MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP and is protected by the attorney-client privilege and the work product doctrine. This memorandum is intended solely for the use of the addressees and other authorized representatives of Ardent Capital Partners III LP. Any unauthorized review, use, disclosure, or distribution is prohibited.
TO: James Prentice, Partner; Sandra Tung, Partner
FROM: Sylvia Hartwell, Partner (Tax); Ryan Kowalski, Associate; Megan Chu, Associate
DATE: April 14, 2025
RE: FIRPTA and Nonresident Alien Withholding Analysis — Acquisition of Luminex Systems Holdings Inc. by Ardent Apex Holdings Inc. / Ardent Apex Merger Sub Inc.
Matter No.: 1001-00004
Client: Ardent Capital Partners III LP
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I. Executive Summary
The purpose of this memorandum is to analyze the withholding obligations arising under the Foreign Investment in Real Property Tax Act ("FIRPTA"), Sections 897 and 1445 of the Internal Revenue Code of 1986, as amended (the "Code"), and the nonresident alien ("NRA") withholding provisions under Sections 1441 through 1443 of the Code, in connection with the payment of merger consideration to stockholders of Luminex Systems Holdings Inc. ("Luminex Holdings" or the "Target") who are non-U.S. persons. This analysis is being prepared in connection with the proposed acquisition of the Target by Ardent Apex Holdings Inc. (the "Parent"), through a reverse triangular merger in which Ardent Apex Merger Sub Inc. ("Merger Sub") will merge with and into Luminex Holdings, with Luminex Holdings surviving as a wholly owned subsidiary of the Parent.
Transaction Overview. The transaction is structured as a reverse triangular merger under the General Corporation Law of the State of Delaware. Merger Sub, a newly formed Delaware corporation and wholly owned direct subsidiary of the Parent, will merge with and into Luminex Holdings, with Luminex Holdings continuing as the surviving corporation and becoming a wholly owned subsidiary of the Parent. The aggregate equity value of the transaction is $2,800,000,000. Each outstanding share of Luminex Holdings common stock (other than shares subject to rollover arrangements) will be converted into the right to receive $20.00 per share in cash, without interest. On a fully diluted basis, there are approximately 140,000,000 shares of Luminex Holdings common stock outstanding. The merger consideration is all cash, except for the management rollover equity described below. The Merger Agreement was executed on March 24, 2025.
Key Non-U.S. Stockholders. The following stockholders of Luminex Holdings have been identified as non-U.S. persons or entities for purposes of the FIRPTA and NRA withholding analysis:
• Luminex Systems AG (Swiss Aktiengesellschaft, registered in the Canton of Glenrock Assurance, commercial register number CHE-284.391.057), which holds a mirrored interest in Luminex Holdings via the 2021 share exchange structure described in Section II.B below;
• Dr. Stefan Kessler (Chief Executive Officer, Swiss tax resident), who holds approximately 8.5% of the equity of Luminex Holdings;
• Annelise Gruber (Chief Financial Officer, Swiss tax resident), who holds approximately 4.2% of the equity of Luminex Holdings;
• Dr. Markus Vogt (Chief Technology Officer, Swiss tax resident), who holds approximately 3.8% of the equity of Luminex Holdings; and
• Other management and employee holders who are non-U.S. persons resident in Switzerland, Germany, the United Kingdom, and Singapore, collectively holding a portion of the remaining 11.5% management and employee equity.
We note that Ridgeline Growth Equity Fund II LP (holding approximately 52% of the equity, a Delaware limited partnership with its principal place of business in Boston, Massachusetts) and Meridian Venture Partners IV LP (holding approximately 20% of the equity, a Delaware limited partnership with its principal place of business in San Francisco, California) are each U.S. persons for federal income tax purposes. The FIRPTA and NRA withholding analysis set forth in this memorandum is therefore focused primarily on the management and employee holders who are non-U.S. persons and on any indirect foreign ownership interests.
Summary of Conclusions. Based on our analysis, we have reached the following principal conclusions:
1. FIRPTA Withholding (Section 1445). Luminex Holdings is not expected to be a "United States real property holding corporation" ("USRPHC") within the meaning of Section 897(c)(2) of the Code, and therefore the shares of Luminex Holdings are not "United States real property interests" ("USRPIs"). Accordingly, FIRPTA withholding under Section 1445 should not apply to the payment of merger consideration to non-U.S. person stockholders, provided that the Target delivers the requisite FIRPTA certificate (i.e., a certification of non-USRPHC status) at or prior to closing.
2. NRA Withholding (Sections 1441–1443). The merger consideration paid to cashing-out stockholders constitutes amounts realized in exchange for their Luminex Holdings stock—that is, the consideration arises from a capital transaction and does not constitute fixed or determinable annual or periodical ("FDAP") income. Accordingly, NRA withholding under Section 1441 (or Section 1442, in the case of foreign corporate stockholders) should not apply.
3. Backup Withholding (Section 3406). Backup withholding at the rate of 24% applies to U.S. person stockholders who fail to furnish a valid IRS Form W-9 with a certified taxpayer identification number.
4. Rollover Transactions and Foreign Withholding. Specific attention is required with respect to (a) the rollover transactions involving Dr. Kessler, Ms. Gruber, and Dr. Vogt, including the interplay between Section 351 of the Code and the withholding provisions, and (b) the potential domestic tax withholding obligations in Switzerland, Germany, the United Kingdom, and Singapore arising from the cash-out of non-U.S. employees holding Luminex Holdings equity.
Each of these conclusions is discussed in detail below.
II. Background
A. Transaction Structure
The transaction is structured as a reverse triangular merger under the General Corporation Law of the State of Delaware. Ardent Apex Merger Sub Inc. ("Merger Sub"), a Delaware corporation incorporated on March 7, 2025 (EIN 93-2178502), and the sole stockholder of which is Ardent Capital Partners III LP, will merge with and into Luminex Systems Holdings Inc. ("Luminex Holdings" or the "Target"), a Delaware corporation incorporated on June 14, 2021 (EIN 86-2547193). Upon consummation of the merger, Luminex Holdings will be the surviving corporation and will become a wholly owned subsidiary of Ardent Apex Holdings Inc. (the "Parent"), a Delaware corporation incorporated on March 5, 2025 (EIN 93-2178435).
The Agreement and Plan of Merger (the "Merger Agreement") was executed on March 24, 2025, by and among the Parent, Merger Sub, and Luminex Holdings. Pursuant to the Merger Agreement, each outstanding share of Luminex Holdings common stock (other than dissenting shares, treasury shares, and shares subject to rollover arrangements) will be converted into the right to receive $20.00 per share in cash, without interest (the "Per-Share Merger Consideration"). Based on approximately 140,000,000 fully diluted shares of Luminex Holdings common stock outstanding, the aggregate equity value of the transaction is $2,800,000,000. The merger consideration is all cash, with the exception of certain management rollover equity interests described in Section II.C below.
The closing of the merger (the "Closing") is expected to occur on or about May 30, 2025, subject to the satisfaction or waiver of customary closing conditions, including stockholder approval, antitrust clearances, and the delivery of certain closing deliverables specified in the Merger Agreement.
B. Target Corporate Structure
Luminex Systems Holdings Inc. is a Delaware corporation that serves as the U.S. intermediate holding company for the worldwide operations historically conducted by Luminex Systems AG. The current corporate structure resulted from a 2021 reorganization (sometimes referred to informally as an "inversion") in which each share of Luminex Systems AG was exchanged on a one-for-one basis for a share of the newly formed Luminex Holdings pursuant to a share exchange agreement. Following the 2021 reorganization, Luminex Holdings became the ultimate parent entity of the Luminex group, with Luminex Systems AG becoming a wholly owned subsidiary of Luminex Holdings, notwithstanding that Luminex Systems AG was the historical ultimate parent of the group.
Luminex Holdings' wholly owned subsidiaries include the following entities:
• Luminex Systems Inc. — A Delaware corporation (EIN 86-2547210). Luminex Systems Inc. is the principal U.S. operating subsidiary of the group and conducts the group's U.S. operations, including sales, marketing, research and development, and customer support for the Luminex One enterprise SaaS platform. Luminex Systems Inc. reported U.S. revenue of approximately $194,800,000 for the fiscal year ended December 31, 2024. Its principal offices are located at 2100 Reston Gateway Drive, Suite 800, Reston, Virginia 20191.
• Luminex Systems AG — A Swiss Aktiengesellschaft registered in the Canton of Glenrock Assurance (commercial register number CHE-284.391.057), with its registered office at Bahnhofstrasse 71, 8001 Zürich, Switzerland. Luminex AG is the historical parent entity of the Luminex group and remains the principal European operating entity.
• Luminex Systems UK Ltd. — A private company limited by shares incorporated in England and Wales (Company No. 12847362), with its registered office at 14 Broadwick Street, London W1F 8HN, United Kingdom. Luminex UK conducts the group's operations in the United Kingdom and Ireland.
• Luminex Systems GmbH — A German limited liability company registered with the Munich Commercial Register (HRB 247891), with its registered office at Leopoldstrasse 120, 80802 Munich, Germany. Veltronix GmbH conducts the group's operations in Germany, Austria, and other German-speaking markets.
• Luminex Systems Pte. Ltd. — A Singapore private company limited by shares (UEN 201924781K), with its registered office at 8 Marina Boulevard, #36-01, Singapore. Luminex Singapore conducts the group's operations in the Asia-Pacific region.
The inverted corporate structure is relevant to the USRPHC analysis set forth in Section III.B below, because the determination of whether Luminex Holdings is a USRPHC focuses on whether the fair market value of Luminex Holdings' USRPIs equals or exceeds 50% of the aggregate fair market value of its worldwide assets (including both U.S. and non-U.S. real property interests and all other assets used or held for use in a trade or business). Because Luminex Holdings holds substantial non-U.S. assets through its foreign subsidiaries (particularly Luminex AG), the ratio of U.S. real property interests to total worldwide assets is expected to be well below the 50% threshold.
C. Stockholder Composition
The following table sets forth the current stockholder composition of Luminex Holdings, the expected allocation between cash-out and rollover consideration, and the U.S. or non-U.S. tax status of each stockholder or group of stockholders:
The aggregate management rollover equity is $405,020,000, and the aggregate management cash-out is $378,980,000. Ridgeline and Meridian are each receiving all-cash consideration and are not participating in the management rollover.
The "Other management/employees" category includes a mix of U.S.-resident employees of Luminex Systems Inc. (approximately 1,650 employees based in Reston, Virginia and other U.S. locations) and non-U.S.-resident employees of Luminex AG, Veltronix GmbH, Luminex UK Ltd., and Luminex Singapore Pte. Ltd. (approximately 2,550 employees globally outside the United States). A complete list of stockholders, their respective tax residencies, and the allocation of rollover and cash-out consideration is being compiled by Megan Chu in coordination with Luminex Holdings' general counsel and equity plan administrator.
For purposes of the FIRPTA and NRA withholding analysis, the relevant population is the non-U.S. person stockholders receiving cash merger consideration. The minimum identified non-U.S. person cash-out amount, based on the three named senior executives alone (Kessler, Gruber, and Vogt), is $201,880,000. Including non-U.S. employees in the "Other management/employees" category, the aggregate non-U.S. person cash-out amount is expected to be substantially higher.
III. FIRPTA Analysis Under Sections 897 and 1445
A. Overview of FIRPTA Framework
The Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") subjects nonresident alien individuals and foreign corporations to U.S. federal income tax on gains derived from the disposition of USRPIs. The principal operative provisions are Section 897 and Section 1445 of the Code, which function as follows:
Section 897(a) — Substantive Tax. Section 897(a) of the Code provides that gain or loss of a nonresident alien individual or foreign corporation from the disposition of a USRPI is treated as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business. The effect of this provision is to subject the gain to U.S. federal income tax at regular graduated rates (in the case of individuals) or at the corporate tax rate (in the case of foreign corporations), rather than the flat 30% rate (or applicable treaty rate) ordinarily applicable to FDAP income from U.S. sources.
Section 1445(a) — Withholding Obligation. Section 1445(a) of the Code provides that a transferee of a USRPI must deduct and withhold a tax equal to 15% of the "amount realized" by the foreign transferor on the disposition. This withholding obligation is a mechanism to ensure collection of the tax imposed by Section 897(a). The withholding rate was increased from 10% to 15% by the Protecting Americans from Tax Hikes (PATH) Act of 2015, effective for dispositions after February 16, 2016.
Definition of USRPI. Under Section 897(c)(1) of the Code, the term "United States real property interest" includes:
(i) an interest in real property (including an interest in a mine, well, or other natural deposit) located in the United States or the U.S. Virgin Islands; and
(ii) any interest (other than an interest solely as a creditor) in any domestic corporation, unless the taxpayer establishes that such domestic corporation was at no time a USRPHC during the shorter of (A) the 5-year period ending on the date of the disposition, or (B) the period after June 18, 1980, during which the taxpayer held such interest.
Accordingly, if Luminex Holdings is (or at any time during the relevant 5-year testing period has been) a USRPHC, then shares of Luminex Holdings held by non-U.S. person stockholders would constitute USRPIs, and the disposition of those shares in the merger would be subject to both the substantive tax under Section 897(a) and the withholding obligation under Section 1445(a).
B. USRPHC Determination — Luminex Systems Holdings Inc.
Statutory Test. A domestic corporation is a USRPHC if the fair market value of its USRPIs equals or exceeds 50% of the sum of the fair market values of:
(i) its USRPIs;
(ii) its interests in real property located outside the United States; and
(iii) any other assets used or held for use in a trade or business.
See Code § 897(c)(2); Treas. Reg. § 1.897-2(b)(1). The determination is made as of a "determination date," which under Treasury Regulations Section 1.897-2(c)(2) is generally the last day of each calendar quarter, the date of any acquisition or disposition of a USRPI or interest in foreign real property, and any other date on which the corporation must make a determination under the regulations.
Analysis of Luminex Holdings' Asset Composition. Based on our review of the due diligence materials, financial statements, and representations made by the Target in the Merger Agreement, we have analyzed Luminex Holdings' asset composition as follows:
U.S. Real Property Interests. Luminex Holdings is an enterprise software-as-a-service (SaaS) company. Its primary assets consist of intellectual property (including the proprietary "Luminex One" platform), customer relationships, goodwill, cash and cash equivalents, accounts receivable, and equity interests in its operating subsidiaries. The group's business is fundamentally a technology and software business, not a real-property-intensive business.
With respect to U.S. real property holdings specifically, the due diligence review conducted by Calderwood & Harkness in connection with the transaction has identified the following:
• Luminex Systems Inc. (the U.S. operating subsidiary) leases its headquarters at 2100 Reston Gateway Drive, Suite 800, Reston, Virginia 20191. This is a leasehold interest only; no fee interest in U.S. real property has been identified in the due diligence materials reviewed to date.
• No other owned U.S. real property has been identified. Luminex Systems Inc. may maintain additional leased office spaces in other U.S. locations, but these are also leasehold interests and not fee interests in U.S. real property.
• A leasehold interest in real property is generally not classified as a USRPI unless it is classified as a fee interest for federal income tax purposes (e.g., because the lease is a long-term ground lease or is otherwise treated as a sale for tax purposes). Based on the terms of the Reston headquarters lease reviewed in due diligence (a standard 10-year commercial office lease with no purchase option), the leasehold interest should not constitute a USRPI.
Worldwide Asset Base. Luminex Holdings' worldwide asset base includes the following categories of assets, which are substantial in value and are not USRPIs:
• intellectual property, including the Luminex One platform, associated patents, trademarks, copyrights, and trade secrets;
• Goodwill and going-concern value attributable to the Luminex business as a whole;
• Customer relationships and the subscriber base (the group reported approximately $441,000,000 in annual recurring revenue ("ARR") for fiscal year 2024);
• Accounts receivable, cash, and cash equivalents;
• Equity interests in foreign subsidiaries, including Luminex Systems AG (Switzerland), Luminex Systems UK Ltd. (England and Wales), Luminex Systems GmbH (Germany), and Luminex Systems Pte. Ltd. (Singapore); and
• Personal property, equipment, and other tangible assets used in the software business.
The fair market value of any USRPIs held directly by Luminex Holdings or indirectly through Luminex Systems Inc. is de minimis relative to the $2,800,000,000 aggregate equity value (which itself is a proxy for the total fair market value of Luminex Holdings' assets, adjusted for liabilities). Even under a conservative analysis, the value of any U.S. real property interests is well below 1% of the total worldwide asset base, and therefore far below the 50% threshold established by Section 897(c)(2).
Historical Determination. Luminex Holdings was incorporated on June 14, 2021, and the 2021 reorganization involved a share exchange in which the equity interests in Luminex Systems AG were contributed to Luminex Holdings. This transaction did not involve the acquisition of any substantial U.S. real property. At no time since its incorporation has Luminex Holdings been a USRPHC. The 5-year testing period under Section 897(c)(1)(A)(ii) extends back to the earlier of the date five years prior to the disposition or the period during which the non-U.S. stockholder held the interest. Because Luminex Holdings was incorporated less than five years ago (June 14, 2021), the testing period is limited to the period from incorporation through the date of disposition. There is no indication that Luminex Holdings was a USRPHC at any point during this period.
Conclusion. Based on the foregoing analysis, Luminex Holdings is not a USRPHC within the meaning of Section 897(c)(2) of the Code, and has not been a USRPHC at any time during the relevant testing period. Accordingly, the shares of Luminex Holdings are not USRPIs, and Section 897 of the Code does not apply to the disposition of Luminex Holdings shares by non-U.S. person stockholders in the merger. The withholding obligation under Section 1445(a) will not apply, provided that the Target delivers the requisite FIRPTA certificate as discussed in Section III.C below.
C. FIRPTA Certificate (Section 1445 Exemption)
Regulatory Exemption. Treasury Regulations Section 1.1445-2(c)(3) provides that a transferee of a domestic corporation's stock is not required to withhold under Section 1445(a) if the transferee receives a certification from the transferor domestic corporation stating that the corporation is not, and has not been within the relevant testing period, a USRPHC within the meaning of Section 897(c)(2) of the Code. This certification is commonly referred to as a "FIRPTA certificate" or a "non-USRPHC certificate."
Required Content. The FIRPTA certificate must be in writing, signed under penalties of perjury by an authorized officer of the corporation, and must contain the following information:
(i) the name, address, and employer identification number (EIN) of the corporation;
(ii) a statement that the corporation is not, and has not been at any time during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a USRPHC within the meaning of Section 897(c)(2) of the Code; and
(iii) such additional information as may be required by the Treasury Regulations.
Delivery at Closing. Pursuant to the Merger Agreement, the Target is required to deliver the FIRPTA certificate at or prior to the Closing. The form of the certificate is attached as Exhibit A to this memorandum. The relevant information for the certificate is as follows:
• Name: Luminex Systems Holdings Inc.
• Address: 2100 Reston Gateway Drive, Suite 800, Reston, Virginia 20191
• EIN: 86-2547193
• Date of incorporation: June 14, 2021
IRS Notification Requirement. Under Treasury Regulations Section 1.897-2(h)(2), a domestic corporation that provides a certification that it is not a USRPHC must send a copy of the certification to the Internal Revenue Service within 30 days of the date the certification is provided. The copy should be sent to the address specified in the applicable regulations and revenue procedures. We will coordinate with the Target's counsel to ensure timely compliance with this notification requirement.
Recommendation. We recommend the following actions with respect to the FIRPTA certificate:
• Confirm that the FIRPTA certificate is a required closing deliverable under the Merger Agreement and that the form of certificate is consistent with the requirements of Treasury Regulations Section 1.1445-2(c)(3);
• Coordinate with Caldwell, Raines & Sheppard LLP (Target's counsel, contacts: Patricia Okonkwo and Daniel Feinberg) to confirm that the Target will deliver the certificate in the prescribed form at or prior to the Closing, and that the Target's authorized officers are prepared to sign the certificate under penalties of perjury;
• Ensure that a copy of the certificate is sent to the IRS within 30 days of the date it is provided, as required by Treasury Regulations Section 1.897-2(h)(2); and
• Provide the certificate (or a copy thereof) to Atlas Shareholder Services Inc. (the paying agent) so that Atlas has the documentation necessary to release merger consideration to non-U.S. person stockholders without FIRPTA withholding.
Consequences of Failure to Deliver Certificate. If the Target fails or refuses to deliver the FIRPTA certificate at or prior to the Closing, Section 1445(a) would require the transferee—here, the surviving corporation and/or the paying agent (Atlas Shareholder Services Inc.)—to withhold 15% of the amount realized by each non-U.S. person stockholder upon surrender of that stockholder's shares. Given the magnitude of the non-U.S. person cash-out amounts, the consequences of such failure would be severe. For the three named senior executives alone (Kessler, Gruber, and Vogt), the aggregate FIRPTA withholding on their cash-out amounts would be approximately:
• Dr. Stefan Kessler: 15% × $95,200,000 = $14,280,000
• Annelise Gruber: 15% × $58,800,000 = $8,820,000
• Dr. Markus Vogt: 15% × $47,880,000 = $7,182,000
• Subtotal for named executives: $30,282,000
Including the non-U.S. portion of the "Other management/employees" cash-out (estimated at a substantial portion of $177,100,000), total FIRPTA withholding could exceed $50,000,000. This withholding would be in excess of any actual U.S. federal income tax liability of the non-U.S. stockholders (which, as discussed in Section IV, is expected to be zero with respect to the merger consideration). The over-withholding would be refundable only upon the filing of U.S. federal income tax returns by each affected non-U.S. stockholder, creating significant cash flow and administrative burdens.
Accordingly, it is critical that the FIRPTA certificate be obtained at Closing. The risk of non-delivery is assessed as low, given that the Target has no identified basis to refuse the certificate and the Merger Agreement requires its delivery as a closing condition.
D. Publicly Traded Corporation Exception
Section 1445(b)(5) of the Code provides an exemption from FIRPTA withholding under Section 1445(a) for the disposition of an interest in a domestic corporation if such interest is in a class of stock that is "regularly traded on an established securities market." This exception is designed to relieve transferees of publicly traded stock from the impracticable burden of determining the USRPHC status of the corporation and the transferor's status as a non-U.S. person in connection with routine market transactions.
Luminex Holdings is a privately held Delaware corporation. Its shares are not listed on any securities exchange, are not traded on any over-the-counter market, and are not otherwise "regularly traded on an established securities market" within the meaning of Section 1445(b)(5) and the Treasury Regulations thereunder. Accordingly, this exception does not apply to the merger.
E. Cleansing Statement Alternative (Section 897(c)(1)(B))
For the sake of completeness, we note that Section 897(c)(1)(B) of the Code provides a "cleansing" mechanism under which a corporation that is or has been a USRPHC may dispose of all of its USRPIs in taxable transactions before the date of a relevant disposition of its stock, such that the corporation's shares would no longer be treated as USRPIs in the hands of a non-U.S. person stockholder. This provision would require that (i) as of the date of the disposition of the stock, the corporation holds no USRPIs, and (ii) all of the USRPIs held during the relevant testing period were disposed of in transactions in which the full amount of gain was recognized.
Because Luminex Holdings is not a USRPHC and has not been a USRPHC at any time during the relevant testing period, there is no need to resort to the cleansing mechanism under Section 897(c)(1)(B). This provision is discussed here solely for informational purposes and in the event that the USRPHC analysis were to change based on new facts or a different valuation of the Target's assets.
IV. Nonresident Alien Withholding Analysis Under Sections 1441–1443
A. General Framework
Section 1441(a). Section 1441(a) of the Code requires every person having the control, receipt, custody, disposal, or payment of any items of income from sources within the United States that are "fixed or determinable annual or periodical" (commonly referred to as "FDAP") income to deduct and withhold from such payment a tax equal to 30% of the amount thereof. This 30% rate may be reduced under an applicable income tax treaty, provided the non-U.S. person recipient furnishes a valid IRS Form W-8BEN (or W-8BEN-E, in the case of a foreign entity) claiming treaty benefits.
Section 1442. Section 1442 of the Code provides a parallel withholding rule for payments of FDAP income to foreign corporations.
Section 1443. Section 1443 of the Code provides rules for withholding on payments to foreign tax-exempt organizations.
Definition of FDAP Income. FDAP income includes, among other items, dividends, interest, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, royalties, and other fixed or determinable annual or periodical gains, profits, and income. See Code § 1441(a); Treas. Reg. § 1.1441-2(b). Importantly, FDAP income generally does not include gains derived from the sale or exchange of property (i.e., capital gains), unless such gains are otherwise subject to U.S. federal income tax under a specific Code provision (such as Section 897, discussed above).
B. Characterization of Merger Consideration
The central question for purposes of the Section 1441/1442 analysis is whether the merger consideration paid to cashing-out stockholders of Luminex Holdings constitutes FDAP income (and is therefore subject to NRA withholding) or, alternatively, constitutes amounts realized from the sale or exchange of property (a capital transaction, and therefore not subject to NRA withholding).
Capital Transaction Treatment. In a reverse triangular merger of the type contemplated here, stockholders of the Target who do not participate in the rollover receive cash in exchange for the cancellation of their Target shares. Under well-established principles of federal income tax law, this payment is treated as an "amount realized" by each such stockholder in exchange for the stockholder's Target shares—that is, as a sale or exchange of stock. See Code §§ 302(a), 331; Rev. Rul. 69-6, 1969-1 C.B. 104. The merger consideration is not characterized as a dividend or other distribution with respect to the Target stock.
This treatment is consistent with the Merger Agreement itself, which provides that each share of Luminex Holdings common stock outstanding immediately prior to the effective time of the merger (other than excluded shares and rollover shares) shall be converted into the right to receive the Per-Share Merger Consideration of $20.00 in cash. The conversion of shares into the right to receive cash constitutes an exchange for purposes of Section 1001 of the Code.
The IRS and the courts have consistently treated cash received by a stockholder in a cash-out merger as proceeds from a sale or exchange of stock under Section 302(a) or Section 331 of the Code. Because each cashing-out stockholder is surrendering all of its Luminex Holdings shares in the merger and receiving solely cash consideration, the transaction constitutes a complete termination of each such stockholder's interest in Luminex Holdings, and the sale-or-exchange treatment under Section 302(a) or Section 331 is appropriate.
Conclusion. Accordingly, the merger consideration paid to cashing-out stockholders (including non-U.S. person stockholders) is not FDAP income and is not subject to NRA withholding under Section 1441 or Section 1442 of the Code.
Potential Recharacterization as Dividend. We note one potential exception to the foregoing conclusion. If any portion of the merger consideration were recharacterized as a dividend—for example, under Section 302(d) of the Code (treating a redemption as a distribution under Section 301 in certain circumstances) or if there were a constructive dividend arising from the transaction—such recharacterized amount could constitute FDAP income and could be subject to NRA withholding under Section 1441.
We assess the risk of recharacterization as low for the following reasons:
• The merger is an acquisition of the Target by an unrelated third party (Ardent Capital Partners III LP), not a redemption by the Target in the context of a continuing stockholder;
• Each cashing-out stockholder is receiving cash in exchange for the cancellation of all of such stockholder's shares (i.e., a complete termination of interest);
• There is no continuing equity interest in the Target (or the surviving corporation) for any cashing-out stockholder (the rollover participants receive equity in the Parent, not in the surviving corporation, and are treated separately);
• The payment represents the per-share fair market value of the Luminex Holdings shares as determined in an arm's-length negotiation between unrelated parties; and
• There are no facts suggesting the existence of a constructive dividend or other distribution in connection with the merger.
Accordingly, the risk of dividend recharacterization is assessed as minimal, and we do not expect NRA withholding to be required with respect to any portion of the merger consideration.
C. Rollover Participants — Special Considerations
Three of the non-U.S. person stockholders—Dr. Stefan Kessler, Annelise Gruber, and Dr. Markus Vogt—are each contributing a portion of their Luminex Holdings shares to Ardent Apex Holdings Inc. (the Parent) in exchange for equity interests in the Parent, rather than receiving cash for those shares (the "Rollover Transaction"). The remaining portion of their Luminex Holdings shares will be converted into cash consideration in the merger in the same manner as all other cashing-out stockholders.
Structure of the Rollover Transaction. As structured, each rollover participant will contribute a specified number of Luminex Holdings shares to the Parent in exchange for newly issued equity interests (common units or shares) of the Parent, immediately prior to or contemporaneously with the effective time of the merger. The specific rollover amounts are as follows:
Tax Treatment of the Rollover. The Rollover Transaction may be treated as a tax-free exchange under Section 351 of the Code, provided that the rollover participants, together with any other transferors of property to the Parent in the same transaction, are in "control" (within the meaning of Section 368(c)) of the Parent immediately after the exchange. If the Section 351 requirements are satisfied, the rollover participants would recognize no gain or loss on the contribution of their Luminex Holdings shares to the Parent. The Parent's basis in the contributed shares would be a carryover basis, and the rollover participants' basis in the Parent equity interests received would be a substituted basis.
Whether the Section 351 control requirement is satisfied depends on the overall transaction structure, including the identity and holdings of all transferors and the allocation of the Parent's equity immediately after the closing. This determination is being analyzed separately by Pendleton & Associates LLP (Richard Chow) and will be addressed in a separate memorandum.
If the Rollover Transaction does not qualify under Section 351 (e.g., because the rollover participants do not together with other transferors constitute an 80% control group), the exchange of Luminex Holdings shares for Parent equity interests would be a taxable exchange. In that case, each rollover participant would recognize gain (or loss) equal to the difference between the fair market value of the Parent equity interests received and the rollover participant's adjusted basis in the Luminex Holdings shares contributed.
NRA Withholding on the Rollover. Regardless of whether the Rollover Transaction qualifies under Section 351 or is treated as a taxable exchange, the NRA withholding analysis is the same:
• If treated as a tax-free exchange under Section 351: No gain is recognized, and no withholding is required.
• If treated as a taxable exchange: The rollover participant is exchanging stock for stock (or stock for equity interests). The amount realized is not FDAP income; it is gain from the sale or exchange of property. Accordingly, NRA withholding under Section 1441 does not apply.
NRA Withholding on the Cash-Out Portion. The cash-out portion of each rollover participant's consideration is treated in the same manner as the cash-out consideration received by all other cashing-out stockholders: as an amount realized from the sale or exchange of stock, which is not FDAP income and is not subject to NRA withholding under Section 1441. See Section IV.B above.
Recommendation. We recommend that Calderwood & Harkness coordinate with Pendleton & Associates LLP (Richard Chow) to confirm the expected federal income tax treatment of the Rollover Transaction for non-U.S. persons, including the Section 351 analysis and any reporting obligations. In addition, IRS Forms W-8BEN should be collected from each of Dr. Kessler, Ms. Gruber, and Dr. Vogt (and any other non-U.S. rollover participants) to document their non-U.S. person status and treaty eligibility for purposes of the transaction.
D. Treaty Benefits
Even in the unlikely event that any portion of the merger consideration or rollover consideration were subject to NRA withholding under Sections 1441 or 1442 of the Code, the applicable income tax treaties between the United States and the countries of residence of the non-U.S. person stockholders would provide additional protection, as follows:
U.S.-Switzerland Income Tax Treaty. The Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income (the "U.S.-Switzerland Treaty") provides the following relevant provisions:
• Dividends (Article 10): Dividends paid by a U.S. company to a Swiss resident may be taxed in the United States, but at a reduced rate of 5% (for qualifying corporate shareholders holding at least 10% of the voting stock) or 15% (for individuals and other recipients).
• Capital Gains (Article 13): Gains from the alienation of shares of a U.S. company derived by a Swiss resident are generally taxable only in Switzerland (the state of residence of the alienator), unless the shares form part of the business property of a permanent establishment that the Swiss resident has in the United States. Because none of the identified Swiss-resident stockholders (Kessler, Gruber, Vogt) maintain a U.S. permanent establishment through which their Luminex Holdings shares are held, Article 13 would exempt their capital gains from U.S. taxation.
U.S.-Germany Income Tax Treaty. The Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes (the "U.S.-Germany Treaty") contains similar provisions. Article 13 generally provides that gains from the alienation of shares are taxable only in the state of residence of the alienator, subject to exceptions for permanent establishments and real property-rich companies.
U.S.-United Kingdom Income Tax Treaty. The Convention between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital Gains (the "U.S.-UK Treaty") similarly provides that capital gains from the sale of shares are generally taxable only in the state of residence of the alienator, subject to limited exceptions.
U.S.-Singapore Income Tax Treaty. The Convention between the Government of the United States of America and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the "U.S.-Singapore Treaty") provides analogous treatment, with capital gains from the disposition of shares generally exempt from U.S. tax for Singapore residents, subject to certain exceptions.
These treaty provisions reinforce the conclusion that non-U.S. person stockholders will not be subject to U.S. federal income tax on their gain from the disposition of Luminex Holdings shares in the merger, provided that Luminex Holdings is not a USRPHC (as concluded in Section III.B above) and that the stockholders are bona fide residents of the relevant treaty jurisdictions who satisfy the applicable Limitation on Benefits ("LOB") provisions. The LOB analysis for each treaty is summarized in Exhibit C to this memorandum.
V. Withholding on Amounts Paid to the Paying Agent / Exchange Agent
A. Role of Atlas Shareholder Services Inc.
Atlas Shareholder Services Inc. ("Atlas"), with offices at 6201 15th Avenue, Brooklyn, New York 11219 (contact: Dennis Carmichael, Vice President, Corporate Actions), has been appointed as the paying agent and exchange agent for the merger consideration pursuant to Section 2.02 of the Merger Agreement and the related Paying Agent Agreement dated March 24, 2025. Atlas will be responsible for:
• Mailing letters of transmittal and exchange instructions to all record holders of Luminex Holdings common stock following the effective time of the merger;
• Receiving duly completed letters of transmittal and supporting documentation (including share certificates or book-entry transfer confirmations, IRS Forms W-9 or W-8, and any other required documents) from stockholders;
• Processing share surrenders and verifying the entitlement of each surrendering stockholder to receive the Per-Share Merger Consideration of $20.00 per share;
• Distributing the merger consideration in cash to each stockholder upon acceptance of a properly completed letter of transmittal;
• Effecting any required tax withholding on the merger consideration payments, including FIRPTA withholding (if applicable), NRA withholding (if applicable), and backup withholding; and
• Remitting withheld amounts to the IRS and filing applicable information returns (including Forms 1099-B and 1042-S, as appropriate).
Atlas has substantial experience serving as paying agent in mergers and acquisitions transactions and is familiar with the withholding and reporting requirements applicable to payments to both U.S. and non-U.S. person stockholders.
B. Withholding Responsibilities of the Paying Agent
Under Treasury Regulations Section 1.1441-1(b)(1), a "withholding agent" includes any person, whether U.S. or foreign, that has the control, receipt, custody, disposal, or payment of an item of income of a foreign person subject to withholding. As the paying agent disbursing merger consideration to stockholders, Atlas is a withholding agent within the meaning of the regulations and bears primary responsibility for ensuring that any required withholding is effected.
The specific withholding responsibilities applicable to Atlas in connection with the merger are as follows:
FIRPTA Withholding. Atlas must confirm receipt of a valid FIRPTA certificate from Luminex Holdings (in the form attached as Exhibit A hereto) before releasing merger consideration to non-U.S. person stockholders without FIRPTA withholding. If the FIRPTA certificate is obtained and is in the prescribed form, no FIRPTA withholding is required. If the FIRPTA certificate is not obtained prior to the Closing, Atlas must withhold 15% of the amount realized by each non-U.S. person stockholder and remit the withheld amounts to the IRS in accordance with the deposit rules of Section 1445 and the Treasury Regulations thereunder.
NRA Withholding. As discussed in Section IV.B above, the merger consideration constitutes amounts realized in exchange for stock (a capital transaction) and does not constitute FDAP income. Accordingly, NRA withholding under Section 1441 or Section 1442 should not be required. Nevertheless, Atlas should collect IRS Form W-8BEN (for non-U.S. individual stockholders) or IRS Form W-8BEN-E (for non-U.S. entity stockholders) from all non-U.S. person stockholders for documentation and record-keeping purposes, and to substantiate the absence of a withholding obligation in the event of an IRS inquiry.
Backup Withholding (Section 3406). Section 3406 of the Code requires backup withholding at the rate of 24% on "reportable payments" (including broker proceeds from the sale of securities) paid to U.S. persons who fail to provide a valid IRS Form W-9 with a certified taxpayer identification number ("TIN"). Atlas must apply backup withholding to any merger consideration payment to a U.S. person stockholder who fails to provide a valid W-9. Non-U.S. persons who provide a valid W-8BEN or W-8BEN-E are generally exempt from backup withholding (but may be subject to NRA withholding, which as discussed above does not apply in this case).
Form Collection Requirements. In connection with the foregoing, Atlas should require the submission of the following forms as a condition to the release of merger consideration:
• IRS Form W-9 — from each U.S. person stockholder;
• IRS Form W-8BEN — from each non-U.S. individual stockholder; and
• IRS Form W-8BEN-E — from each non-U.S. entity stockholder.
These form collection requirements should be incorporated into the Letter of Transmittal that Atlas distributes to stockholders.
C. Escrow and Indemnification Implications
Pursuant to the Merger Agreement, an escrow amount of $140,000,000 (representing 5% of the aggregate equity value of $2,800,000,000) will be deposited with Continental Fiduciary Trust Company (the "Escrow Agent"), Account Reference CFT-ESC-2025-7894, and held for a period of 18 months following the Closing to secure the Target stockholders' indemnification obligations under the Merger Agreement. The escrow amount is funded from the merger consideration otherwise payable to the Target stockholders, pro rata based on their respective equity interests.
The withholding implications of the escrow arrangement are as follows:
Withholding at Time of Escrow Deposit. Under current IRS guidance, including Revenue Procedure 84-77, amounts placed in escrow in connection with a merger are generally not subject to current withholding at the time of deposit into escrow. This is because the amounts deposited in escrow are contingent in nature—the stockholders' right to receive the escrowed funds is subject to reduction based on indemnification claims, and the stockholders do not have unrestricted access to the escrowed funds at the time of deposit.
Withholding at Time of Escrow Distribution. Amounts released from escrow to stockholders are subject to withholding at the time of distribution, to the extent withholding would otherwise be required on such amounts. If, at the time of a distribution from escrow, the FIRPTA certificate remains valid and the characterization of the merger consideration as a capital transaction has not changed, no FIRPTA withholding or NRA withholding should be required on escrow distributions to non-U.S. person stockholders. However, if circumstances change (e.g., if the FIRPTA certificate is subsequently invalidated), withholding may be required at the time of distribution.
Coordination with Escrow Agent. Atlas Shareholder Services and Continental Fiduciary Trust Company (contact: Laura Svensson, Vice President, Escrow Services) should be instructed as follows:
• At the time of any escrow release to non-U.S. person stockholders, the Escrow Agent should confirm with counsel whether withholding is required before distributing the escrowed funds;
• The Escrow Agent should maintain on file the IRS Forms W-8BEN or W-8BEN-E provided by non-U.S. person stockholders, and should collect updated forms if the originals have expired at the time of an escrow release; and
• If withholding is required at the time of an escrow distribution (e.g., because of changed circumstances), the Escrow Agent should deduct and remit the required withholding to the IRS and file the applicable information returns.
VI. IRS Form W-9 / W-8 Collection
Calderwood & Harkness LLP has issued a letter to Luminex Holdings and to each selling stockholder requesting the submission of IRS Form W-9 (for U.S. persons) or IRS Form W-8BEN / W-8BEN-E (for non-U.S. persons) in connection with the payment of merger consideration and tax reporting obligations arising from the merger. The timely collection of these forms is essential to ensure proper withholding treatment by Atlas Shareholder Services and to avoid the imposition of backup withholding on U.S. person stockholders.
Key Non-U.S. Persons Requiring IRS Form W-8BEN or W-8BEN-E:
• Dr. Stefan Kessler — Swiss tax resident individual; IRS Form W-8BEN required, claiming benefits under the U.S.-Switzerland Income Tax Treaty.
• Annelise Gruber — Swiss tax resident individual; IRS Form W-8BEN required, claiming benefits under the U.S.-Switzerland Income Tax Treaty.
• Dr. Markus Vogt — Swiss tax resident individual; IRS Form W-8BEN required, claiming benefits under the U.S.-Switzerland Income Tax Treaty.
• Other non-U.S. management and employee holders — Employees of Luminex Systems AG, Luminex Systems GmbH, Luminex Systems UK Ltd., and Luminex Systems Pte. Ltd. who hold Luminex Holdings shares and are non-U.S. persons; IRS Form W-8BEN (for individuals) or IRS Form W-8BEN-E (for entities, if applicable) required, claiming benefits under the applicable income tax treaty (U.S.-Switzerland, U.S.-Germany, U.S.-United Kingdom, or U.S.-Singapore, as applicable).
Key U.S. Persons Requiring IRS Form W-9:
• Ridgeline Growth Equity Fund II LP — Delaware limited partnership, U.S. person; EIN to be confirmed by fund administrator.
• Meridian Venture Partners IV LP — Delaware limited partnership, U.S. person; EIN to be confirmed by fund administrator.
• U.S.-resident management and employee holders — Employees of Luminex Systems Inc. and other U.S.-based employees who hold Luminex Holdings shares and are U.S. persons.
Deadline. All IRS Forms W-8 and W-9 must be collected before the Closing Date to ensure proper withholding treatment by Atlas Shareholder Services. The Letter of Transmittal form prepared by Atlas will include a request for the applicable W-8 or W-9 form as a condition to the release of merger consideration. Atlas will not release merger consideration to any stockholder who has not submitted the required tax form.
Process. Ryan Kowalski is coordinating with Atlas Shareholder Services (Dennis Carmichael) to ensure that the Letter of Transmittal includes appropriate instructions for the submission of IRS Forms W-8 and W-9, including instructions for non-U.S. persons claiming treaty benefits. In addition, Megan Chu is compiling a comprehensive stockholder list, organized by tax residency, to track the status of form collection and to identify any stockholders for whom additional outreach is required.
VII. Coordination with Foreign Tax Withholding Obligations
A. Swiss Withholding Tax
As analyzed separately in the Swiss Withholding Tax Analysis Memorandum prepared by Sylvia Hartwell (dated April 10, 2025), Swiss anticipatory withholding tax (Verrechnungssteuer) at a statutory rate of 35% applies to dividends and other qualifying distributions from Swiss companies, including deemed dividends from Luminex Systems AG. The U.S.-Switzerland Income Tax Treaty reduces the rate applicable to qualifying recipients to 5% (for qualifying corporate shareholders holding at least 10% of the voting stock) or 15% (for other recipients).
The merger itself, however, is structured as an exchange of shares of Luminex Holdings, a Delaware corporation. The payment of merger consideration to Luminex Holdings stockholders in exchange for the cancellation of their Luminex Holdings shares should not directly trigger Swiss anticipatory withholding tax, because the relevant payment is made with respect to shares of a U.S. corporation, not a Swiss corporation, and the merger consideration does not constitute a dividend or distribution from Luminex Systems AG.
Nevertheless, coordination is needed with Breitfeld Hess & Partner AG (Dr. Lukas Breitfeld), Swiss tax counsel to the transaction, to confirm that no Swiss withholding obligations arise from the transaction, including from any restructuring or any deemed distributions that may be imputed in connection with the change of ownership of Luminex Systems AG (which, as a subsidiary of Luminex Holdings, will indirectly change ownership in the merger). In particular, counsel should confirm that the Swiss anti-avoidance rules (including the Kapitaleinlageprinzip and the rules regarding indirect partial liquidation) do not give rise to Swiss anticipatory tax obligations in connection with the transaction.
B. German Withholding
Employees of Luminex Systems GmbH (Leopoldstrasse 120, 80802 Munich, Germany; HRB 247891) who hold shares of Luminex Holdings and who receive cash-out consideration in the merger may be subject to German wage tax withholding (Lohnsteuer) and social insurance contributions to the extent the merger consideration is treated as compensation-related income under German tax law. This issue arises primarily where the Luminex Holdings shares were acquired by the employees through equity incentive plans or other employment-related arrangements, and where the gain on such shares is attributable to the employee's service relationship with Veltronix GmbH.
Under German tax principles, the "spread" at the time of exercise or vesting of an employment-related equity award may be treated as employment income subject to wage tax withholding by the employer (Veltronix GmbH). To the extent the gain recognized in the merger is attributable to appreciation occurring after vesting (as opposed to the spread at vesting), it may be treated as capital gains rather than employment income, and may be subject to a different tax regime (the Abgeltungsteuer or flat tax on capital income at 25%, plus solidarity surcharge and church tax, if applicable).
We are coordinating with Wendt Schäfer Rechtsanwälte PartG mbB (Dr. Katarina Wendt), German tax counsel, to analyze the treatment of merger consideration received by Veltronix GmbH employees and to determine the extent of any German wage tax withholding obligations.
C. UK Withholding
Employees of Luminex Systems UK Ltd. (14 Broadwick Street, London W1F 8HN, England and Wales; Company No. 12847362) who hold shares of Luminex Holdings and who receive cash-out consideration in the merger may be subject to UK Pay As You Earn ("PAYE") income tax withholding and National Insurance Contributions ("NIC") if the Luminex Holdings shares were acquired through employment-related securities arrangements within the meaning of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 ("ITEPA 2003").
Under ITEPA 2003, securities acquired through employment are subject to income tax charges at the time of various chargeable events, including acquisition, vesting, exercise of options, and in certain cases, disposal. If the shares were acquired through a tax-advantaged scheme (such as an Enterprise Management Incentive ("EMI") option scheme or a Company Share Option Plan ("CSOP")), different rules and rates may apply. The UK does not generally impose withholding tax on capital gains from the disposal of shares.