Company: LGN
Filing Date: 2025-08-25
Form Type: S-1/A
Source: 0001193125-25-186788
Chunk: 283

Company: Legence Corp.
Filing Date: 2025-08-25
Form: S-1/A
Chunk 283
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 their fair value measured as of the grant date. The Company recognizes compensation expense for
liability-classified awards at their fair value measured as of the reporting date, with an offset to stock-based compensation liability in Other long-term liabilities on the Consolidated Balance Sheets.

Series A Profits Interests awards are comprised of time vesting (60%) (“Time Interests”), performance vesting (20%) (“Performance
Interests”), and exit vesting (20%) (“Exit Interests”). Time Interests and Restricted Series C Common Interests are service based awards, and the Company accounts for these awards as liability-classified awards under ASC 718. The
awards are liability-classified due to a below fair value repurchase feature that is exercisable by the Parent under certain employment termination scenarios. The Company recognizes compensation expense on a straight-line basis over the five-year
vesting period with accelerated vesting and compensation expense when or if a change of control, as defined in Parent agreement (“Change of Control”), event occurs. The liability is adjusted for changes in fair value at each reporting
date. The liability is reclassified to equity when or if the awards are no longer subject to the below fair value repurchase feature.

The Company
accounts for the Performance Interests as equity-classified awards under ASC 718 and recognizes compensation expense when or if certain liquidity events (including Change of Control) that trigger vesting occur. The Company also accounts for the Exit
Interests as equity-classified awards under ASC 718 and recognizes compensation expense when or if a Change of Control that triggers vesting occurs. Awards forfeitures are accounted for as they occur.

The Company utilizes the option-pricing method (“OPM”) and the hybrid method to determine the fair value of stock-based payment awards using
certain assumptions. The expected life assumption represents the period of time the Parent interests are expected to be outstanding while the risk-free rate is based on the U.S. Treasury yield for a term consistent with the expected life. The
expected volatility assumption is based on the volatility of guideline public companies, adjusted for the Company’s size and leverage. Since the Parent interests do not have a provision for recurring distributions and the Parent does not have
a history or expectation of future recurring distributions, the Company’s expected dividend yield assumption is nil. The hybrid method incorporates various future outcomes, including IPO scenarios and a delayed exit scenario, and allocates the
value in each scenario using the OPM.

Once vested, the holders of the Series A Profits Interests may participate