiums have been paid or are owed by the Company with respect to any plan.

We further confirm that no "controlled group" or "affiliated service group" issues have been identified under IRC §§ 414(b), (c), (m), or (o) that would extend defined benefit plan liability to the Company by reason of the Company's affiliation with any other entity. The Company has represented that it does not have any subsidiaries, and that no prior owner or predecessor entity of the Company maintained a defined benefit pension plan. This conclusion is based on the Company's representations and has not been independently verified.

The absence of any defined benefit plan or Title IV liability is a favorable finding from the Purchaser's perspective, as it eliminates a significant category of potential ERISA liability that can arise in connection with acquisitions.

C. Multiemployer Plans

We confirm, based on the documents reviewed and the Company's representations, that the Company does not contribute to, and has no obligation to contribute to, any multiemployer plan within the meaning of ERISA § 3(37) or IRC § 414(f). The Company has no collective bargaining agreements, and no employees of the Company are covered by any multiemployer plan arrangement.

Accordingly, no withdrawal liability under ERISA §§ 4201–4225 exists or is expected to arise in connection with the Transaction. This is a favorable finding, as multiemployer plan withdrawal liability can be substantial and is imposed on a strict liability basis upon an employer's complete or partial withdrawal from a multiemployer plan.

V. Health and Welfare Plans

A. Medical / Health Plans

1. Plan Structure. The Company provides group medical coverage to eligible employees and their dependents through two fully insured arrangements, as described below.

BlueLine Health Plan of Tennessee (the "BlueLine Plan"). The Company's primary medical coverage is provided through a fully insured group health insurance policy issued by BlueLine Health Plan of Tennessee. The BlueLine Plan covers approximately 2,900 enrolled employees and their eligible dependents located in Tennessee, Alabama, and Kentucky. The BlueLine Plan offers two plan design options: (i) a Preferred Provider Organization ("PPO") option with traditional copayment and coinsurance structure, and (ii) a High Deductible Health Plan ("HDHP") option that is compatible with Health Savings Accounts ("HSAs") under IRC § 223. The current BlueLine Plan policy period runs from January 1, 2025 through December 31, 2025, having been renewed in November 2024.

SouthPoint Insurance Co. (the "SouthPoint Plan"). Employees and their eligible dependents located in Georgia are covered under a separate fully insured group health insurance policy issued by SouthPoint Insurance Co. The SouthPoint Plan covers approximately 300 enrolled employees and their eligible dependents. Like the BlueLine Plan, the SouthPoint Plan offers both PPO and HDHP options. The current SouthPoint Plan policy period runs from January 1, 2025 through December 31, 2025.

The Company does not maintain any self-insured medical plan. The fully insured structure means that the insurance carriers bear the underwriting risk for medical claims, and the Company's financial exposure is limited to the payment of premiums and administration of the plans. This is a favorable finding from the Purchaser's perspective, as it eliminates the risk of incurred-but-not-reported ("IBNR") medical claims liability at the time of closing.

2. Premiums and Cost Sharing. The approximate annual premium costs for the Company's medical plans are as follows:

BlueLine Plan:

• Approximate annual gross premium: $18.4 million

• Employer contribution: approximately 70% of the premium for employee-only coverage and approximately 55% of the premium for dependent coverage (employee + spouse, employee + child(ren), and family tiers)

• Resulting approximate annual employer cost: $12.5 million (estimated)

SouthPoint Plan:

• Approximate annual gross premium: $2.1 million

• Employer contribution: similar cost-sharing structure to the BlueLine Plan (approximately 70% employee-only; approximately 55% dependent)

• Resulting approximate annual employer cost: $1.4 million (estimated)

Neither the BlueLine Plan nor the SouthPoint Plan includes premium rate guarantees extending beyond the current policy periods (both expiring December 31, 2025). Accordingly, both plans will be subject to renewal negotiations in the fourth quarter of 2025. We note that BlueLine has communicated a preliminary expectation of an 8% to 12% premium increase for the 2026 renewal year, based on the Company's recent claims experience. This anticipated increase should be factored into the Purchaser's post-closing operating budget and may influence decisions regarding the timing and approach for transitioning the Company's health plans to the Purchaser's platform (if any) following the closing.

3. ACA Compliance. The Company is an "applicable large employer" ("ALE") within the meaning of IRC § 4980H, having employed an average of more than 50 full-time employees (including full-time equivalent employees) during the preceding calendar year. As an ALE, the Company is subject to the employer shared responsibility provisions of the ACA (commonly referred to as the "employer mandate" or "pay or play" rules), which require the Company to offer affordable, minimum-value health coverage to substantially all (at least 95%) of its full-time employees or face potential penalty assessments under IRC § 4980H(a) or (b).

Our review of the Company's Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) for the 2022 and 2023 tax years confirms that these forms were timely filed with the IRS and timely furnished to employees. The Company has represented that it has not received any IRS Letter 226-J (Employer Shared Responsibility Payment assessment) for any tax year. This representation is consistent with our review of the Company's ACA reporting, which indicates that the Company has offered minimum value coverage to at least 95% of its full-time employees in each year reviewed.

We note that the Company's classification of PRN/per diem employees for ACA purposes requires particular attention, given the variable-hour nature of these workers and the potential for some PRN/per diem employees to work sufficient hours to be treated as full-time employees under the ACA. The Company has confirmed that it utilizes the look-back measurement method (as described in Treasury Regulation § 54.4980H-3(d)) to determine the full-time status of variable-hour and seasonal employees. Under this method, the Company measures the hours of service of variable-hour employees over a 12-month standard measurement period and, based on the results, classifies employees as full-time or non-full-time for the subsequent 12-month stability period. This is the appropriate methodology for employers with a significant variable-hour workforce and, when properly applied, provides protection against ACA penalty liability for employees whose hours fluctuate.

We recommend that the Company confirm its 2024 ACA reporting compliance, including the timely filing of Forms 1094-C and 1095-C for the 2024 tax year (which will be due in early 2025), as an open diligence item.

B. Dental Plan

The Company maintains a self-insured dental plan for eligible full-time employees and their dependents. The dental plan is administered by a third-party administrator and provides coverage for preventive, basic, and major dental services, subject to annual maximums and customary cost-sharing provisions. The Company has obtained stop-loss insurance to cap its exposure to catastrophic claims under the self-insured dental plan. Annual claims under the dental plan have averaged approximately $1.8 million over the most recent plan years. A formal plan document for the dental plan is on file in the data room.

Because the dental plan is self-insured, it is subject to ERISA as an employee welfare benefit plan. We have confirmed that a plan document and summary plan description are on file. The self-insured nature of the dental plan means that the Company bears the financial risk for dental claims (up to the stop-loss attachment point), and there may be incurred-but-not-reported claims at the time of closing. However, given the relatively modest annual claims volume and the availability of stop-loss coverage, we do not view this as a material concern. The Purchaser should, however, consider the treatment of the self-insured dental plan in the context of post-closing benefits integration planning.

C. Other Welfare Benefits

In addition to the medical and dental plans described above, the Company provides the following welfare benefits to eligible employees:

Group Term Life Insurance. The Company provides group term life insurance coverage to full-time employees equal to one times (1×) the employee's annual base salary, subject to a maximum benefit of $250,000. The life insurance coverage is fully insured and is provided on a non-contributory basis (i.e., the Company pays 100% of the premium). Imputed income is reported for coverage amounts in excess of $50,000, in accordance with IRC § 79. The carrier for the group term life insurance policy is identified in the data room materials.

Accidental Death and Dismemberment (AD&D). The Company provides AD&D coverage to full-time employees in an amount equal to the group term life insurance benefit (1× annual base salary, up to $250,000). AD&D coverage is fully insured and non-contributory.

Short-Term Disability. The Company provides short-term disability coverage to full-time employees, which pays a benefit equal to 60% of the employee's pre-disability weekly earnings, subject to a 7-day elimination period for illness and a 0-day elimination period for accidental injury. The maximum benefit duration is 26 weeks. Short-term disability coverage is fully insured.

Long-Term Disability. The Company provides long-term disability coverage to full-time employees, which pays a benefit equal to 60% of the employee's pre-disability monthly earnings, subject to a maximum monthly benefit of $10,000 and a 180-day elimination period. Long-term disability coverage is fully insured.

Section 125 Cafeteria Plan. The Company maintains a Section 125 cafeteria plan (within the meaning of IRC § 125) that permits eligible employees to pay their share of group health, dental, and vision insurance premiums on a pre-tax basis. The cafeteria plan also includes a health flexible spending account ("Health FSA") component, which permits employees to set aside up to $3,200 (the 2025 limit under IRC § 125(i)) on a pre-tax basis for eligible medical expenses not covered by insurance. The plan includes a $640 carryover feature for unused Health FSA balances, consistent with IRS Notice 2013-71 and subsequent guidance. Additionally, the cafeteria plan includes a dependent care flexible spending account ("DCFSA") component, which permits employees to set aside up to $5,000 per year on a pre-tax basis for eligible dependent care expenses under IRC § 129. A plan document for the cafeteria plan is on file.

Employee Assistance Program (EAP). The Company provides an employee assistance program that offers confidential counseling, referral, and support services to employees and their family members. The EAP is provided through an external vendor and covers a range of issues, including mental health, substance abuse, financial counseling, and legal consultation.

Tuition Reimbursement Program. The Company maintains a tuition reimbursement program that provides reimbursement of up to $5,250 per year per eligible employee for qualified educational expenses related to the employee's current position or career development within the Company. This benefit is consistent with the exclusion from gross income provided by IRC § 127 for employer-provided educational assistance.

No Post-Retirement Medical or Life Insurance Benefits. Importantly, the Company does not provide, and has no obligation to provide, any post-retirement or post-termination health, medical, life insurance, or other welfare benefits to any current or former employee or dependent, except as required under COBRA continuation coverage (discussed below) or analogous state law. The absence of any other post-employment benefit ("OPEB") obligation is a favorable finding, as OPEB liabilities can be substantial and may require accrual on the Company's balance sheet under applicable accounting standards (ASC 715). We recommend that this representation be specifically included in the SPA.

D. COBRA. The Company is subject to the continuation coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and corresponding provisions of ERISA §§ 601–608 and IRC § 4980B. COBRA requires that the Company's group health plans offer qualifying beneficiaries the opportunity to continue their group health coverage for a specified period following a qualifying event (such as termination of employment, reduction in hours, or divorce).

Based on our review of the Company's COBRA administration records and procedures, we confirm the following:

• The Company utilizes a third-party administrator to handle COBRA notices, elections, and premium collection. The third-party administrator is responsible for generating and distributing initial COBRA notices (general notices provided upon coverage commencement), qualifying event notices, election notices, and all other required communications.

• We reviewed sample qualifying event notices generated by the third-party administrator and confirmed that they substantially comply with the model COBRA election notice format published by the DOL (as revised in 2024). The notices contain the required information regarding the qualifying event, the continuation coverage options available, the applicable premium amounts, the election period, and the consequences of failing to elect continuation coverage.

• The Company has represented that there are no outstanding COBRA disputes, claims, or litigation. No participant or qualified beneficiary has asserted a claim for COBRA benefits that has been denied or is under dispute.

We note that the Transaction itself (i.e., the acquisition of the Company's stock by the Purchaser) will not constitute a COBRA qualifying event for employees of the Company, because the Company will continue to exist as a separate entity following the closing and employment will not be terminated by reason of the stock purchase. However, any post-closing workforce restructuring, terminations, or reductions in hours that occur following the Transaction could give rise to COBRA qualifying events for affected employees. We advise the Purchaser to plan for COBRA obligations in connection with any post-closing workforce changes.

E. HIPAA. The Company's group health plans are subject to the privacy and security requirements of the Health Insurance Portability and Accountability Act of 1996, as amended ("HIPAA"), and the regulations promulgated thereunder, including the Privacy Rule (45 C.F.R. Part 160 and Subparts A and E of Part 164), the Security Rule (45 C.F.R. Part 160 and Subparts A and C of Part 164), and the Breach Notification Rule (45 C.F.R. Part 160 and Subpart D of Part 164).

Based on our review of the Company's HIPAA compliance documentation, we confirm the following:

• The Company has adopted and implemented written HIPAA privacy and security policies and procedures that govern the use and disclosure of protected health information ("PHI") and electronic protected health information ("ePHI") in connection with the administration of the Company's group health plans.

• The Company has designated a Privacy Officer (responsible for the development and implementation of HIPAA privacy policies and procedures and the handling of privacy complaints) and a Security Officer (responsible for the development and implementation of administrative, physical, and technical safeguards for ePHI).

• Business associate agreements that comply with 45 C.F.R. § 164.504(e) have been executed with each third-party administrator, insurance carrier, and other service provider that receives, creates, maintains, or transmits PHI on behalf of the Company's group health plans.

• The Company has represented that no HIPAA breach notifications have been required in the past three years. No investigations, audits, or enforcement actions by the U.S. Department of Health and Human Services Office for Civil Rights ("OCR") have been initiated or are pending with respect to the Company's group health plans.

We recommend that the Purchaser confirm the Company's compliance with the requirements of the 2013 HIPAA Omnibus Rule (which, among other things, expanded the obligations of business associates and modified the breach notification standard), and that the Company's HIPAA policies and procedures be reviewed and updated as necessary following the closing to reflect any changes in the plan sponsor, plan administrator, or service provider relationships.

VI. Executive Compensation Arrangements

A. Employment Agreements

1. Summary of Named Executive Employment Agreements. The Company has entered into written employment agreements with four of its five named executive officers. The material terms of each agreement are summarized below.

Daniel Burch, President and Chief Executive Officer:

• Effective Date: March 1, 2020, as amended effective January 1, 2023

• Base Salary: $625,000 per annum, subject to annual review and increase (but not decrease) by the Board

• Annual Bonus: Target bonus equal to 75% of base salary (i.e., $468,750 at target), with actual bonus ranging from 0% to 150% of target based on achievement of Company and individual performance objectives established by the Board. Bonus is earned on a calendar-year basis and paid within 75 days following the end of the applicable performance period.

• Term: Initial three-year term, automatically renewing for successive one-year terms unless either party provides at least 90 days' advance written notice of non-renewal prior to the expiration of the then-current term

• Restrictive Covenants: 24-month post-termination non-competition covenant (prohibiting employment by or provision of services to any Competing Business within a 100-mile radius of any Company facility); 24-month post-termination non-solicitation covenant (covering both employees and referral sources of the Company)

• Other Benefits: Participation in all Company benefit plans; 25 days of paid time off per year; term life insurance supplement of $500,000 (in addition to group term life)

Angela Moretti, Chief Financial Officer:

• Effective Date: June 15, 2019, as amended effective January 1, 2023

• Base Salary: $440,000 per annum, subject to annual review and increase by the Board

• Annual Bonus: Target bonus equal to 60% of base salary (i.e., $264,000 at target), with actual bonus ranging from 0% to 150% of target based on Company and individual performance

• Term: Auto-renewal for successive one-year terms unless 90 days' notice of non-renewal

• Restrictive Covenants: 18-month post-termination non-competition covenant; 18-month post-termination non-solicitation covenant (employees and referral sources)

• Other Benefits: Participation in all Company benefit plans; 20 days of paid time off per year

Dr. Samir Patel, Chief Medical Officer:

• Effective Date: September 1, 2021

• Base Salary: $520,000 per annum, subject to annual review and increase by the Board

• Annual Bonus: Target bonus equal to 50% of base salary (i.e., $260,000 at target), with actual bonus ranging from 0% to 150% of target based on Company and individual performance

• Term: Auto-renewal for successive one-year terms unless 90 days' notice of non-renewal

• Restrictive Covenants: 18-month post-termination non-competition covenant; 18-month post-termination non-solicitation covenant

• Clinical Practice Component: Dr. Patel is permitted to engage in part-time clinical practice at MedVance facilities, subject to scheduling and conflict-of-interest restrictions. Compensation for clinical services is included within Dr. Patel's base salary; no additional clinical practice compensation is provided.

• Other Benefits: Participation in all Company benefit plans; continuing medical education allowance; 20 days of paid time off per year

Karen Tolliver, Chief Operating Officer:

• Effective Date: January 15, 2020, as amended effective January 1, 2023

• Base Salary: $410,000 per annum, subject to annual review and increase by the Board

• Annual Bonus: Target bonus equal to 55% of base salary (i.e., $225,500 at target), with actual bonus ranging from 0% to 150% of target based on Company and individual performance

• Term: Auto-renewal for successive one-year terms unless 90 days' notice of non-renewal

• Restrictive Covenants: 18-month post-termination non-competition covenant; 18-month post-termination non-solicitation covenant

• Other Benefits: Participation in all Company benefit plans; 20 days of paid time off per year

We note that the fifth named executive, Dr. Catherine Ryland (Founder and Board Chair), does not have a written employment agreement with the Company. Dr. Ryland's compensation arrangement is addressed separately in Section VI.C below in connection with the discussion of her supplemental executive retirement arrangement.

2. Severance Provisions in Employment Agreements. Each of the four employment agreements described above provides for severance benefits upon the executive's termination of employment by the Company without "Cause" or the executive's resignation for "Good Reason" (each as defined in the respective employment agreement). The definitions of Cause and Good Reason are substantially similar across all four agreements, with Cause generally encompassing willful misconduct, material breach, conviction of a felony, and failure to perform duties after notice and cure, and Good Reason generally encompassing a material diminution in duties, authority, or title, a material reduction in base salary, a material breach by the Company, or a relocation of the executive's principal office by more than 50 miles.

The severance benefits payable upon a qualifying termination (outside the change-of-control context) are as follows:

All agreements condition the payment of severance benefits upon the executive's timely execution and non-revocation of a general release of claims in a form satisfactory to the Company. Severance payments are made in installments consistent with the Company's regular payroll schedule (rather than in a lump sum), commencing on the first regular payroll date following the 60th day after the executive's separation from service. No severance benefits are payable upon termination for Cause, voluntary resignation without Good Reason, death, or disability (though separate benefits may be payable upon death or disability under the Company's insurance programs).

3. Change-of-Control Provisions in Employment Agreements. Each of the four employment agreements includes a definition of "Change of Control" that will be satisfied by the Transaction. The definitions are substantially identical across all four agreements and include, among other triggering events, the sale, transfer, or other disposition of more than 50% of the outstanding equity securities of the Company, the merger or consolidation of the Company with or into another entity in which the Company's stockholders immediately prior to the transaction do not own more than 50% of the voting power of the surviving entity, or the sale of all or substantially all of the Company's assets.

The change-of-control provisions in the employment agreements utilize a "double-trigger" structure, meaning that enhanced severance benefits are payable only upon a qualifying termination of employment (termination without Cause or resignation for Good Reason) that occurs within 24 months following a Change of Control. The double-trigger structure is significant because it means that the mere consummation of the Transaction does not, by itself, trigger any severance payment obligation; a qualifying termination must also occur.

The enhanced change-of-control severance benefits are as follows:

The enhanced change-of-control severance amounts supersede (and are not in addition to) the regular severance amounts described in Section VI.A.2 above. That is, if a qualifying termination occurs within 24 months following the closing of the Transaction, the executive receives the enhanced change-of-control amount rather than the regular severance amount.

The aggregate maximum enhanced change-of-control severance exposure across all four executives, if all were terminated without Cause or resigned for Good Reason within 24 months of closing, is approximately $6,660,500 (plus COBRA premium reimbursement). We emphasize, however, that these amounts are payable only upon a qualifying termination within the change-of-control window and are not payable at closing. Nonetheless, to the extent the Purchaser anticipates any post-closing restructuring, executive departures, or role reassignments that could constitute a constructive termination (i.e., Good Reason), these contingent liabilities should be carefully modeled. In particular, any material diminution in an executive's duties, authority, or title, or any material reduction in an executive's base salary or target bonus opportunity, that occurs within 24 months of closing could trigger a Good Reason resignation and the corresponding enhanced change-of-control severance payment.

4. IRC § 280G / 4999 Analysis. Payments and benefits provided to the named executives in connection with the Transaction may constitute "parachute payments" under IRC § 280G. Section 280G denies a tax deduction to the Company (or its successor) for any "excess parachute payment" made to a "disqualified individual" (generally, officers, shareholders, and highly compensated employees) in connection with a change in ownership or control. In addition, IRC § 4999 imposes a 20% excise tax on the recipient of any excess parachute payment. A "parachute payment" is any payment in the nature of compensation that is contingent on a change in ownership or control and that, in the aggregate with all other such payments, equals or exceeds three times the disqualified individual's "base amount" (generally, the individual's average annual W-2 compensation over the five taxable years preceding the change).

We note the following considerations relevant to the § 280G analysis:

• MedVance Health Systems, Inc. is a C corporation with institutional shareholders. Accordingly, the safe harbor exemption available under IRC § 280G(b)(5) for S corporations, partnerships, and certain closely held corporations (which permits the parachute payments to be approved by a shareholder vote) is not available.

• Each of the four employment agreements contains a "best net" or "cutback" provision. Under this provision, if any payments or benefits to the executive would constitute excess parachute payments, the payments will be reduced to the "safe harbor" amount (i.e., to one dollar less than three times the base amount) only if the reduction would result in a greater after-tax benefit to the executive than receiving the full payment and bearing the 20

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP
MEMORANDUM
TO: Beatrice Holloway; Megan Chu
FROM: Derek Okonkwo
DATE: January 20, 2025
RE: Employee Benefits and ERISA Diligence Review — MedVance Health Systems, Inc. (Project Ascend)
Matter No.: 0478231.0001
I. Executive Summary
This memorandum summarizes the findings of the employee benefits and ERISA diligence review conducted by Calderwood & Harkness LLP in connection with the proposed acquisition (the "Transaction") of MedVance Health Systems, Inc. (the "Company" or "Target") by Ardent Healthcare Holdings Inc. (the "Purchaser"), a portfolio company of Ardent Capital Partners III LP ("Ardent GP"). The Transaction contemplates the acquisition of 100% of the outstanding equity of the Company for an aggregate purchase price of approximately $620 million, to be effectuated through a Stock Purchase Agreement (the "SPA").
Our review encompasses all Company Benefit Plans as disclosed in the virtual data room maintained by Blackwell Thornton Capital Partners and supplemental document productions provided in response to our diligence request lists. The scope of our review includes the Company's 401(k) profit sharing plan, group health and welfare plans, executive employment agreements, equity compensation arrangements, supplemental executive retirement arrangements, and all other compensation and benefit programs maintained by the Company for the benefit of its current and former employees, officers, directors, and independent contractors.
Our principal findings are as follows:
• No Defined Benefit Pension Liability. The Company does not sponsor, maintain, or contribute to any defined benefit pension plan, and accordingly there is no underfunded pension liability exposure, no Pension Benefit Guaranty Corporation ("PBGC") obligations, and no Title IV of ERISA concerns.
• 401(k) Plan Generally Well-Administered. The Company's 401(k) Profit Sharing Plan (the "401(k) Plan") is generally well-administered and has received a favorable IRS determination letter. We identified certain discrete compliance items — specifically, a historical late deposit of employee deferrals (self-corrected through the Department of Labor Voluntary Fiduciary Correction Program) and a missing participant issue — that are remediable and do not present material risk to the Transaction.
• Health and Welfare Plans Typical for Industry. The Company's group health and welfare plans are typical for a mid-market healthcare services company with approximately 4,800 employees across Tennessee, Alabama, Georgia, and Kentucky. All medical plans are fully insured. The Company appears to be in compliance with its obligations under the Affordable Care Act ("ACA"), COBRA, and HIPAA.
• Executive Compensation Arrangements Require Close Attention. Executive compensation arrangements for the five named executives contain change-of-control provisions that will be triggered by the Transaction. Most significantly, the Company's 2018 Equity Incentive Plan contains a single-trigger acceleration provision that will cause all unvested equity awards to vest immediately upon closing, with an estimated aggregate cost of approximately $36.3 million. The named executive employment agreements contain double-trigger enhanced severance provisions that will be triggered only upon a qualifying termination within 24 months following the change of control. These provisions require close attention in purchase price modeling and SPA drafting.
• No Multiemployer Plan Exposure. No multiemployer plan (Title IV) exposure was identified. The Company does not contribute to, and has no obligation to contribute to, any multiemployer plan within the meaning of ERISA § 3(37).
• SPA Representations and Warranties Recommended. We have identified specific ERISA and employee benefits representations and warranties that we recommend for inclusion in the SPA, as set forth in detail in Section X of this memorandum.
Our review is based on approximately 74 documents produced by the Company in the virtual data room in response to the initial benefits diligence request list dated October 28, 2024 and the supplemental benefits diligence request list dated December 5, 2024 (referenced throughout this memorandum by data room index numbers). Our review was supplemented by a management call conducted on January 9, 2025 with Angela Moretti, the Company's Chief Financial Officer, and Jonathan Garrett of Whitaker, Poole & Simms LLP ("WPS"), the Company's outside benefits counsel. Follow-up written questions were submitted on January 12, 2025, and Company responses were received on January 17, 2025.
II. Scope and Methodology
A. Documents Reviewed
The following is a summary of the principal categories of documents reviewed in connection with this diligence engagement. Individual documents are referenced by their data room index numbers where appropriate throughout this memorandum.
• MedVance Health Systems, Inc. 401(k) Profit Sharing Plan document (as amended and restated effective January 1, 2022) and all subsequent amendments thereto (Data Room Index Nos. 6.1.001–6.1.008)
• IRS Determination Letter dated March 14, 2022 confirming the qualified status of the 401(k) Plan under Internal Revenue Code ("IRC" or "Code") § 401(a) (Data Room Index No. 6.1.009)
• Summary Plan Descriptions for all Company Benefit Plans, including the 401(k) Plan, group health plans, dental plan, life and disability plans, cafeteria plan, and severance plan (Data Room Index Nos. 6.2.001–6.2.015)
• Annual Return/Report of Employee Benefit Plan (Form 5500) filings for the 401(k) Plan for plan years ending December 31, 2021, December 31, 2022, and December 31, 2023, including all schedules and attachments thereto (Data Room Index Nos. 6.3.001–6.3.009)
• Brightwater Capital Management custodial agreement and recordkeeping services agreement for the 401(k) Plan (Data Room Index Nos. 6.4.001–6.4.003)
• Trust agreement for the MedVance Health Systems, Inc. 401(k) Profit Sharing Plan Trust (Data Room Index No. 6.4.004)
• Annual nondiscrimination testing results for the 401(k) Plan, including ADP/ACP testing and top-heavy testing, for the 2022 and 2023 plan years (Data Room Index Nos. 6.5.001–6.5.004)
• Group health insurance policies issued by BlueLine Health Plan of Tennessee and SouthPoint Insurance Co., including all riders, endorsements, and amendments (Data Room Index Nos. 6.6.001–6.6.012)
• Self-insured dental plan document and related stop-loss insurance policy (Data Room Index Nos. 6.7.001–6.7.003)
• Group term life insurance, accidental death and dismemberment ("AD&D"), short-term disability, and long-term disability insurance certificates and policies (Data Room Index Nos. 6.8.001–6.8.008)
• Section 125 cafeteria plan document, including health flexible spending account and dependent care flexible spending account components (Data Room Index No. 6.9.001)
• COBRA continuation coverage administration records, including sample qualifying event notices, election forms, and third-party administrator agreement (Data Room Index Nos. 6.10.001–6.10.005)
• HIPAA privacy and security policies and procedures, including business associate agreements with third-party administrators and service providers (Data Room Index Nos. 6.11.001–6.11.009)
• Executive Employment Agreements for Daniel Burch (President and Chief Executive Officer), Angela Moretti (Chief Financial Officer), Dr. Samir Patel (Chief Medical Officer), and Karen Tolliver (Chief Operating Officer), including all amendments thereto (Data Room Index Nos. 7.1.001–7.1.012)
• MedVance Health Systems, Inc. 2018 Equity Incentive Plan, as amended in 2021, together with the form of stock option agreement, form of restricted stock agreement, and all individual equity award agreements for each of the approximately 28 plan participants (Data Room Index Nos. 7.2.001–7.2.038)
• Management rollover term sheets and letters of intent exchanged between Ardent GP and each of Daniel Burch, Angela Moretti, Dr. Samir Patel, and Karen Tolliver (Data Room Index Nos. 7.3.001–7.3.004)
• MedVance Health Systems, Inc. Severance Plan for Director-Level and Above Employees, including plan document and summary plan description (Data Room Index Nos. 7.4.001–7.4.002)
• Board resolution and summary memorandum establishing the supplemental executive retirement arrangement for Dr. Catherine Ryland (Data Room Index Nos. 7.5.001–7.5.002)
• Board resolutions authorizing the adoption, amendment, or modification of each Company Benefit Plan (Data Room Index Nos. 7.6.001–7.6.014)
• Summary of workers' compensation program, including carrier information and claims history for calendar years 2021 through 2024 (Data Room Index Nos. 8.1.001–8.1.004)
• ACA compliance filings, including Forms 1094-C and 1095-C for the 2022 and 2023 tax years (Data Room Index Nos. 6.12.001–6.12.006)
B. Supplemental Inquiries
In addition to the documents reviewed in the virtual data room, our diligence was supplemented by the following:
Management Call (January 9, 2025). We participated in a management diligence call with Angela Moretti, CFO of MedVance, and Jonathan Garrett of Whitaker, Poole & Simms LLP, the Company's outside benefits counsel. During this call, we discussed the administration and operational history of the 401(k) Plan, the status of 2024 nondiscrimination testing, the structure and intent of the Ryland supplemental retirement arrangement, the Company's ACA compliance methodology for PRN/per diem employees, and various other benefits-related topics.
Written Follow-Up Questions (January 12, 2025). Following the management call, we submitted a supplemental written diligence questionnaire consisting of 23 questions to Ms. Moretti and Mr. Garrett, addressing, among other things, the history and resolution of the late deferral deposit issue, the status of the DOL top hat plan filing for the Ryland arrangement, the methodology and supporting documentation for 409A valuations used in connection with equity grants, and confirmation of controlled group and affiliated service group status.
Company Responses (January 17, 2025). The Company's written responses to our supplemental diligence questionnaire were received on January 17, 2025. The responses are referenced throughout this memorandum where relevant. Certain items remain outstanding and are identified in Section IX (Summary of Open Diligence Items) below.
C. Limitations. This memorandum is based solely on the documents provided to us in the virtual data room, the supplemental materials described above, and the oral and written representations of Company management and its outside counsel. No independent audit or examination of plan operations, fiduciary processes, financial records, or administrative procedures was conducted. We have relied on the accuracy and completeness of the information provided and have not independently verified the factual representations made by the Company or its advisors.
We note that the Company's Form 5500 for the 401(k) Plan for the plan year ending December 31, 2024 has not yet been filed (the filing deadline, with extension, is October 15, 2025). Additionally, the Company's 2024 nondiscrimination testing (ADP/ACP and top-heavy) is currently in process and results have not yet been provided. These items are identified as open diligence items requiring follow-up prior to execution of the SPA.
III. Company Workforce Overview
The following workforce statistics are relevant to the employee benefits analysis and provide necessary context for evaluating the Company's plan eligibility requirements, ACA obligations, and overall benefits cost structure.
• Total Employees. The Company employs approximately 4,800 individuals across four states: Tennessee (principal operations and corporate headquarters in Nashville), Alabama, Georgia, and Kentucky. The Company operates a network of outpatient healthcare facilities, urgent care centers, and ancillary healthcare service locations across these states.
• Full-Time Employees. Approximately 3,200 employees are classified as full-time (defined as employees regularly scheduled to work 30 or more hours per week) and are eligible for the Company's health and welfare benefit plans, subject to applicable waiting periods.
• 401(k) Plan Eligible Employees. Approximately 4,100 employees are eligible to participate in the 401(k) Plan after satisfaction of the Plan's age and service requirements (age 21 with 90 days of service). The Plan excludes PRN/per diem employees from eligibility.
• Employee Classifications. The Company utilizes three employee classifications relevant to benefits eligibility: (i) full-time employees (30 or more hours per week), (ii) part-time employees (fewer than 30 hours per week on a regularly scheduled basis), and (iii) PRN/per diem employees (employees who work on an as-needed basis without a regular schedule). Benefits eligibility varies by classification, with full-time employees generally eligible for the full suite of health, welfare, and retirement benefits, part-time employees eligible for the 401(k) Plan but not health and welfare benefits, and PRN/per diem employees excluded from most benefit plans.
• No Collective Bargaining Agreements. The Company has confirmed that there are no collective bargaining agreements in effect, and no employees of the Company are represented by a labor union or similar collective bargaining organization. Accordingly, no benefit obligations arise under any collective bargaining agreement, and no "multiemployer plan" contributions are required by reason of any such agreement.
• No Leased Employees or Co-Employment Arrangements. The Company has represented that it does not use leased employees (within the meaning of IRC § 414(n)) or maintain any co-employment or professional employer organization ("PEO") arrangements. All benefits-eligible individuals are common-law employees of the Company.
IV. Qualified Retirement Plans
A. MedVance Health Systems, Inc. 401(k) Profit Sharing Plan
1. Plan Design and Terms. The Company sponsors and maintains the MedVance Health Systems, Inc. 401(k) Profit Sharing Plan (the "401(k) Plan" or the "Plan"), a tax-qualified defined contribution plan under IRC § 401(a) that includes a cash-or-deferred arrangement under IRC § 401(k). The material terms of the Plan are as follows:
Plan Type. The Plan is a Section 401(k) profit sharing plan with participant-directed investments. The Plan is maintained pursuant to a pre-approved plan document platform administered by Brightwater Capital Management (the Fidelity prototype document), which facilitates ongoing compliance with changes in applicable law.
Adoption and Restatement History. The Plan was originally adopted effective January 1, 2012 by MedVance Health Systems, Inc. The Plan was subsequently amended and restated in its entirety effective January 1, 2022, incorporating all required amendments through that date, including amendments required by the Tax Cuts and Jobs Act of 2017, the Setting Every Community Up for Retirement Enhancement Act of 2019 (the "SECURE Act"), and the Bipartisan American Miners Act of 2019. The 2022 restatement also incorporated the Company's election to add a Roth deferral feature. Subsequent amendments have been adopted to incorporate provisions required by the SECURE 2.0 Act of 2022 that became effective in 2023 and 2024.
Eligibility. Employees of the Company are eligible to participate in the Plan upon attaining age 21 and completing 90 days of service with the Company. Employees classified as PRN/per diem are excluded from Plan eligibility. No other classes of employees are excluded. As of the most recent plan year, approximately 4,100 employees satisfy the eligibility requirements, and approximately 3,412 employees are active participants.
Employee Elective Deferrals. Participants may elect to defer a percentage of their eligible compensation to the Plan on a pre-tax basis, up to the applicable annual limit under IRC § 402(g) ($23,000 for 2024; $23,500 for 2025). Participants who have attained age 50 or older may make additional catch-up contributions under IRC § 414(v) ($7,500 for 2024 and 2025). Effective with the 2022 amendment and restatement, participants may also designate all or a portion of their elective deferrals as Roth contributions under IRC § 402A.
Employer Matching Contributions. The Company makes matching contributions equal to 50% of the first 6% of compensation deferred by each participant — that is, a maximum employer match of 3% of eligible compensation. Matching contributions are made on a per-payroll-period basis and are subject to a true-up at the end of each plan year to ensure that participants who increase their deferral rates during the year receive the full match to which they are entitled.
Discretionary Profit-Sharing Contributions. The Plan permits the Company to make discretionary profit-sharing contributions in such amounts as the Board of Directors (or its designee) may determine from time to time. The Company has made profit-sharing contributions in four of the last five plan years. The most recent profit-sharing contribution, for the 2023 plan year, was equal to 1.5% of eligible compensation for each eligible participant, representing an aggregate contribution of approximately $2.1 million. No profit-sharing contribution was made for the 2020 plan year, which coincided with the COVID-19 pandemic. There is no obligation to make a profit-sharing contribution in any given year.
Vesting. Employee elective deferrals (including Roth contributions) and any rollover contributions are 100% vested at all times. Employer matching contributions are subject to a three-year cliff vesting schedule (0% vested until the participant completes three years of vesting service, at which point the participant becomes 100% vested). Discretionary profit-sharing contributions are subject to a six-year graded vesting schedule (20% after two years, 40% after three years, 60% after four years, 80% after five years, and 100% after six years). Participants also become 100% vested in all employer contributions upon attainment of normal retirement age, death, or total and permanent disability while employed by the Company.
Compensation Definition. For purposes of all contribution calculations, "compensation" is defined as W-2 compensation (as reported in box 1 of Form W-2), which includes base salary, bonuses, commissions, and overtime, but excludes reimbursements, fringe benefits, and other items not includible in gross income. Compensation is subject to the annual limit under IRC § 401(a)(17) ($345,000 for 2025).
Normal Retirement Age. The Plan's normal retirement age is 65.
Distributions. The Plan permits distributions upon separation from service, attainment of age 59½, death, or total and permanent disability. The Plan also permits hardship withdrawals in accordance with the safe harbor standards of Treasury Regulation § 1.401(k)-1(d)(3)(iii) and plan loans, subject to IRC § 72(p) limitations (maximum loan of the lesser of $50,000 or 50% of the participant's vested account balance).
2. Determination Letter and Plan Document Compliance. The 401(k) Plan received a favorable IRS Determination Letter dated March 14, 2022, which confirmed the Plan's qualified status under IRC § 401(a) and the tax-exempt status of the Plan's trust under IRC § 501(a). The determination letter was issued in connection with the Plan's amendment and restatement effective January 1, 2022.
Because the Plan is maintained on a pre-approved document platform (the Fidelity prototype plan), the Plan's ongoing tax-qualified status is also supported by the favorable opinion letter issued by the IRS to the plan sponsor (Fidelity) for the pre-approved document. WPS has confirmed that the 2022 restatement incorporated all amendments required under applicable law through that date, and that subsequent amendments have been timely adopted to incorporate mandatory provisions of the SECURE 2.0 Act of 2022, including provisions relating to the increased catch-up contribution limits for participants ages 60–63 (effective for plan years beginning after December 31, 2024), the mandatory Roth treatment of catch-up contributions for higher-compensated employees (effective for plan years beginning after December 31, 2025, as extended by IRS Notice 2023-62 and subsequent guidance), and other required and optional SECURE 2.0 provisions.
Based on our review of the Plan document and amendments, we believe the Plan document is in substantial compliance with current law. We note, however, that the ongoing adoption of SECURE 2.0 amendments is a multi-year process, and we recommend that the Purchaser confirm with WPS or its own benefits counsel that all required amendments continue to be adopted on a timely basis following the closing.
3. Form 5500 Filings. We reviewed the Form 5500 Annual Return/Report of Employee Benefit Plan filings for the 401(k) Plan for the three most recent plan years. A summary of key data from these filings is set forth below:
All three filings were submitted on a timely basis with no extensions noted. As a "large plan filer" (more than 100 participants at the beginning of the plan year), the 401(k) Plan is subject to the requirement that the annual report include the report of an independent qualified public accountant. The Plan's independent auditor for each of the three years reviewed was Prumvane & Reese LLP, which issued unqualified (clean) audit opinions for all three plan years. We reviewed the auditor's reports and noted no material findings, qualified opinions, or reportable conditions.
We note that the Plan Year 2024 Form 5500 has not yet been filed, as the filing deadline (with the automatic extension available for plans that file on a calendar-year basis) is October 15, 2025. This is identified as an open item for purposes of ongoing monitoring.
4. Nondiscrimination Testing. The 401(k) Plan does not utilize a safe harbor contribution formula (i.e., it does not satisfy the requirements of IRC § 401(k)(12) or § 401(k)(13)), and accordingly, the Plan is required to satisfy the annual nondiscrimination testing requirements under IRC §§ 401(k)(3) and 401(m)(2), commonly referred to as the Actual Deferral Percentage ("ADP") test and the Actual Contribution Percentage ("ACP") test, respectively. The Plan is also subject to annual top-heavy testing under IRC § 416.
We reviewed the nondiscrimination testing results for the 2022 and 2023 plan years, which were prepared by WPS. The Plan passed both the ADP and ACP tests for each year using the current-year testing method. Specifically:
• 2023 Plan Year: ADP test passed (HCE ADP: 6.12%; NHCE ratio: 4.87%; margin within permissible limits). ACP test passed (HCE ACP: 3.01%; NHCE ACP: 2.44%). Top-heavy test: Plan was not top-heavy (key employee account balances represented approximately 3.2% of total Plan assets, well below the 60% threshold).
• 2022 Plan Year: ADP test passed (HCE ADP: 5.98%; NHCE ratio: 4.71%). ACP test passed (HCE ACP: 2.88%; NHCE ACP: 2.31%). Top-heavy test: Plan was not top-heavy (key employee account balances represented approximately 3.5% of total Plan assets).
The 2024 plan year nondiscrimination testing is currently in process. During the January 9, 2025 management call, Ms. Moretti and Mr. Garrett indicated that the Company expects the Plan to pass all nondiscrimination tests for the 2024 plan year based on preliminary data, and that no corrective distributions or other remedial actions are anticipated. We have requested that the completed 2024 testing results be provided when available, and this remains an open diligence item.
We note that the Plan's reliance on annual nondiscrimination testing (rather than a safe harbor design) creates an ongoing compliance obligation and a degree of year-to-year uncertainty regarding whether the Plan will satisfy the ADP and ACP tests. We recommend that the Purchaser consider converting the Plan to a safe harbor contribution formula following the closing, which would eliminate the requirement for annual ADP and ACP testing, reduce ongoing compliance risk, and simplify plan administration. A safe harbor match of 100% of the first 3% of compensation deferred plus 50% of the next 2% of compensation deferred would satisfy the safe harbor requirements and would represent a modest increase in employer matching costs relative to the current formula.
5. Fiduciary and Service Provider Matters. Trustee and Recordkeeper. Brightwater Capital Management serves as both the trustee and the recordkeeper for the 401(k) Plan. The Plan's assets are held in trust by Westvale Solutions. The custodial and recordkeeping services agreement between the Company and Fidelity was entered into in connection with the 2022 Plan restatement and is terminable by either party upon 90 days' written notice. We reviewed the agreement and noted no unusual provisions or material concerns.
Named Fiduciary. The Plan's named fiduciary is the MedVance Benefits Committee (the "Committee"), which consists of three members: Angela Moretti (CFO), Karen Tolliver (COO), and one non-executive Human Resources director (currently identified as Sarah Mitchell, VP of Human Resources). The Committee is responsible for the administration and operation of the Plan, including the selection and monitoring of Plan investments, the interpretation of Plan provisions, and the adjudication of claims and appeals. The Committee operates pursuant to a written charter adopted by the Board of Directors. We reviewed the charter and noted that it includes standard provisions regarding committee governance, delegation of duties, and indemnification.
Investment Lineup. The Plan offers participants a diversified investment menu consisting of 22 mutual fund options across various asset classes (domestic equity, international equity, fixed income, and money market), plus a suite of target-date funds (Fidelity Freedom Funds) designed to provide age-appropriate asset allocation. The Plan does not include any Company stock (MedVance common stock) as an investment option, and the Plan does not maintain an employee stock ownership plan ("ESOP") component. The absence of Company stock from the Plan eliminates any concerns regarding employer stock concentration, insider trading restrictions in connection with the Transaction, or the duty of prudence issues that have been the subject of extensive ERISA stock-drop litigation.
Fee Disclosures. The Plan has on file the required fee disclosures from Fidelity under ERISA § 408(b)(2) and the regulations thereunder (29 C.F.R. § 2550.408b-2), as well as annual participant-level fee disclosures under 29 C.F.R. § 2550.404a-5. Based on our review, these disclosures appear to have been provided on a timely basis for the plan years under review. We did not conduct an independent assessment of the reasonableness of Plan fees, which would be outside the scope of this diligence review.
No Examination History. Based on the Company's representations and our review of available documents, no audit, examination, or investigation of the 401(k) Plan has been initiated or conducted by the IRS, the Department of Labor ("DOL"), or any other governmental authority. No determination letter audit or compliance check has been conducted during the period under review.
No Pending Claims or Litigation. Based on the Company's representations, there are no pending or threatened claims, lawsuits, arbitrations, or administrative proceedings relating to the 401(k) Plan (other than routine claims for benefits in the ordinary course of plan administration). No participant or beneficiary has filed a claim for benefits that has been denied and is the subject of an appeal or administrative review.
6. Identified Issues. Our review identified the following discrete compliance items relating to the 401(k) Plan. While neither issue presents a material risk to the Transaction, we note them for completeness and recommend that they be addressed prior to or promptly following the closing.
Late Deposit of Employee Deferrals. During the second quarter of 2023 (specifically, the payroll cycles ending April 14, 2023 and April 28, 2023), employee elective deferral contributions were deposited into the Plan trust four to six business days after the earliest date the contributions could reasonably have been segregated from the Company's general assets. Under DOL regulations (29 C.F.R. § 2510.3-102), employee contributions must be deposited into the plan trust as soon as they can reasonably be segregated from the employer's general assets, but in no event later than the 15th business day of the month following the month in which the contributions are received or withheld. For small plans, a seven-business-day safe harbor applies, but this safe harbor is not available to plans with more than 100 participants. The DOL has taken the position that the outer boundary of the 15th business day is not a safe harbor for large plans, and that contributions must be deposited as of the earliest date they can reasonably be segregated — typically within one to three business days of payroll.
The Company identified the late deposits through its internal monitoring procedures and self-corrected the issue using the DOL Voluntary Fiduciary Correction Program ("VFCP") procedures. Specifically, the Company calculated the lost earnings attributable to the late deposits (using the DOL's Online Calculator) and deposited the lost earnings into the affected participants' accounts. The VFCP correction was documented and the required Prohibited Transaction Exemption ("PTE") 2002-51 notice was filed. The Company has represented that it implemented improved payroll procedures following the incident, including the establishment of a dedicated payroll-to-trust transfer protocol and enhanced monitoring by the Benefits Committee, to prevent recurrence. No subsequent late deposits have been identified.
We assess this issue as presenting low residual risk. The self-correction through the VFCP, combined with the implementation of improved procedures, should be sufficient to address any DOL concern regarding the historical late deposits.
Missing Participants. Approximately 14 terminated participants with account balances under $5,000 have had uncashed distribution checks outstanding for more than 180 days. Under the terms of the Plan document, participants with account balances of $5,000 or less upon separation from service are subject to mandatory distribution. The Plan provides that accounts of $1,000 or less are distributed in a lump sum, and accounts between $1,000 and $5,000 are rolled over to an individual retirement account ("IRA") designated by the Plan administrator if the participant does not affirmatively elect a distribution. The uncashed checks suggest that the mandatory distribution process was initiated but not completed, likely because the participants did not cash the checks and the Company was unable to locate the participants to effectuate the distributions.
We recommend that the Company take steps to resolve this issue prior to the closing of the Transaction. Appropriate remedial steps include: (i) conducting a diligent search for the missing participants using commercially available locator services, certified mail, and other reasonable methods; (ii) for participants who cannot be located, rolling over uncashed distribution amounts to individual retirement accounts established on behalf of the participants, or utilizing the DOL's Missing Participants Program (to the extent applicable) or a state unclaimed property process; and (iii) documenting all search efforts and remedial actions taken. The aggregate account balances at issue are modest (estimated at less than $45,000 in total), and resolution of this issue should be straightforward.
B. Absence of Defined Benefit Plans
We confirm, based on the documents reviewed and the Company's representations, that the Company does not sponsor, maintain, or contribute to, and has never sponsored, maintained, or contributed to, any defined benefit pension plan subject to Title IV of ERISA or IRC § 412. The Company has no obligations to the Pension Benefit Guaranty Corporation, and no PBGC premiums have been paid or are owed by the Company with respect to any plan.
We further confirm that no "controlled group" or "affiliated service group" issues have been identified under IRC §§ 414(b), (c), (m), or (o) that would extend defined benefit plan liability to the Company by reason of the Company's affiliation with any other entity. The Company has represented that it does not have any subsidiaries, and that no prior owner or predecessor entity of the Company maintained a defined benefit pension plan. This conclusion is based on the Company's representations and has not been independently verified.
The absence of any defined benefit plan or Title IV liability is a favorable finding from the Purchaser's perspective, as it eliminates a significant category of potential ERISA liability that can arise in connection with acquisitions.
C. Multiemployer Plans
We confirm, based on the documents reviewed and the Company's representations, that the Company does not contribute to, and has no obligation to contribute to, any multiemployer plan within the meaning of ERISA § 3(37) or IRC § 414(f). The Company has no collective bargaining agreements, and no employees of the Company are covered by any multiemployer plan arrangement.
Accordingly, no withdrawal liability under ERISA §§ 4201–4225 exists or is expected to arise in connection with the Transaction. This is a favorable finding, as multiemployer plan withdrawal liability can be substantial and is imposed on a strict liability basis upon an employer's complete or partial withdrawal from a multiemployer plan.
V. Health and Welfare Plans
A. Medical / Health Plans
1. Plan Structure. The Company provides group medical coverage to eligible employees and their dependents through two fully insured arrangements, as described below.
BlueLine Health Plan of Tennessee (the "BlueLine Plan"). The Company's primary medical coverage is provided through a fully insured group health insurance policy issued by BlueLine Health Plan of Tennessee. The BlueLine Plan covers approximately 2,900 enrolled employees and their eligible dependents located in Tennessee, Alabama, and Kentucky. The BlueLine Plan offers two plan design options: (i) a Preferred Provider Organization ("PPO") option with traditional copayment and coinsurance structure, and (ii) a High Deductible Health Plan ("HDHP") option that is compatible with Health Savings Accounts ("HSAs") under IRC § 223. The current BlueLine Plan policy period runs from January 1, 2025 through December 31, 2025, having been renewed in November 2024.
SouthPoint Insurance Co. (the "SouthPoint Plan"). Employees and their eligible dependents located in Georgia are covered under a separate fully insured group health insurance policy issued by SouthPoint Insurance Co. The SouthPoint Plan covers approximately 300 enrolled employees and their eligible dependents. Like the BlueLine Plan, the SouthPoint Plan offers both PPO and HDHP options. The current SouthPoint Plan policy period runs from January 1, 2025 through December 31, 2025.
The Company does not maintain any self-insured medical plan. The fully insured structure means that the insurance carriers bear the underwriting risk for medical claims, and the Company's financial exposure is limited to the payment of premiums and administration of the plans. This is a favorable finding from the Purchaser's perspective, as it eliminates the risk of incurred-but-not-reported ("IBNR") medical claims liability at the time of closing.
2. Premiums and Cost Sharing. The approximate annual premium costs for the Company's medical plans are as follows:
BlueLine Plan:
• Approximate annual gross premium: $18.4 million
• Employer contribution: approximately 70% of the premium for employee-only coverage and approximately 55% of the premium for dependent coverage (employee + spouse, employee + child(ren), and family tiers)
• Resulting approximate annual employer cost: $12.5 million (estimated)
SouthPoint Plan:
• Approximate annual gross premium: $2.1 million
• Employer contribution: similar cost-sharing structure to the BlueLine Plan (approximately 70% employee-only; approximately 55% dependent)
• Resulting approximate annual employer cost: $1.4 million (estimated)
Neither the BlueLine Plan nor the SouthPoint Plan includes premium rate guarantees extending beyond the current policy periods (both expiring December 31, 2025). Accordingly, both plans will be subject to renewal negotiations in the fourth quarter of 2025. We note that BlueLine has communicated a preliminary expectation of an 8% to 12% premium increase for the 2026 renewal year, based on the Company's recent claims experience. This anticipated increase should be factored into the Purchaser's post-closing operating budget and may influence decisions regarding the timing and approach for transitioning the Company's health plans to the Purchaser's platform (if any) following the closing.
3. ACA Compliance. The Company is an "applicable large employer" ("ALE") within the meaning of IRC § 4980H, having employed an average of more than 50 full-time employees (including full-time equivalent employees) during the preceding calendar year. As an ALE, the Company is subject to the employer shared responsibility provisions of the ACA (commonly referred to as the "employer mandate" or "pay or play" rules), which require the Company to offer affordable, minimum-value health coverage to substantially all (at least 95%) of its full-time employees or face potential penalty assessments under IRC § 4980H(a) or (b).
Our review of the Company's Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) for the 2022 and 2023 tax years confirms that these forms were timely filed with the IRS and timely furnished to employees. The Company has represented that it has not received any IRS Letter 226-J (Employer Shared Responsibility Payment assessment) for any tax year. This representation is consistent with our review of the Company's ACA reporting, which indicates that the Company has offered minimum value coverage to at least 95% of its full-time employees in each year reviewed.
We note that the Company's classification of PRN/per diem employees for ACA purposes requires particular attention, given the variable-hour nature of these workers and the potential for some PRN/per diem employees to work sufficient hours to be treated as full-time employees under the ACA. The Company has confirmed that it utilizes the look-back measurement method (as described in Treasury Regulation § 54.4980H-3(d)) to determine the full-time status of variable-hour and seasonal employees. Under this method, the Company measures the hours of service of variable-hour employees over a 12-month standard measurement period and, based on the results, classifies employees as full-time or non-full-time for the subsequent 12-month stability period. This is the appropriate methodology for employers with a significant variable-hour workforce and, when properly applied, provides protection against ACA penalty liability for employees whose hours fluctuate.
We recommend that the Company confirm its 2024 ACA reporting compliance, including the timely filing of Forms 1094-C and 1095-C for the 2024 tax year (which will be due in early 2025), as an open diligence item.
B. Dental Plan
The Company maintains a self-insured dental plan for eligible full-time employees and their dependents. The dental plan is administered by a third-party administrator and provides coverage for preventive, basic, and major dental services, subject to annual maximums and customary cost-sharing provisions. The Company has obtained stop-loss insurance to cap its exposure to catastrophic claims under the self-insured dental plan. Annual claims under the dental plan have averaged approximately $1.8 million over the most recent plan years. A formal plan document for the dental plan is on file in the data room.
Because the dental plan is self-insured, it is subject to ERISA as an employee welfare benefit plan. We have confirmed that a plan document and summary plan description are on file. The self-insured nature of the dental plan means that the Company bears the financial risk for dental claims (up to the stop-loss attachment point), and there may be incurred-but-not-reported claims at the time of closing. However, given the relatively modest annual claims volume and the availability of stop-loss coverage, we do not view this as a material concern. The Purchaser should, however, consider the treatment of the self-insured dental plan in the context of post-closing benefits integration planning.
C. Other Welfare Benefits
In addition to the medical and dental plans described above, the Company provides the following welfare benefits to eligible employees:
Group Term Life Insurance. The Company provides group term life insurance coverage to full-time employees equal to one times (1×) the employee's annual base salary, subject to a maximum benefit of $250,000. The life insurance coverage is fully insured and is provided on a non-contributory basis (i.e., the Company pays 100% of the premium). Imputed income is reported for coverage amounts in excess of $50,000, in accordance with IRC § 79. The carrier for the group term life insurance policy is identified in the data room materials.
Accidental Death and Dismemberment (AD&D). The Company provides AD&D coverage to full-time employees in an amount equal to the group term life insurance benefit (1× annual base salary, up to $250,000). AD&D coverage is fully insured and non-contributory.
Short-Term Disability. The Company provides short-term disability coverage to full-time employees, which pays a benefit equal to 60% of the employee's pre-disability weekly earnings, subject to a 7-day elimination period for illness and a 0-day elimination period for accidental injury. The maximum benefit duration is 26 weeks. Short-term disability coverage is fully insured.
Long-Term Disability. The Company provides long-term disability coverage to full-time employees, which pays a benefit equal to 60% of the employee's pre-disability monthly earnings, subject to a maximum monthly benefit of $10,000 and a 180-day elimination period. Long-term disability coverage is fully insured.
Section 125 Cafeteria Plan. The Company maintains a Section 125 cafeteria plan (within the meaning of IRC § 125) that permits eligible employees to pay their share of group health, dental, and vision insurance premiums on a pre-tax basis. The cafeteria plan also includes a health flexible spending account ("Health FSA") component, which permits employees to set aside up to $3,200 (the 2025 limit under IRC § 125(i)) on a pre-tax basis for eligible medical expenses not covered by insurance. The plan includes a $640 carryover feature for unused Health FSA balances, consistent with IRS Notice 2013-71 and subsequent guidance. Additionally, the cafeteria plan includes a dependent care flexible spending account ("DCFSA") component, which permits employees to set aside up to $5,000 per year on a pre-tax basis for eligible dependent care expenses under IRC § 129. A plan document for the cafeteria plan is on file.
Employee Assistance Program (EAP). The Company provides an employee assistance program that offers confidential counseling, referral, and support services to employees and their family members. The EAP is provided through an external vendor and covers a range of issues, including mental health, substance abuse, financial counseling, and legal consultation.
Tuition Reimbursement Program. The Company maintains a tuition reimbursement program that provides reimbursement of up to $5,250 per year per eligible employee for qualified educational expenses related to the employee's current position or career development within the Company. This benefit is consistent with the exclusion from gross income provided by IRC § 127 for employer-provided educational assistance.
No Post-Retirement Medical or Life Insurance Benefits. Importantly, the Company does not provide, and has no obligation to provide, any post-retirement or post-termination health, medical, life insurance, or other welfare benefits to any current or former employee or dependent, except as required under COBRA continuation coverage (discussed below) or analogous state law. The absence of any other post-employment benefit ("OPEB") obligation is a favorable finding, as OPEB liabilities can be substantial and may require accrual on the Company's balance sheet under applicable accounting standards (ASC 715). We recommend that this representation be specifically included in the SPA.
D. COBRA. The Company is subject to the continuation coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and corresponding provisions of ERISA §§ 601–608 and IRC § 4980B. COBRA requires that the Company's group health plans offer qualifying beneficiaries the opportunity to continue their group health coverage for a specified period following a qualifying event (such as termination of employment, reduction in hours, or divorce).
Based on our review of the Company's COBRA administration records and procedures, we confirm the following:
• The Company utilizes a third-party administrator to handle COBRA notices, elections, and premium collection. The third-party administrator is responsible for generating and distributing initial COBRA notices (general notices provided upon coverage commencement), qualifying event notices, election notices, and all other required communications.
• We reviewed sample qualifying event notices generated by the third-party administrator and confirmed that they substantially comply with the model COBRA election notice format published by the DOL (as revised in 2024). The notices contain the required information regarding the qualifying event, the continuation coverage options available, the applicable premium amounts, the election period, and the consequences of failing to elect continuation coverage.
• The Company has represented that there are no outstanding COBRA disputes, claims, or litigation. No participant or qualified beneficiary has asserted a claim for COBRA benefits that has been denied or is under dispute.
We note that the Transaction itself (i.e., the acquisition of the Company's stock by the Purchaser) will not constitute a COBRA qualifying event for employees of the Company, because the Company will continue to exist as a separate entity following the closing and employment will not be terminated by reason of the stock purchase. However, any post-closing workforce restructuring, terminations, or reductions in hours that occur following the Transaction could give rise to COBRA qualifying events for affected employees. We advise the Purchaser to plan for COBRA obligations in connection with any post-closing workforce changes.
E. HIPAA. The Company's group health plans are subject to the privacy and security requirements of the Health Insurance Portability and Accountability Act of 1996, as amended ("HIPAA"), and the regulations promulgated thereunder, including the Privacy Rule (45 C.F.R. Part 160 and Subparts A and E of Part 164), the Security Rule (45 C.F.R. Part 160 and Subparts A and C of Part 164), and the Breach Notification Rule (45 C.F.R. Part 160 and Subpart D of Part 164).
Based on our review of the Company's HIPAA compliance documentation, we confirm the following:
• The Company has adopted and implemented written HIPAA privacy and security policies and procedures that govern the use and disclosure of protected health information ("PHI") and electronic protected health information ("ePHI") in connection with the administration of the Company's group health plans.
• The Company has designated a Privacy Officer (responsible for the development and implementation of HIPAA privacy policies and procedures and the handling of privacy complaints) and a Security Officer (responsible for the development and implementation of administrative, physical, and technical safeguards for ePHI).
• Business associate agreements that comply with 45 C.F.R. § 164.504(e) have been executed with each third-party administrator, insurance carrier, and other service provider that receives, creates, maintains, or transmits PHI on behalf of the Company's group health plans.
• The Company has represented that no HIPAA breach notifications have been required in the past three years. No investigations, audits, or enforcement actions by the U.S. Department of Health and Human Services Office for Civil Rights ("OCR") have been initiated or are pending with respect to the Company's group health plans.
We recommend that the Purchaser confirm the Company's compliance with the requirements of the 2013 HIPAA Omnibus Rule (which, among other things, expanded the obligations of business associates and modified the breach notification standard), and that the Company's HIPAA policies and procedures be reviewed and updated as necessary following the closing to reflect any changes in the plan sponsor, plan administrator, or service provider relationships.
VI. Executive Compensation Arrangements
A. Employment Agreements
1. Summary of Named Executive Employment Agreements. The Company has entered into written employment agreements with four of its five named executive officers. The material terms of each agreement are summarized below.
Daniel Burch, President and Chief Executive Officer:
• Effective Date: March 1, 2020, as amended effective January 1, 2023
• Base Salary: $625,000 per annum, subject to annual review and increase (but not decrease) by the Board
• Annual Bonus: Target bonus equal to 75% of base salary (i.e., $468,750 at target), with actual bonus ranging from 0% to 150% of target based on achievement of Company and individual performance objectives established by the Board. Bonus is earned on a calendar-year basis and paid within 75 days following the end of the applicable performance period.
• Term: Initial three-year term, automatically renewing for successive one-year terms unless either party provides at least 90 days' advance written notice of non-renewal prior to the expiration of the then-current term
• Restrictive Covenants: 24-month post-termination non-competition covenant (prohibiting employment by or provision of services to any Competing Business within a 100-mile radius of any Company facility); 24-month post-termination non-solicitation covenant (covering both employees and referral sources of the Company)
• Other Benefits: Participation in all Company benefit plans; 25 days of paid time off per year; term life insurance supplement of $500,000 (in addition to group term life)
Angela Moretti, Chief Financial Officer:
• Effective Date: June 15, 2019, as amended effective January 1, 2023
• Base Salary: $440,000 per annum, subject to annual review and increase by the Board
• Annual Bonus: Target bonus equal to 60% of base salary (i.e., $264,000 at target), with actual bonus ranging from 0% to 150% of target based on Company and individual performance
• Term: Auto-renewal for successive one-year terms unless 90 days' notice of non-renewal
• Restrictive Covenants: 18-month post-termination non-competition covenant; 18-month post-termination non-solicitation covenant (employees and referral sources)
• Other Benefits: Participation in all Company benefit plans; 20 days of paid time off per year
Dr. Samir Patel, Chief Medical Officer:
• Effective Date: September 1, 2021
• Base Salary: $520,000 per annum, subject to annual review and increase by the Board
• Annual Bonus: Target bonus equal to 50% of base salary (i.e., $260,000 at target), with actual bonus ranging from 0% to 150% of target based on Company and individual performance
• Term: Auto-renewal for successive one-year terms unless 90 days' notice of non-renewal
• Restrictive Covenants: 18-month post-termination non-competition covenant; 18-month post-termination non-solicitation covenant
• Clinical Practice Component: Dr. Patel is permitted to engage in part-time clinical practice at MedVance facilities, subject to scheduling and conflict-of-interest restrictions. Compensation for clinical services is included within Dr. Patel's base salary; no additional clinical practice compensation is provided.
• Other Benefits: Participation in all Company benefit plans; continuing medical education allowance; 20 days of paid time off per year
Karen Tolliver, Chief Operating Officer:
• Effective Date: January 15, 2020, as amended effective January 1, 2023
• Base Salary: $410,000 per annum, subject to annual review and increase by the Board
• Annual Bonus: Target bonus equal to 55% of base salary (i.e., $225,500 at target), with actual bonus ranging from 0% to 150% of target based on Company and individual performance
• Term: Auto-renewal for successive one-year terms unless 90 days' notice of non-renewal
• Restrictive Covenants: 18-month post-termination non-competition covenant; 18-month post-termination non-solicitation covenant
• Other Benefits: Participation in all Company benefit plans; 20 days of paid time off per year
We note that the fifth named executive, Dr. Catherine Ryland (Founder and Board Chair), does not have a written employment agreement with the Company. Dr. Ryland's compensation arrangement is addressed separately in Section VI.C below in connection with the discussion of her supplemental executive retirement arrangement.
2. Severance Provisions in Employment Agreements. Each of the four employment agreements described above provides for severance benefits upon the executive's termination of employment by the Company without "Cause" or the executive's resignation for "Good Reason" (each as defined in the respective employment agreement). The definitions of Cause and Good Reason are substantially similar across all four agreements, with Cause generally encompassing willful misconduct, material breach, conviction of a felony, and failure to perform duties after notice and cure, and Good Reason generally encompassing a material diminution in duties, authority, or title, a material reduction in base salary, a material breach by the Company, or a relocation of the executive's principal office by more than 50 miles.
The severance benefits payable upon a qualifying termination (outside the change-of-control context) are as follows:
All agreements condition the payment of severance benefits upon the executive's timely execution and non-revocation of a general release of claims in a form satisfactory to the Company. Severance payments are made in installments consistent with the Company's regular payroll schedule (rather than in a lump sum), commencing on the first regular payroll date following the 60th day after the executive's separation from service. No severance benefits are payable upon termination for Cause, voluntary resignation without Good Reason, death, or disability (though separate benefits may be payable upon death or disability under the Company's insurance programs).
3. Change-of-Control Provisions in Employment Agreements. Each of the four employment agreements includes a definition of "Change of Control" that will be satisfied by the Transaction. The definitions are substantially identical across all four agreements and include, among other triggering events, the sale, transfer, or other disposition of more than 50% of the outstanding equity securities of the Company, the merger or consolidation of the Company with or into another entity in which the Company's stockholders immediately prior to the transaction do not own more than 50% of the voting power of the surviving entity, or the sale of all or substantially all of the Company's assets.
The change-of-control provisions in the employment agreements utilize a "double-trigger" structure, meaning that enhanced severance benefits are payable only upon a qualifying termination of employment (termination without Cause or resignation for Good Reason) that occurs within 24 months following a Change of Control. The double-trigger structure is significant because it means that the mere consummation of the Transaction does not, by itself, trigger any severance payment obligation; a qualifying termination must also occur.
The enhanced change-of-control severance benefits are as follows:
The enhanced change-of-control severance amounts supersede (and are not in addition to) the regular severance amounts described in Section VI.A.2 above. That is, if a qualifying termination occurs within 24 months following the closing of the Transaction, the executive receives the enhanced change-of-control amount rather than the regular severance amount.
The aggregate maximum enhanced change-of-control severance exposure across all four executives, if all were terminated without Cause or resigned for Good Reason within 24 months of closing, is approximately $6,660,500 (plus COBRA premium reimbursement). We emphasize, however, that these amounts are payable only upon a qualifying termination within the change-of-control window and are not payable at closing. Nonetheless, to the extent the Purchaser anticipates any post-closing restructuring, executive departures, or role reassignments that could constitute a constructive termination (i.e., Good Reason), these contingent liabilities should be carefully modeled. In particular, any material diminution in an executive's duties, authority, or title, or any material reduction in an executive's base salary or target bonus opportunity, that occurs within 24 months of closing could trigger a Good Reason resignation and the corresponding enhanced change-of-control severance payment.
4. IRC § 280G / 4999 Analysis. Payments and benefits provided to the named executives in connection with the Transaction may constitute "parachute payments" under IRC § 280G. Section 280G denies a tax deduction to the Company (or its successor) for any "excess parachute payment" made to a "disqualified individual" (generally, officers, shareholders, and highly compensated employees) in connection with a change in ownership or control. In addition, IRC § 4999 imposes a 20% excise tax on the recipient of any excess parachute payment. A "parachute payment" is any payment in the nature of compensation that is contingent on a change in ownership or control and that, in the aggregate with all other such payments, equals or exceeds three times the disqualified individual's "base amount" (generally, the individual's average annual W-2 compensation over the five taxable years preceding the change).
We note the following considerations relevant to the § 280G analysis:
• MedVance Health Systems, Inc. is a C corporation with institutional shareholders. Accordingly, the safe harbor exemption available under IRC § 280G(b)(5) for S corporations, partnerships, and certain closely held corporations (which permits the parachute payments to be approved by a shareholder vote) is not available.
• Each of the four employment agreements contains a "best net" or "cutback" provision. Under this provision, if any payments or benefits to the executive would constitute excess parachute payments, the payments will be reduced to the "safe harbor" amount (i.e., to one dollar less than three times the base amount) only if the reduction would result in a greater after-tax benefit to the executive than receiving the full payment and bearing the 20

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