Company: LGN
Filing Date: 2025-02-14
Form Type: DRS
Source: 0000950123-25-002471
Chunk: 78

Company: Legence Corp.
Filing Date: 2025-02-14
Form: DRS
Chunk 78
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 which includes certain mergers, asset sales and other forms of business combinations and certain changes to the composition of the Legence board of directors), we could be required to make a substantial, immediate lump-sum payment. This payment would equal the present value of hypothetical future payments that could be required under the Tax Receivable Agreement. The calculation of the hypothetical future payments will be
based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement, including (i) the sufficiency of taxable income to fully utilize the tax benefits, (ii) U.S. federal, state and local tax rates for future periods.
(iii) treating any LGN Units (other than those held by us) outstanding on the termination date as exchanged on the termination date, (iv) the taxable disposition of certain non-amortizable property
and (v) the utilization of certain loss carryovers. Such lump-sum payment to the TRA Members could be greater than the specified percentage of any actual benefits we ultimately realize in respect of the
tax benefits that are subject to the Tax Receivable Agreement. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity.

Our ability to generate net taxable income is subject to substantial uncertainty. Accordingly, as a result of the assumptions, the required lump-sum payment may be significantly in advance of, and could materially exceed, the realized future tax benefits to which the payment relates. This payment obligation could (i) make us a less attractive
target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivable Agreement and (ii) result in holders of our Class A Common Stock receiving
substantially less consideration in connection with a change of control transaction than they would receive in the absence of such obligation. Accordingly, the TRA Members’ interests may conflict with those of the holders of our Class A
Common Stock.

If the Tax Receivable Agreement terminates early at our election, as a result of our breach or upon a change of control (as
defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other

49

Confidential Treatment Requested by Legence Corp.

Pursuant to 17 C.F.R. Section 200.83

forms of business combinations and certain changes to the composition of the Legence board of directors), we could be required to make payments under the Tax Receivable Agreement that exceed our
actual cash tax savings under