state-local-tax-memo.docx

1001-00004 · Ardent Capital Partners · Tax

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CALDERWOOD & HARKNESS LLP 7 Times Square New York, New York 10036

MEMORANDUM

April 14, 2025

TO: Theodore "Ted" Hargrove and Victoria Langford, Co-Founders & Managing Partners, Ardent Capital Partners III LP, 399 Park Avenue, 42nd Floor, New York, New York 10022

James Prentice, Responsible Partner (M&A), Calderwood & Harkness LLP

FROM: Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP

CC: Sandra Tung, Billing Partner (M&A), Calderwood & Harkness LLP Ryan Kowalski, Lead Associate (M&A), Calderwood & Harkness LLP Megan Chu, Working Associate (M&A), Calderwood & Harkness LLP Richard Chow, Engagement Partner, Pendleton & Associates LLP

RE: State and Local Tax Considerations — Proposed Acquisition of Luminex Systems Holdings Inc. by Ardent Capital Partners III LP

MATTER NO.: 1001-00004

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I. EXECUTIVE SUMMARY

This memorandum addresses the state and local tax considerations arising from the proposed acquisition (the "Transaction") of Luminex Systems Holdings Inc. ("Luminex Holdings" or the "Target") by Ardent Capital Partners III LP ("Ardent Fund III" or the "Buyer") for an aggregate equity value of approximately $2,800,000,000 ($20.00 per fully diluted share, based on 140,000,000 fully diluted shares outstanding). The Transaction is structured as a reverse triangular merger under Delaware law, pursuant to which Ardent Apex Merger Sub Inc. ("Merger Sub"), a newly formed Delaware corporation and wholly owned subsidiary of Ardent Apex Holdings Inc. ("Apex Holdings"), will merge with and into Luminex Holdings, with Luminex Holdings surviving as a wholly owned subsidiary of Apex Holdings (the "Merger").

The purpose of this memorandum is to identify, analyze, and, where possible, quantify the principal state and local tax implications of the Transaction for Ardent Fund III, its affiliates, and the surviving Luminex enterprise. This analysis is intended to support the deal team's evaluation of the Transaction structure, the Section 338(h)(10) election currently under consideration, the proposed intercompany royalty restructuring, and the post-closing compliance and integration planning.

The key entities involved in the Transaction structure are as follows:

• Ardent Capital Partners III LP — Delaware limited partnership; the Buyer

• Ardent Capital GP III LLC — Delaware limited liability company; general partner of Ardent Fund III

• Ardent Apex Holdings Inc. — Delaware corporation; intermediate holding company (EIN: 93-2178435)

• Ardent Apex Merger Sub Inc. — Delaware corporation; merger subsidiary (EIN: 93-2178502)

• Luminex Systems Holdings Inc. — Delaware corporation; the Target (EIN: 86-2547193)

• Luminex Systems Inc. — Delaware corporation; principal U.S. operating subsidiary (EIN: 86-2547210)

The state and local tax topics addressed herein include the following:

(1) Delaware entity-level taxes, including franchise taxes, entity taxes for limited partnerships and limited liability companies, transfer taxes, and unclaimed property/escheat considerations;

(2) Virginia corporate income and franchise taxes, including Virginia's conformity to the Internal Revenue Code, the implications of a Section 338(h)(10) election for Virginia purposes, sales and use tax considerations applicable to the Luminex One SaaS platform, and Virginia transfer and recording taxes;

(3) California income and franchise tax nexus analysis, including combined/unitary reporting considerations, California's conformity to Section 338(h)(10), withholding obligations on nonresident sellers, and transfer tax analysis;

(4) Tax considerations in other states where Luminex Systems Inc. or Vectis Solutions LLC (an Ardent Fund II portfolio company headquartered in South San Francisco, California) has established nexus or economic presence, including New York, Texas, Massachusetts, Illinois, Washington, New Jersey, Pennsylvania, Georgia, Ohio, Florida, North Carolina, Connecticut, and Maryland;

(5) State transfer and documentary stamp taxes applicable to the Merger, including analysis of controlling-interest transfer taxes in states where Luminex entities may hold real property;

(6) State income tax implications of the Section 338(h)(10) election currently under evaluation, including state-by-state conformity analysis, quantification of incremental state-level amortization benefits, and analysis of state-level gain recognition on the deemed asset sale;

(7) Post-closing state filing obligations, including short-period returns, combined reporting group establishment, change-of-ownership reporting, withholding adjustments, and estimated tax recalculations;

(8) State treatment of the proposed intercompany royalty restructuring (current rate: 4.5% of U.S. net revenues; proposed rate: 6.0% of U.S. net revenues), with particular focus on state-level add-back statutes applicable to related-party intangible expenses;

(9) Unclaimed property and escheat considerations for undelivered or uncashed merger consideration; and

(10) Sales and use tax considerations applicable to the Luminex One SaaS platform and any merger-related asset transfers.

This memorandum should be read in conjunction with the following companion memoranda prepared by our office and by Pendleton & Associates LLP:

• Tax Structure Memorandum (Section 338(h)(10) Election Analysis) — Calderwood & Harkness LLP (S. Hartwell)

• Transfer Pricing Restructuring Memorandum — Pendleton & Associates LLP (R. Chow) and Calderwood & Harkness LLP (S. Hartwell)

• FIRPTA / NRA Withholding Analysis Memorandum — Calderwood & Harkness LLP (S. Hartwell)

We have coordinated with Pendleton & Associates LLP (Richard Chow, Engagement Partner) on the quantitative modeling referenced herein. Pendleton is in the process of completing certain state-by-state tax benefit models; preliminary estimates are noted in this memorandum where available, with final figures to follow under separate cover.

Our principal recommendations and action items are set forth in Section XIII of this memorandum. We note in particular the importance of completing the state-by-state Section 338(h)(10) benefit quantification, the California combined reporting analysis, the Virginia add-back statute analysis in connection with the royalty restructuring, and the comprehensive nexus study before any definitive structuring elections are finalized.

II. TRANSACTION STRUCTURE OVERVIEW (STATE TAX PERSPECTIVE)

A. Pre-Closing Corporate Structure

The pre-closing corporate structure of the Target group is summarized below. Understanding this structure is essential to the state tax analysis because the location of entities, assets, employees, and revenue-generating activities determines the nexus and filing obligations in each jurisdiction.

Luminex Systems Holdings Inc. is a Delaware corporation incorporated on June 14, 2021. Luminex Holdings serves as the intermediate U.S. holding company for the Luminex enterprise. Its operational headquarters are located at 2100 Reston Gateway Drive, Suite 800, Reston, Virginia 20191. Luminex Holdings' registered agent in Delaware is Capitol Corporate Services, Inc., located at 1675 South Ashbury Asset Advisors, Suite B, Dover, Delaware 19901. Luminex Holdings is the entity whose shares are the subject of the Merger and is the entity with respect to which the Section 338(h)(10) election is under consideration.

Luminex Systems Inc. is a Delaware corporation and is the wholly owned subsidiary of Luminex Holdings. Luminex Systems Inc. (referred to herein as "Luminex US") is the principal U.S. operating entity of the Luminex enterprise. Luminex US operates the Luminex One platform, a cloud-based enterprise resource planning (ERP), procurement automation, and supply-chain analytics SaaS offering. As of year-end 2024, Luminex US employed approximately 1,650 employees in the United States, the majority of whom are located at the Reston, Virginia headquarters, with additional employees dispersed across multiple states. For its fiscal year ended December 31, 2024, Luminex US generated approximately $194,800,000 in U.S. revenue, derived from subscription, professional services, and support contracts with enterprise customers across the United States.

Luminex Systems AG is a Swiss Aktiengesellschaft (CHE-284.391.057) and is a direct subsidiary of Luminex Holdings. Luminex AG was formed as part of a 2021 inversion/redomiciliation structure and serves as the parent of the Luminex enterprise's European and Asia-Pacific operations and as the holding entity for certain intellectual property. Luminex AG is the licensor of intellectual property to Luminex US under the current intercompany royalty arrangement discussed in Section X of this memorandum.

The Luminex enterprise also includes the following foreign subsidiaries, each of which is an indirect subsidiary of Luminex Holdings through Luminex AG:

• Luminex Systems UK Ltd. — Incorporated in England and Wales (Company No. 12847362); London office

• Luminex Systems GmbH — Organized under German law, registered in Munich (HRB 247891); Munich office

• Luminex Systems Pte. Ltd. — Incorporated in Singapore (UEN 201924781K); Singapore office

As of the date of the Merger Agreement, the ownership of Luminex Holdings is as follows:

• Ridgeline Growth Equity Fund II LP — 52% (headquartered at 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116)

• Meridian Venture Partners IV LP — 20% (headquartered in San Francisco, California)

• Management and Employees — 28% (including, among others, Dr. Stefan Kessler, Annelise Gruber, and Dr. Markus Vogt)

B. Post-Closing Corporate Structure

Following the consummation of the Merger, the corporate structure of the enterprise will be as follows. Ardent Apex Holdings Inc. will serve as the parent holding company. Luminex Systems Holdings Inc. will be the surviving corporation in the Merger and will become a wholly owned subsidiary of Apex Holdings. Luminex US, Luminex AG, and the foreign subsidiaries will continue as indirect subsidiaries of Apex Holdings through Luminex Holdings, with no change to their organizational structure or jurisdictions of incorporation.

The equity holders of Apex Holdings following the closing are expected to be:

• Ardent Capital Partners III LP — $695,980,000 in equity

• Management Rollover Participants — $405,020,000 in aggregate rollover equity (certain members of existing management electing to roll over a portion of their equity consideration)

• Northvale Sovereign Holdings Ltd. — $200,000,000 co-investment

• Summit Ridge Capital Partners LP — $100,000,000 co-investment (headquartered at 161 North Clark Street, Suite 4700, Chicago, Illinois 60601)

• Crestline Mezzanine Partners II LP — 2.0% warrant coverage

From a state tax perspective, the post-closing ownership structure is significant because the identity, domicile, and activities of the equity holders and their affiliates may create additional state tax nexus or combined/unitary reporting obligations in certain jurisdictions. For example, the inclusion of Vectis Solutions LLC — an existing Ardent Fund II portfolio company headquartered in South San Francisco, California — in a California combined reporting group with Luminex entities could materially affect California apportionment and tax liability, as discussed in Section V below.

C. Merger Mechanics Relevant to State Tax

The Transaction is structured as a reverse triangular merger. Merger Sub, a newly formed Delaware corporation and wholly owned subsidiary of Apex Holdings, will merge with and into Luminex Holdings, with Luminex Holdings surviving as the surviving corporation. In connection with the Merger, all outstanding shares of Luminex Holdings capital stock (other than rollover shares and dissenting shares, if any) will be cancelled and converted into the right to receive cash consideration of $20.00 per share, payable through Atlas Shareholder Services Inc. (the "Paying Agent"; contact: Dennis Carmichael), plus any applicable rollover equity in Apex Holdings.

For state income tax purposes in most jurisdictions, a reverse triangular merger is treated as an acquisition of stock rather than an acquisition of assets. This characterization is generally favorable from a transfer tax perspective, as most states impose transfer and documentary stamp taxes only on transfers of real property and not on transfers of stock or equity interests. However, this stock-acquisition characterization limits the buyer's ability to obtain a step-up in the tax basis of the target's assets for state income tax purposes absent a special election.

To address this, the parties are evaluating a joint election under Section 338(h)(10) of the Internal Revenue Code. If made, the Section 338(h)(10) election would cause the Transaction to be treated, for federal income tax purposes (and for state purposes in conforming states), as a deemed sale by "old target" of all of its assets at fair market value, followed by a deemed purchase of those assets by "new target" at the allocated purchase price. The estimated step-up in basis attributable to amortizable intangible assets is approximately $620,000,000, which would generate annual federal income tax savings of approximately $8,680,000 and a present value benefit of approximately $195,000,000 at an 8% discount rate over a 15-year amortization period.

State conformity to Section 338(h)(10) varies on a state-by-state basis. In states that conform to the Internal Revenue Code's treatment of Section 338 elections, the deemed asset sale will be recognized and the stepped-up basis will generate state-level amortization deductions. In states that do not conform, or that impose taxes on a basis other than income (e.g., gross receipts taxes), the election may provide limited or no incremental state tax benefit. A detailed analysis of state conformity is set forth in Section VII below.

III. DELAWARE TAX CONSIDERATIONS

A. Delaware Franchise Tax

Delaware imposes an annual franchise tax on all corporations incorporated in the State of Delaware, regardless of whether the corporation conducts business or earns income in Delaware. The franchise tax is imposed under Title 8 of the Delaware Code, Section 503. All four Delaware corporations involved in the Transaction are subject to this obligation:

Luminex Systems Holdings Inc. — As a Delaware corporation, Luminex Holdings is subject to the annual Delaware franchise tax. Because Luminex Holdings will survive the Merger and continue as a Delaware corporation, its franchise tax obligations will continue post-closing without interruption.

Ardent Apex Holdings Inc. — As a newly formed Delaware corporation (incorporated March 5, 2025), Apex Holdings is subject to the Delaware franchise tax beginning with its first taxable year. Because Apex Holdings will serve as the ultimate parent of the post-closing group, its franchise tax obligation will be ongoing.

Ardent Apex Merger Sub Inc. — As a Delaware corporation incorporated on March 7, 2025, Merger Sub is subject to the Delaware franchise tax. However, because Merger Sub will cease to exist upon consummation of the Merger (it will merge into Luminex Holdings and will not survive), a final franchise tax return will be required for the short period from the date of its incorporation through the date of the Merger. Merger Sub should file a certificate of merger with the Delaware Secretary of State, and a final franchise tax report and payment should be submitted.

Luminex Systems Inc. — As a Delaware corporation, Luminex US is subject to the annual Delaware franchise tax, and this obligation will continue post-closing without change.

Delaware franchise tax may be calculated under two alternative methods: the authorized-shares method and the assumed par value capital method. The authorized-shares method calculates the tax based on the number of shares of capital stock a corporation is authorized to issue, without regard to the par value or actual capitalization. The assumed par value capital method calculates the tax based on a formula that takes into account the corporation's total gross assets (as reported on its federal income tax return) and the number of authorized and issued shares, using an assumed par value. For many corporations — particularly those with significant assets relative to authorized shares, or those with a large number of low-par-value authorized shares — the assumed par value capital method produces a significantly lower franchise tax liability.

Following the closing, the capitalization of Luminex Holdings will change (the existing shares will have been cancelled and new shares issued to Apex Holdings), and Apex Holdings will have a new capital structure reflecting the equity contributions of its various investors. We recommend that the franchise tax calculation for each Delaware corporation be evaluated under both methods following the closing, with particular attention to the new capitalization of Apex Holdings and Luminex Holdings, to ensure that the most favorable calculation method is used for each entity.

We note that Delaware does not impose a corporate income tax on entities that are incorporated in Delaware but that have no nexus with Delaware beyond their incorporation. However, Luminex Holdings and Luminex US may have Delaware nexus if they conduct operational activities within the state beyond maintenance of a registered office and agent. Based on our review of the due diligence materials, neither Luminex Holdings nor Luminex US appears to maintain employees, offices, or significant operational activities in Delaware (the Reston, Virginia location serves as the operational headquarters), but this should be confirmed with the Target as part of the due diligence process.

B. Delaware Entity-Level Taxes for LPs and LLCs

Ardent Capital Partners III LP is a Delaware limited partnership and is subject to the $300 annual tax imposed on Delaware limited partnerships under 6 Del. C. § 17-1109. This annual tax is due on or before June 1 of each year. Ardent Fund III is not subject to Delaware income tax absent Delaware-source income.

Ardent Capital GP III LLC is a Delaware limited liability company and is subject to the $300 annual tax imposed on Delaware limited liability companies under 6 Del. C. § 18-1107. As with Ardent Fund III, Ardent GP III LLC is not subject to Delaware income tax absent Delaware-source income.

Neither Ardent Fund III nor Ardent GP III LLC is expected to generate Delaware-source income as a result of the Transaction, provided that their activities in Delaware are limited to maintaining their respective registered offices and agents and the limited administrative activities customarily conducted by Delaware-domiciled investment fund entities.

C. Delaware Transfer Tax / Realty Transfer Tax

Delaware imposes a real estate transfer tax under 30 Del. C. § 5401 et seq. on transfers of real property situated in Delaware. The tax is imposed at a rate of 4% of the value of the property transferred (allocated between the transferor and transferee, typically 2.5% to the seller and 1.5% to the buyer, depending on the county and municipality).

The Merger itself does not involve a direct transfer of real property. Rather, it involves the cancellation of Luminex Holdings stock and the issuance of cash and equity consideration. Even if Luminex Holdings or Luminex US were to hold real property in Delaware, the reverse triangular merger structure (a stock-level transaction) would generally not trigger the Delaware real estate transfer tax because there is no conveyance of a deed or other instrument of transfer with respect to the real property itself.

Based on our review of the due diligence materials, neither Luminex Holdings nor Luminex US appears to own any real property in the State of Delaware. The Delaware registered office is maintained through Capitol Corporate Services, Inc., which provides registered agent services at its Dover, Delaware address. If both entities maintain only leasehold interests in Delaware (or no real property interests at all), no Delaware real estate transfer tax should be triggered by the Merger.

We further note that Delaware does not impose a securities transfer tax. Accordingly, the cancellation and conversion of Luminex Holdings stock in connection with the Merger will not give rise to any Delaware securities transfer tax liability.

D. Unclaimed Property / Escheat

Delaware's Abandoned Property Law (12 Del. C. § 1130 et seq.) is among the most significant in the nation, both because of Delaware's status as the state of incorporation for a large number of U.S. corporations and because of the priority rules established by the U.S. Supreme Court in Texas v. New Jersey, 379 U.S. 674 (1965), and Delaware v. New York, 507 U.S. 490 (1993). Under these priority rules, unclaimed property is generally escheatable to: (1) the state of the last known address of the owner (if reflected in the holder's records); or (2) if no last known address is available, the state of incorporation of the holder.

In the context of the Merger, the merger consideration of $20.00 per share will be payable through Atlas Shareholder Services Inc. (the "Paying Agent"), a New York corporation. Any uncashed checks or undelivered merger consideration will constitute unclaimed property subject to state escheat laws. The applicable dormancy period in Delaware is generally five years for most categories of intangible property, including uncashed checks and unpaid dividends or distributions.

Because Luminex Holdings is incorporated in Delaware, Delaware may assert an escheat claim under its Abandoned Property Law with respect to unclaimed merger consideration payable to shareholders for whom no last known address is reflected in the Paying Agent's or Luminex Holdings' records. To the extent that the Paying Agent (Atlas Shareholder Services Inc.) is a New York corporation, New York's unclaimed property law could also be implicated as a secondary rule for shareholders with no last known address, depending on the application of the priority rules and any applicable intermediary holder analysis.

We recommend coordinating with Atlas Shareholder Services Inc. (contact: Dennis Carmichael) to ensure that:

(a) the Paying Agent's records maintain current addresses for all Luminex Holdings shareholders entitled to receive merger consideration;

(b) a compliance timeline is established to track dormancy periods in all applicable states;

(c) the Paying Agent's procedures for handling returned mail, uncashed checks, and undelivered consideration comply with Delaware and New York unclaimed property reporting requirements; and

(d) any unclaimed amounts are properly reported and remitted to the applicable state escheat authority upon expiration of the relevant dormancy period.

IV. VIRGINIA TAX CONSIDERATIONS

A. Corporate Income Tax

Virginia imposes a corporate income tax at a rate of 6% on the Virginia taxable income of corporations doing business in the Commonwealth. Virginia taxable income is generally computed by reference to federal taxable income, with certain Virginia-specific additions and subtractions.

Both Luminex Systems Holdings Inc. and Luminex Systems Inc. have substantial nexus with Virginia. The operational headquarters of the Luminex enterprise are located at 2100 Reston Gateway Drive, Suite 800, Reston, Virginia 20191, and the majority of Luminex US's approximately 1,650 U.S. employees are based in Virginia. This physical presence — including the maintenance of offices, the employment of a substantial workforce, and the conduct of business operations from Virginia — clearly establishes Virginia corporate income tax nexus for both entities.

For tax years beginning on or after January 1, 2022, Virginia employs a single-sales-factor apportionment formula for most corporate taxpayers. Under this formula, the percentage of a corporation's income apportioned to Virginia is determined solely by reference to the ratio of the corporation's Virginia sales to its total sales everywhere. For purposes of the sales factor, Virginia uses market-based sourcing for receipts from services. Under market-based sourcing, revenue from services is sourced to the state where the benefit of the service is received by the customer, rather than where the service is performed. This means that Luminex US's revenue from its SaaS platform is sourced to Virginia to the extent that its customers are located in Virginia and receive the benefit of the Luminex One platform in Virginia.

Luminex US's total U.S. revenue for 2024 was approximately $194,800,000. The portion of that revenue sourced to Virginia customers will determine Luminex US's Virginia apportionment percentage under the single-sales-factor formula. Based on our preliminary review, and given the enterprise SaaS nature of the Luminex One platform, we expect that Virginia-sourced revenues represent a meaningful but not dominant share of total U.S. revenues, though the exact percentage will depend on the geographic distribution of Luminex US's customer base, which we have requested from management.

Following the closing of the Merger, the surviving corporation (Luminex Holdings) and its subsidiary (Luminex US) will continue their pre-existing Virginia income tax filing obligations without interruption. If Ardent Apex Holdings Inc. has no independent Virginia nexus (i.e., no employees, property, or sales sourced to Virginia), Apex Holdings should not itself be subject to Virginia corporate income tax. However, this determination should be confirmed based on the post-closing activities and management structure of Apex Holdings. If Apex Holdings establishes Virginia nexus (for example, if board meetings or management activities are conducted in Virginia), it could become subject to Virginia income tax filing requirements.

B. Virginia Conformity to Section 338(h)(10)

Virginia generally conforms to the Internal Revenue Code as amended through a fixed-date conformity provision. Under this approach, Virginia's General Assembly enacts legislation annually (or as needed) to update the date through which Virginia conforms to the IRC. As of the date of this memorandum, Virginia conforms to the IRC as of a date that includes Section 338 and the regulations thereunder. However, because Virginia's conformity is on a fixed-date basis, any future amendments to the IRC affecting Section 338 would not automatically be recognized for Virginia purposes until Virginia enacts new conformity legislation.

If the Section 338(h)(10) election is made, Virginia should recognize the deemed asset sale for Virginia corporate income tax purposes, consistent with its general conformity to the IRC. This means that:

(a) "Old target" (Luminex US, as the member of the selling consolidated group whose assets are deemed sold) would recognize gain on the deemed asset sale for Virginia purposes;

(b) "New target" would be treated as having purchased all of its assets at fair market value as of the closing date, resulting in a stepped-up basis in those assets for Virginia tax purposes; and

(c) the stepped-up basis in amortizable intangible assets (estimated at approximately $620,000,000 at the federal level) would generate Virginia-level amortization deductions over a 15-year period, reducing Luminex US's Virginia taxable income in each year of the amortization period.

To quantify the Virginia-specific benefit, we apply the 6% Virginia corporate income tax rate to the Virginia-apportioned share of the annual federal amortization deduction. If the annual federal amortization deduction is approximately $8,680,000 (based on a 15-year straight-line amortization of $620,000,000 in intangibles divided by the total step-up allocation, with further adjustment for assets amortizable on an accelerated or different basis), the Virginia benefit in each year will equal 6% multiplied by the product of $8,680,000 and the Virginia apportionment percentage. For illustration, if the Virginia apportionment percentage is 15%, the annual Virginia tax savings would be approximately $78,120 (6% × $8,680,000 × 15%). This figure is subject to refinement based on the actual Virginia apportionment factors and the detailed asset allocation under the Section 338(h)(10) election, which Pendleton & Associates LLP is currently modeling.

We note that Virginia's fixed-date conformity provision should be monitored going forward to confirm that Virginia continues to conform to the IRC provisions applicable to Section 338 elections.

C. Virginia Sales and Use Tax

Virginia imposes a combined state and local sales tax at a general rate of 5.3% (4.3% state rate plus 1% local rate, with higher rates in certain localities including Northern Virginia, where the rate is 6% inclusive of an additional 0.7% regional tax).

The taxability of SaaS transactions under Virginia law has been the subject of evolving guidance. Under current Virginia Department of Taxation guidance, SaaS that is accessed remotely over the internet and does not involve the delivery of tangible personal property to the customer is generally not subject to Virginia sales and use tax. Virginia distinguishes between the sale of tangible personal property (including prewritten computer software delivered in a tangible medium) and the provision of services accessed electronically. To the extent that the Luminex One platform is a true SaaS offering — delivered entirely through cloud-based access without the transfer of tangible personal property — it should not be subject to Virginia retail sales and use tax under current guidance.

However, analysis is needed to determine whether any aspect of the Luminex One platform could be characterized as a taxable "communications service" under Virginia's Communications Sales and Use Tax (Va. Code § 58.1-648 et seq.), which imposes a 5% tax on communications services. If the platform includes any voice-over-IP, telecommunications, or similar communications components, those components could potentially be subject to the communications tax. We recommend a review of the Luminex One platform's functionality with Luminex management to confirm the appropriate Virginia sales tax classification.

Post-closing operational decisions — including the selection of data center locations, the addition of new product features, or changes in the delivery model — may affect Virginia sales and use tax obligations and should be evaluated as part of the integration planning process.

D. Virginia Transfer / Recording Taxes

Virginia imposes a grantor's tax on the transfer of real property at a rate of $0.50 per $500 of consideration (equivalent to $1.00 per $1,000), plus a recordation tax on deeds of trust and mortgages. Certain counties and cities in Virginia may impose additional local taxes.

The Merger does not involve the direct transfer of real property. Because the Transaction is structured as a reverse triangular merger — a stock-level transaction in which Luminex Holdings survives and its assets (including any real property) remain within the same legal entity — no deed or other instrument conveying real property will be recorded. Accordingly, no Virginia grantor's tax or recordation tax should be triggered by the Merger itself.

Based on our review of the due diligence materials, the Reston, Virginia headquarters at 2100 Reston Gateway Drive, Suite 800, appears to be leased rather than owned by Luminex Holdings or Luminex US. If this is confirmed, no Virginia real property transfer tax analysis is necessary in connection with the Merger. However, if due diligence reveals that any Luminex entity owns real property in Virginia, the transfer tax implications should be revisited.

Virginia does not impose a stock transfer tax. Accordingly, the cancellation and conversion of Luminex Holdings stock in connection with the Merger will not give rise to any Virginia stock transfer tax.

V. CALIFORNIA TAX CONSIDERATIONS

A. Franchise / Income Tax Nexus

California imposes a corporate franchise tax at a rate of 8.84% on the net income of corporations doing business in California, subject to a minimum franchise tax of $800 per year. Corporations that are not doing business in California but that derive income from California sources are subject to the 8.84% corporate income tax on their California-source income.

The threshold question for the Luminex entities is whether any of them have nexus with California — either through physical presence or economic nexus — sufficient to subject them to California's franchise or income tax.

Luminex Systems Inc.: Even if Luminex US does not maintain a physical office or employees in California, it may have established economic nexus with California based on its SaaS revenues sourced to California customers. California has codified the principles of South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), and imposes economic nexus on corporations with California-sourced sales exceeding $610,395 (the threshold for 2024, as adjusted annually for inflation). Given that Luminex US generated approximately $194,800,000 in U.S. revenue in 2024 from an enterprise SaaS customer base, it is highly likely that a material portion of that revenue — potentially tens of millions of dollars — is attributable to California customers. Under California's market-based sourcing rules (Cal. Rev. & Tax. Code § 25136), revenue from services is sourced to California to the extent the customer receives the benefit of the service in California. For a SaaS platform like Luminex One, the benefit is generally received where the customer's users access the platform, which in many cases will include California given its large share of the national economy.

We therefore expect that Luminex US has California franchise tax nexus based on economic nexus principles, and that Luminex US is currently filing (or should be filing) California franchise tax returns. This should be confirmed with Luminex management as part of the due diligence process.

Luminex Systems Holdings Inc.: As a holding company with no independent operations, Luminex Holdings may not have independent California nexus. However, if Luminex Holdings is included in a California combined reporting group with Luminex US (as discussed in Section V.B below), it may be pulled into California filing requirements through the combined report.

Luminex Systems AG: As a Swiss entity, Luminex AG is generally beyond the jurisdiction of California's taxing authority for franchise tax purposes, subject to certain exceptions related to water's-edge elections and intercompany transactions.

Ardent Capital Partners III LP: As a limited partnership, Ardent Fund III is not "doing business" in California solely by virtue of its status as a limited partner in a limited partnership. However, if Ardent Fund III's general partner, Ardent Capital GP III LLC, engages in management activities in California — for example, if any of Ardent GP III LLC's principals or employees travel to California to conduct management activities, attend board meetings, or participate in operational oversight of California-based portfolio companies — such activities could create California nexus for Ardent GP III LLC and, potentially, for Ardent Fund III. We understand that Ardent Fund III is managed from its headquarters at 399 Park Avenue, 42nd Floor, New York, New York, and does not maintain a California office. This should be confirmed, and the frequency and nature of any California-directed management activities should be evaluated.

Vectis Solutions LLC: Vectis Solutions LLC is an existing Ardent Fund II portfolio company headquartered at 4000 Shoreline Court, Suite 300, South San Francisco, California 94080, with 2024 revenue of approximately $68,000,000. Vectis is led by CEO Michael Parekh. The South San Francisco headquarters confirms that Vectis has strong California nexus and is subject to California franchise tax. If post-closing integration of Vectis and Luminex is contemplated — for example, if the entities share management, customers, distribution channels, or technology — combined reporting implications may arise, as discussed below.

B. California Combined / Unitary Reporting

California requires unitary combined reporting for commonly owned or controlled corporations engaged in a unitary business. Under Cal. Rev. & Tax. Code § 25101 et seq., corporations that are members of a unitary group must file a combined report, and their income is apportioned to California based on the combined group's California apportionment factors (single-sales-factor for most taxpayers).

Following the closing of the Merger, Ardent Apex Holdings Inc., Luminex Holdings, and Luminex US will be commonly owned (Apex Holdings will own 100% of Luminex Holdings, which in turn will own 100% of Luminex US). If these entities are engaged in a unitary business — which is likely, given the vertical integration of holding company and operating subsidiary functions — they will be required to file a California combined report.

A critical question is whether Vectis Solutions LLC should also be included in the California combined group. Vectis is controlled by Ardent Fund II (not Ardent Fund III), but if there is common ownership or control at the fund sponsor level and if Vectis and the Luminex entities are engaged in a unitary business (sharing management, distribution, customers, or operational integration), the California Franchise Tax Board ("FTB") could assert that Vectis should be included in the combined group. Factors that the FTB considers in determining unity include centralized management, functional integration, and economies of scale. If post-closing integration plans contemplate cross-selling, shared technology platforms, or management overlap between Vectis and Luminex, the risk of FTB asserting unity increases.

The inclusion or exclusion of Vectis in the combined group would affect California apportionment. If Vectis (with $68,000,000 in revenue and a significant California presence) is included, the combined group's California sales factor could increase, potentially increasing the group's California apportioned income and tax liability. Conversely, if Vectis's California operations are highly profitable relative to the rest of the combined group, inclusion could shift taxable income toward California. This analysis requires detailed financial modeling, which we have requested Pendleton & Associates LLP to perform.

Regarding water's-edge vs. worldwide combined reporting, California's default rule is worldwide combined reporting, which would include Luminex AG and the foreign subsidiaries in the combined report. However, taxpayers may elect water's-edge combined reporting (Cal. Rev. & Tax. Code § 25110 et seq.), which generally excludes foreign entities from the combined group. The water's-edge election requires payment of an annual election fee (currently 0.03% of the taxpayer's California sales plus property and payroll, subject to a minimum and maximum). If a water's-edge election is in effect (or is made post-closing), Luminex AG and the foreign subsidiaries would be excluded from the California combined report, which may be advantageous if the foreign entities' income would otherwise increase the combined group's worldwide income subject to California apportionment.

We recommend that the post-closing combined reporting structure be carefully planned, including a determination of whether to make or maintain a water's-edge election, and a thorough analysis of the unity of Vectis and the Luminex entities.

C. California Conformity to Section 338(h)(10)

California generally conforms to the Internal Revenue Code, including Section 338, through its incorporation of the IRC by reference in Cal. Rev. & Tax. Code § 24451, with certain California-specific modifications. Based on current law, a Section 338(h)(10) election that is made for federal purposes should also be recognized for California franchise tax purposes.

If the Section 338(h)(10) election is made, the deemed asset sale should be recognized for California purposes, and the stepped-up basis in Luminex US's assets should generate California-level amortization deductions. To quantify the California benefit, the 8.84% California franchise tax rate would be applied to the California-apportioned share of the annual amortization deductions. Given that California's tax rate is significantly higher than many other states, the California component of the state-level Section 338(h)(10) benefit may be substantial, particularly if Luminex US has a meaningful California apportionment percentage.

For example, if the annual federal amortization deduction attributable to the step-up is $8,680,000 and the California apportionment percentage (based on combined group sales factor) is 20%, the annual California tax savings would be approximately $153,462 (8.84% × $8,680,000 × 20%). Over a 15-year amortization period, this would generate significant cumulative California tax savings. These figures are illustrative and will be refined by Pendleton & Associates LLP based on actual apportionment data.

D. California Withholding on Nonresident Sellers

California may impose withholding under Cal. Rev. & Tax. Code § 18662 on payments to nonresident sellers of California real property or of a business interest if California-source gain is recognized in connection with the sale. The withholding rate is generally 7% of the total sales price (or, if an election is made, a lower rate based on the seller's expected California tax liability).

The selling stockholders of Luminex Holdings include:

• Ridgeline Growth Equity Fund II LP — receiving approximately $1,456,000,000 in cash consideration (52% × $2,800,000,000)

• Meridian Venture Partners IV LP — receiving approximately $560,000,000 in cash consideration (20% × $2,800,000,000)

• Management and Employee Stockholders — receiving the balance of cash consideration (net of rollover equity)

The analysis of whether California may assert withholding on these payments depends on whether the gain from the sale of Luminex Holdings stock constitutes California-source income. Under general principles, gain from the sale of stock in a corporation is sourced to the seller's state of commercial domicile — not to California — unless the stock has acquired a California "business situs." Stock acquires a California business situs if it is used in the seller's trade or business in California. For passive investors such as Ridgeline and Meridian, the stock of Luminex Holdings generally would not be considered to have a California business situs unless the selling fund maintains its principal operations in California.

Ridgeline Growth Equity Fund II LP is a Delaware limited partnership headquartered in Boston, Massachusetts. Ridgeline's gain from the sale of Luminex Holdings stock should generally not constitute California-source income, absent a finding that Ridgeline's stock had acquired a California business situs.

Meridian Venture Partners IV LP is a Delaware limited partnership headquartered in San Francisco, California. Because Meridian's commercial domicile is in California, Meridian's share of gain from the sale of Luminex Holdings stock may be independently subject to California taxation regardless of the sourcing of the gain from the underlying stock sale. As a California-domiciled entity, Meridian is subject to California tax on its worldwide income, and its partners who are California residents are likewise subject to California tax on their distributive shares of Meridian's income.

Section 338(h)(10) Election Implications: If the Section 338(h)(10) election is made, the transaction is recharacterized for tax purposes as a deemed asset sale by old target. In this scenario, the gain is no longer gain from the sale of stock but rather gain from the deemed sale of assets. Asset sale gain is generally sourced to the states where the assets are located or where the income from the assets is generated. To the extent that Luminex US's assets generate California-source income (because Luminex US has California customers and California-apportioned revenue), the deemed asset sale could create California-source gain — potentially subjecting the selling stockholders (or the deemed selling entity) to California tax on a portion of the gain.

This is a significant risk that must be carefully evaluated. If the Section 338(h)(10) election causes California to assert taxing jurisdiction over a portion of the gain that would not otherwise be California-source income in a straight stock sale, the selling stockholders (particularly Ridgeline and the non-California management holders) could face unexpected California tax liability. The magnitude of this exposure depends on the California apportionment percentage applied to the deemed asset sale gain. This issue should be modeled as part of the Section 338(h)(10) cost-benefit analysis, and the purchase price allocation and escrow provisions should account for any potential state tax exposure.

E. California Transfer Tax

California does not impose a stock transfer tax. The Merger, structured as a stock-level transaction, will not give rise to any California stock transfer tax.

California does impose a documentary transfer tax on transfers of real property. The rate varies by county — the base rate for unincorporated areas is $0.55 per $500 of consideration (or $1.10 per $1,000), but many cities and counties have imposed additional local documentary transfer taxes (e.g., the City of San Francisco imposes rates ranging from $2.50 to $6.00 per $500 depending on the consideration amount; the City of Los Angeles recently enacted a "Measure ULA" transfer tax of up to 5.5% on transfers over $10,000,000).

Based on our review of the due diligence materials, Luminex US does not appear to own real property in California. However, if any post-closing restructuring involves Vectis Solutions LLC and if Vectis owns (rather than leases) its South San Francisco premises, any transfer of Vectis's real property could trigger San Mateo County documentary transfer tax. This should be analyzed if post-closing integration involving Vectis's real property is contemplated.

VI. OTHER NEXUS STATES — KEY ANALYSIS

A. Identification of Nexus States

As a SaaS company with an enterprise customer base spanning the United States, Luminex US has market-based sourcing revenue attributed to virtually every U.S. state. In states that have adopted economic nexus thresholds for corporate income or franchise tax purposes — which, following Wayfair, now includes the vast majority of states — Luminex US's $194,800,000 in annual U.S. revenue almost certainly exceeds the applicable thresholds in every major state.

In addition to economic nexus, Luminex US may have physical presence nexus in states where it maintains employees (whether at offices or working remotely), data centers, or other tangible property. The primary physical presence state is Virginia, but any employees working remotely in other states could establish nexus in those states. A comprehensive nexus study should be conducted post-closing to identify all states in which Luminex US has filing obligations.

Vectis Solutions LLC's nexus states are also relevant if post-closing combined or unitary filing obligations arise. Vectis is headquartered in South San Francisco, California, and its customer footprint will determine its nexus in other states. If Vectis is included in a combined reporting group with Luminex entities in states requiring combined reporting, the combined group's nexus and apportionment would expand accordingly.

The following sections address the key states identified for analysis. This list is non-exhaustive, and additional states may be identified through the post-closing nexus study.

B. New York

New York imposes a Business Corporation Tax (the "BCT") at a rate of 6.5% on the business income of corporations doing business in New York. For taxpayers with business income exceeding $5,000,000, a higher rate of 7.25% applies. New York also imposes a capital base tax (limited to $5,000,000) and a fixed-dollar minimum tax based on New York receipts, with the taxpayer paying the highest of the three calculations.

Ardent Capital Partners III LP maintains its headquarters at 399 Park Avenue, 42nd Floor, New York, New York. As a limited partnership, Ardent Fund III is treated as a transparent entity for New York income tax purposes, and the individual partners' distributive shares of Ardent Fund III income are subject to New York personal income tax to the extent of the partners' New York residency or the New York-source character of the income. Ardent GP III LLC, managing from New York, has New York nexus and may be subject to the New York unincorporated business tax (UBT) at a rate of 4% on its unincorporated business taxable income allocable to New York City, if applicable.

Luminex Holdings / Luminex US: If Luminex US has customers located in New York, it likely has economic nexus with New York based on its New York-sourced receipts. New York uses a single-sales-factor apportionment formula with market-based sourcing for receipts from services, consistent with the national trend.

Post-Closing Combined Reporting: New York requires combined reporting for commonly owned corporations (80% or more common ownership) that are engaged in a unitary business or that meet certain other criteria (including substantial intercorporate transactions or distortion of income). Following the Merger, Apex Holdings, Luminex Holdings, and Luminex US will satisfy the common ownership requirement and are likely engaged in a unitary business. These entities will therefore be required to file a New York combined report.

Section 338(h)(10) Conformity: New York generally conforms to the IRC, including Section 338. A Section 338(h)(10) election should be recognized for New York BCT purposes, and the stepped-up basis should generate New York-level amortization deductions.

C. Texas

Texas does not impose a traditional corporate income tax. Instead, Texas imposes a franchise tax, commonly known as the "margin tax," on taxable entities doing business in Texas. The margin tax is computed on a taxable entity's total revenue (less certain deductions, such as cost of goods sold or compensation), at a rate of 0.75% for most entities (or 0.375% for entities primarily engaged in qualifying wholesale or retail activities).

Luminex US likely has Texas nexus if it has customers in Texas, given Texas's economic nexus standards. The Luminex One SaaS platform, as an enterprise-level cloud-based offering, likely generates revenue from Texas-based customers.

Because the Texas margin tax is based on revenue rather than income, the Section 338(h)(10) election does not provide the same direct benefit as in income-tax states. The election does not generate deductible amortization against a revenue-based tax base. However, the election may affect the computation of the cost-of-goods-sold ("COGS") deduction available under the Texas margin tax, to the extent that the stepped-up basis in acquired assets is includable in COGS. This analysis requires further investigation of the specific assets acquired and their treatment under the Texas COGS computation rules.

D. Massachusetts

Massachusetts imposes a corporate excise tax at a rate of 8% on the taxable net income of corporations doing business in the Commonwealth, plus a non-income measure based on either net worth or tangible property (whichever is greater), subject to certain minimum tax obligations.

Ridgeline Growth Equity Fund II LP is headquartered at 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116. As a limited partnership, Ridgeline itself is not subject to the Massachusetts corporate excise tax, but Ridgeline GP II LLC (the general partner of Ridgeline, presumably organized in Delaware) may have Massachusetts filing obligations based on its management activities in Boston. The individual partners of Ridgeline who are Massachusetts residents will be subject to Massachusetts personal income tax on their distributive shares of Ridgeline's income.

Luminex US: If Luminex US has customers or employees in Massachusetts, it likely has nexus for Massachusetts corporate excise tax purposes. Revenue from the Luminex One platform sourced to Massachusetts customers under market-based sourcing would create economic nexus. Massachusetts uses a three-factor apportionment formula (sales, payroll, property), with the sales factor double-weighted, transitioning to a single-sales-factor for certain taxpayers.

Massachusetts generally conforms to the IRC, and a Section 338(h)(10) election should be recognized for Massachusetts purposes, generating state-level amortization deductions.

E. Illinois

Illinois imposes a combined corporate income tax rate of 9.5%, consisting of a 7% corporate income tax and a 2.5% personal property replacement tax. This combined rate makes Illinois one of the higher-tax states for corporate income purposes.

Summit Ridge Capital Partners LP is headquartered at 161 North Clark Street, Suite 4700, Chicago, Illinois 60601. As a co-investor in the Transaction, Summit Ridge's involvement does not directly create nexus for the Luminex acquisition entities. However, if Summit Ridge's personnel participate in management oversight of the Luminex business from Illinois, this could create an argument for Illinois nexus for certain entities in the post-closing group, though such an argument is unlikely to succeed on these facts alone.

Luminex US: Luminex US has economic nexus with Illinois if it has customers in Illinois, which is highly likely given the size of the Illinois economy and the breadth of Luminex US's enterprise SaaS customer base. Illinois uses a single-sales-factor apportionment formula with market-based sourcing.

Illinois requires combined reporting for commonly owned unitary businesses. Post-closing, Apex Holdings, Luminex Holdings, and Luminex US would likely be required to file a combined report in Illinois. Illinois generally conforms to the IRC, and a Section 338(h)(10) election should be recognized, generating state-level amortization deductions at the 9.5% combined rate.

F. Washington State

Washington does not impose a corporate income tax. Instead, Washington imposes a Business & Occupation ("B&O") tax on gross receipts. SaaS services are generally classified under the "service and other activities" B&O tax classification at a rate of 1.5%. If Luminex US has customers in Washington or employees working in Washington, it is likely subject to the B&O tax on its Washington-sourced receipts.

Because the B&O tax is a gross receipts tax, the Section 338(h)(10) election provides no income-based benefit in Washington. The election does not affect the B&O tax computation, which is based on gross receipts rather than net income.

Washington enacted a capital gains tax effective January 1, 2022, imposing a 7% tax on gains exceeding $250,000 from the sale of long-term capital assets. The tax applies to individuals (not to corporations or other entities), and is sourced based on the taxpayer's domicile. If any management cash-out participants reside in Washington, they may be subject to the Washington capital gains tax on their gain from the sale of Luminex Holdings stock. This analysis is beyond the scope of this memorandum (which addresses entity-level state and local taxes) but should be addressed in a separate individual tax analysis for affected management participants.

G. Other States — Summary Table

The following table summarizes the key state tax characteristics for additional nexus states identified as significant for Luminex US. This summary is preliminary and subject to refinement based on the comprehensive nexus study to be conducted.

Each state listed above should be evaluated in connection with the post-closing nexus study to determine: (i) whether Luminex US has current filing obligations; (ii) whether any delinquent filings exist that should be addressed through voluntary disclosure agreements; (iii) the post-closing combined reporting implications (if applicable); and (iv) the incremental Section 338(h)(10) benefit in each conforming state.

VII. STATE TAX IMPLICATIONS OF THE SECTION 338(h)(10) ELECTION

A. Overview

This Section provides a detailed analysis of the state-level implications of the Section 338(h)(10) election under consideration. The reader should refer to the companion Tax Structure Memorandum (Section 338(h)(10) Election Analysis) for the comprehensive federal analysis.

At the federal level, a Section 338(h)(10) election would cause the Transaction to be treated as a deemed sale by old target of all of its assets at fair market value, followed by a deemed liquidation of old target. The estimated step-up in the tax basis of amortizable intangible assets is approximately $620,000,000. This step-up would generate annual federal amortization deductions of approximately $8,680,000 (assuming straight-line amortization over 15 years under Section 197 of the IRC, with adjustments for certain assets amortizable on different schedules). The present value of the federal tax savings from these amortization deductions is approximately $195,000,000 at an 8% discount rate.

The state-level analysis is critical because the incremental state tax amortization benefits can be substantial — particularly in high-tax states where the Luminex entities have significant apportioned income — and because certain states may not conform to the Section 338(h)(10) election, limiting or eliminating the state-level benefit.

B. Conforming States

The majority of U.S. states conform to the Internal Revenue Code's treatment of Section 338 elections through their general IRC conformity provisions. In these conforming states, the Section 338(h)(10) election will be recognized, the deemed asset sale will be given effect, and the stepped-up basis in Luminex US's assets will generate state-level amortization deductions that reduce apportioned state taxable income in each year of the amortization period.

States with full or substantial conformity to Section 338(h)(10) include (based on our current analysis):

• Virginia

• New York

• California

• Massachusetts

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT This memorandum constitutes a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP in connection with the proposed acquisition of Luminex Systems Holdings Inc. by Ardent Capital Partners III LP. This memorandum is not to be disclosed, disseminated, distributed, or copied, in whole or in part, to any person or entity outside of the addressees and cc recipients listed herein without the prior written consent of Calderwood & Harkness LLP. Disclosure of this memorandum to any third party may constitute a waiver of the attorney-client privilege and/or work product protection.
CALDERWOOD & HARKNESS LLP 7 Times Square New York, New York 10036
MEMORANDUM
April 14, 2025
TO: Theodore "Ted" Hargrove and Victoria Langford, Co-Founders & Managing Partners, Ardent Capital Partners III LP, 399 Park Avenue, 42nd Floor, New York, New York 10022
James Prentice, Responsible Partner (M&A), Calderwood & Harkness LLP
FROM: Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP
CC: Sandra Tung, Billing Partner (M&A), Calderwood & Harkness LLP Ryan Kowalski, Lead Associate (M&A), Calderwood & Harkness LLP Megan Chu, Working Associate (M&A), Calderwood & Harkness LLP Richard Chow, Engagement Partner, Pendleton & Associates LLP
RE: State and Local Tax Considerations — Proposed Acquisition of Luminex Systems Holdings Inc. by Ardent Capital Partners III LP
MATTER NO.: 1001-00004
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I. EXECUTIVE SUMMARY
This memorandum addresses the state and local tax considerations arising from the proposed acquisition (the "Transaction") of Luminex Systems Holdings Inc. ("Luminex Holdings" or the "Target") by Ardent Capital Partners III LP ("Ardent Fund III" or the "Buyer") for an aggregate equity value of approximately $2,800,000,000 ($20.00 per fully diluted share, based on 140,000,000 fully diluted shares outstanding). The Transaction is structured as a reverse triangular merger under Delaware law, pursuant to which Ardent Apex Merger Sub Inc. ("Merger Sub"), a newly formed Delaware corporation and wholly owned subsidiary of Ardent Apex Holdings Inc. ("Apex Holdings"), will merge with and into Luminex Holdings, with Luminex Holdings surviving as a wholly owned subsidiary of Apex Holdings (the "Merger").
The purpose of this memorandum is to identify, analyze, and, where possible, quantify the principal state and local tax implications of the Transaction for Ardent Fund III, its affiliates, and the surviving Luminex enterprise. This analysis is intended to support the deal team's evaluation of the Transaction structure, the Section 338(h)(10) election currently under consideration, the proposed intercompany royalty restructuring, and the post-closing compliance and integration planning.
The key entities involved in the Transaction structure are as follows:
• Ardent Capital Partners III LP — Delaware limited partnership; the Buyer
• Ardent Capital GP III LLC — Delaware limited liability company; general partner of Ardent Fund III
• Ardent Apex Holdings Inc. — Delaware corporation; intermediate holding company (EIN: 93-2178435)
• Ardent Apex Merger Sub Inc. — Delaware corporation; merger subsidiary (EIN: 93-2178502)
• Luminex Systems Holdings Inc. — Delaware corporation; the Target (EIN: 86-2547193)
• Luminex Systems Inc. — Delaware corporation; principal U.S. operating subsidiary (EIN: 86-2547210)
The state and local tax topics addressed herein include the following:
(1) Delaware entity-level taxes, including franchise taxes, entity taxes for limited partnerships and limited liability companies, transfer taxes, and unclaimed property/escheat considerations;
(2) Virginia corporate income and franchise taxes, including Virginia's conformity to the Internal Revenue Code, the implications of a Section 338(h)(10) election for Virginia purposes, sales and use tax considerations applicable to the Luminex One SaaS platform, and Virginia transfer and recording taxes;
(3) California income and franchise tax nexus analysis, including combined/unitary reporting considerations, California's conformity to Section 338(h)(10), withholding obligations on nonresident sellers, and transfer tax analysis;
(4) Tax considerations in other states where Luminex Systems Inc. or Vectis Solutions LLC (an Ardent Fund II portfolio company headquartered in South San Francisco, California) has established nexus or economic presence, including New York, Texas, Massachusetts, Illinois, Washington, New Jersey, Pennsylvania, Georgia, Ohio, Florida, North Carolina, Connecticut, and Maryland;
(5) State transfer and documentary stamp taxes applicable to the Merger, including analysis of controlling-interest transfer taxes in states where Luminex entities may hold real property;
(6) State income tax implications of the Section 338(h)(10) election currently under evaluation, including state-by-state conformity analysis, quantification of incremental state-level amortization benefits, and analysis of state-level gain recognition on the deemed asset sale;
(7) Post-closing state filing obligations, including short-period returns, combined reporting group establishment, change-of-ownership reporting, withholding adjustments, and estimated tax recalculations;
(8) State treatment of the proposed intercompany royalty restructuring (current rate: 4.5% of U.S. net revenues; proposed rate: 6.0% of U.S. net revenues), with particular focus on state-level add-back statutes applicable to related-party intangible expenses;
(9) Unclaimed property and escheat considerations for undelivered or uncashed merger consideration; and
(10) Sales and use tax considerations applicable to the Luminex One SaaS platform and any merger-related asset transfers.
This memorandum should be read in conjunction with the following companion memoranda prepared by our office and by Pendleton & Associates LLP:
• Tax Structure Memorandum (Section 338(h)(10) Election Analysis) — Calderwood & Harkness LLP (S. Hartwell)
• Transfer Pricing Restructuring Memorandum — Pendleton & Associates LLP (R. Chow) and Calderwood & Harkness LLP (S. Hartwell)
• FIRPTA / NRA Withholding Analysis Memorandum — Calderwood & Harkness LLP (S. Hartwell)
We have coordinated with Pendleton & Associates LLP (Richard Chow, Engagement Partner) on the quantitative modeling referenced herein. Pendleton is in the process of completing certain state-by-state tax benefit models; preliminary estimates are noted in this memorandum where available, with final figures to follow under separate cover.
Our principal recommendations and action items are set forth in Section XIII of this memorandum. We note in particular the importance of completing the state-by-state Section 338(h)(10) benefit quantification, the California combined reporting analysis, the Virginia add-back statute analysis in connection with the royalty restructuring, and the comprehensive nexus study before any definitive structuring elections are finalized.
II. TRANSACTION STRUCTURE OVERVIEW (STATE TAX PERSPECTIVE)
A. Pre-Closing Corporate Structure
The pre-closing corporate structure of the Target group is summarized below. Understanding this structure is essential to the state tax analysis because the location of entities, assets, employees, and revenue-generating activities determines the nexus and filing obligations in each jurisdiction.
Luminex Systems Holdings Inc. is a Delaware corporation incorporated on June 14, 2021. Luminex Holdings serves as the intermediate U.S. holding company for the Luminex enterprise. Its operational headquarters are located at 2100 Reston Gateway Drive, Suite 800, Reston, Virginia 20191. Luminex Holdings' registered agent in Delaware is Capitol Corporate Services, Inc., located at 1675 South Ashbury Asset Advisors, Suite B, Dover, Delaware 19901. Luminex Holdings is the entity whose shares are the subject of the Merger and is the entity with respect to which the Section 338(h)(10) election is under consideration.
Luminex Systems Inc. is a Delaware corporation and is the wholly owned subsidiary of Luminex Holdings. Luminex Systems Inc. (referred to herein as "Luminex US") is the principal U.S. operating entity of the Luminex enterprise. Luminex US operates the Luminex One platform, a cloud-based enterprise resource planning (ERP), procurement automation, and supply-chain analytics SaaS offering. As of year-end 2024, Luminex US employed approximately 1,650 employees in the United States, the majority of whom are located at the Reston, Virginia headquarters, with additional employees dispersed across multiple states. For its fiscal year ended December 31, 2024, Luminex US generated approximately $194,800,000 in U.S. revenue, derived from subscription, professional services, and support contracts with enterprise customers across the United States.
Luminex Systems AG is a Swiss Aktiengesellschaft (CHE-284.391.057) and is a direct subsidiary of Luminex Holdings. Luminex AG was formed as part of a 2021 inversion/redomiciliation structure and serves as the parent of the Luminex enterprise's European and Asia-Pacific operations and as the holding entity for certain intellectual property. Luminex AG is the licensor of intellectual property to Luminex US under the current intercompany royalty arrangement discussed in Section X of this memorandum.
The Luminex enterprise also includes the following foreign subsidiaries, each of which is an indirect subsidiary of Luminex Holdings through Luminex AG:
• Luminex Systems UK Ltd. — Incorporated in England and Wales (Company No. 12847362); London office
• Luminex Systems GmbH — Organized under German law, registered in Munich (HRB 247891); Munich office
• Luminex Systems Pte. Ltd. — Incorporated in Singapore (UEN 201924781K); Singapore office
As of the date of the Merger Agreement, the ownership of Luminex Holdings is as follows:
• Ridgeline Growth Equity Fund II LP — 52% (headquartered at 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116)
• Meridian Venture Partners IV LP — 20% (headquartered in San Francisco, California)
• Management and Employees — 28% (including, among others, Dr. Stefan Kessler, Annelise Gruber, and Dr. Markus Vogt)
B. Post-Closing Corporate Structure
Following the consummation of the Merger, the corporate structure of the enterprise will be as follows. Ardent Apex Holdings Inc. will serve as the parent holding company. Luminex Systems Holdings Inc. will be the surviving corporation in the Merger and will become a wholly owned subsidiary of Apex Holdings. Luminex US, Luminex AG, and the foreign subsidiaries will continue as indirect subsidiaries of Apex Holdings through Luminex Holdings, with no change to their organizational structure or jurisdictions of incorporation.
The equity holders of Apex Holdings following the closing are expected to be:
• Ardent Capital Partners III LP — $695,980,000 in equity
• Management Rollover Participants — $405,020,000 in aggregate rollover equity (certain members of existing management electing to roll over a portion of their equity consideration)
• Northvale Sovereign Holdings Ltd. — $200,000,000 co-investment
• Summit Ridge Capital Partners LP — $100,000,000 co-investment (headquartered at 161 North Clark Street, Suite 4700, Chicago, Illinois 60601)
• Crestline Mezzanine Partners II LP — 2.0% warrant coverage
From a state tax perspective, the post-closing ownership structure is significant because the identity, domicile, and activities of the equity holders and their affiliates may create additional state tax nexus or combined/unitary reporting obligations in certain jurisdictions. For example, the inclusion of Vectis Solutions LLC — an existing Ardent Fund II portfolio company headquartered in South San Francisco, California — in a California combined reporting group with Luminex entities could materially affect California apportionment and tax liability, as discussed in Section V below.
C. Merger Mechanics Relevant to State Tax
The Transaction is structured as a reverse triangular merger. Merger Sub, a newly formed Delaware corporation and wholly owned subsidiary of Apex Holdings, will merge with and into Luminex Holdings, with Luminex Holdings surviving as the surviving corporation. In connection with the Merger, all outstanding shares of Luminex Holdings capital stock (other than rollover shares and dissenting shares, if any) will be cancelled and converted into the right to receive cash consideration of $20.00 per share, payable through Atlas Shareholder Services Inc. (the "Paying Agent"; contact: Dennis Carmichael), plus any applicable rollover equity in Apex Holdings.
For state income tax purposes in most jurisdictions, a reverse triangular merger is treated as an acquisition of stock rather than an acquisition of assets. This characterization is generally favorable from a transfer tax perspective, as most states impose transfer and documentary stamp taxes only on transfers of real property and not on transfers of stock or equity interests. However, this stock-acquisition characterization limits the buyer's ability to obtain a step-up in the tax basis of the target's assets for state income tax purposes absent a special election.
To address this, the parties are evaluating a joint election under Section 338(h)(10) of the Internal Revenue Code. If made, the Section 338(h)(10) election would cause the Transaction to be treated, for federal income tax purposes (and for state purposes in conforming states), as a deemed sale by "old target" of all of its assets at fair market value, followed by a deemed purchase of those assets by "new target" at the allocated purchase price. The estimated step-up in basis attributable to amortizable intangible assets is approximately $620,000,000, which would generate annual federal income tax savings of approximately $8,680,000 and a present value benefit of approximately $195,000,000 at an 8% discount rate over a 15-year amortization period.
State conformity to Section 338(h)(10) varies on a state-by-state basis. In states that conform to the Internal Revenue Code's treatment of Section 338 elections, the deemed asset sale will be recognized and the stepped-up basis will generate state-level amortization deductions. In states that do not conform, or that impose taxes on a basis other than income (e.g., gross receipts taxes), the election may provide limited or no incremental state tax benefit. A detailed analysis of state conformity is set forth in Section VII below.
III. DELAWARE TAX CONSIDERATIONS
A. Delaware Franchise Tax
Delaware imposes an annual franchise tax on all corporations incorporated in the State of Delaware, regardless of whether the corporation conducts business or earns income in Delaware. The franchise tax is imposed under Title 8 of the Delaware Code, Section 503. All four Delaware corporations involved in the Transaction are subject to this obligation:
Luminex Systems Holdings Inc. — As a Delaware corporation, Luminex Holdings is subject to the annual Delaware franchise tax. Because Luminex Holdings will survive the Merger and continue as a Delaware corporation, its franchise tax obligations will continue post-closing without interruption.
Ardent Apex Holdings Inc. — As a newly formed Delaware corporation (incorporated March 5, 2025), Apex Holdings is subject to the Delaware franchise tax beginning with its first taxable year. Because Apex Holdings will serve as the ultimate parent of the post-closing group, its franchise tax obligation will be ongoing.
Ardent Apex Merger Sub Inc. — As a Delaware corporation incorporated on March 7, 2025, Merger Sub is subject to the Delaware franchise tax. However, because Merger Sub will cease to exist upon consummation of the Merger (it will merge into Luminex Holdings and will not survive), a final franchise tax return will be required for the short period from the date of its incorporation through the date of the Merger. Merger Sub should file a certificate of merger with the Delaware Secretary of State, and a final franchise tax report and payment should be submitted.
Luminex Systems Inc. — As a Delaware corporation, Luminex US is subject to the annual Delaware franchise tax, and this obligation will continue post-closing without change.
Delaware franchise tax may be calculated under two alternative methods: the authorized-shares method and the assumed par value capital method. The authorized-shares method calculates the tax based on the number of shares of capital stock a corporation is authorized to issue, without regard to the par value or actual capitalization. The assumed par value capital method calculates the tax based on a formula that takes into account the corporation's total gross assets (as reported on its federal income tax return) and the number of authorized and issued shares, using an assumed par value. For many corporations — particularly those with significant assets relative to authorized shares, or those with a large number of low-par-value authorized shares — the assumed par value capital method produces a significantly lower franchise tax liability.
Following the closing, the capitalization of Luminex Holdings will change (the existing shares will have been cancelled and new shares issued to Apex Holdings), and Apex Holdings will have a new capital structure reflecting the equity contributions of its various investors. We recommend that the franchise tax calculation for each Delaware corporation be evaluated under both methods following the closing, with particular attention to the new capitalization of Apex Holdings and Luminex Holdings, to ensure that the most favorable calculation method is used for each entity.
We note that Delaware does not impose a corporate income tax on entities that are incorporated in Delaware but that have no nexus with Delaware beyond their incorporation. However, Luminex Holdings and Luminex US may have Delaware nexus if they conduct operational activities within the state beyond maintenance of a registered office and agent. Based on our review of the due diligence materials, neither Luminex Holdings nor Luminex US appears to maintain employees, offices, or significant operational activities in Delaware (the Reston, Virginia location serves as the operational headquarters), but this should be confirmed with the Target as part of the due diligence process.
B. Delaware Entity-Level Taxes for LPs and LLCs
Ardent Capital Partners III LP is a Delaware limited partnership and is subject to the $300 annual tax imposed on Delaware limited partnerships under 6 Del. C. § 17-1109. This annual tax is due on or before June 1 of each year. Ardent Fund III is not subject to Delaware income tax absent Delaware-source income.
Ardent Capital GP III LLC is a Delaware limited liability company and is subject to the $300 annual tax imposed on Delaware limited liability companies under 6 Del. C. § 18-1107. As with Ardent Fund III, Ardent GP III LLC is not subject to Delaware income tax absent Delaware-source income.
Neither Ardent Fund III nor Ardent GP III LLC is expected to generate Delaware-source income as a result of the Transaction, provided that their activities in Delaware are limited to maintaining their respective registered offices and agents and the limited administrative activities customarily conducted by Delaware-domiciled investment fund entities.
C. Delaware Transfer Tax / Realty Transfer Tax
Delaware imposes a real estate transfer tax under 30 Del. C. § 5401 et seq. on transfers of real property situated in Delaware. The tax is imposed at a rate of 4% of the value of the property transferred (allocated between the transferor and transferee, typically 2.5% to the seller and 1.5% to the buyer, depending on the county and municipality).
The Merger itself does not involve a direct transfer of real property. Rather, it involves the cancellation of Luminex Holdings stock and the issuance of cash and equity consideration. Even if Luminex Holdings or Luminex US were to hold real property in Delaware, the reverse triangular merger structure (a stock-level transaction) would generally not trigger the Delaware real estate transfer tax because there is no conveyance of a deed or other instrument of transfer with respect to the real property itself.
Based on our review of the due diligence materials, neither Luminex Holdings nor Luminex US appears to own any real property in the State of Delaware. The Delaware registered office is maintained through Capitol Corporate Services, Inc., which provides registered agent services at its Dover, Delaware address. If both entities maintain only leasehold interests in Delaware (or no real property interests at all), no Delaware real estate transfer tax should be triggered by the Merger.
We further note that Delaware does not impose a securities transfer tax. Accordingly, the cancellation and conversion of Luminex Holdings stock in connection with the Merger will not give rise to any Delaware securities transfer tax liability.
D. Unclaimed Property / Escheat
Delaware's Abandoned Property Law (12 Del. C. § 1130 et seq.) is among the most significant in the nation, both because of Delaware's status as the state of incorporation for a large number of U.S. corporations and because of the priority rules established by the U.S. Supreme Court in Texas v. New Jersey, 379 U.S. 674 (1965), and Delaware v. New York, 507 U.S. 490 (1993). Under these priority rules, unclaimed property is generally escheatable to: (1) the state of the last known address of the owner (if reflected in the holder's records); or (2) if no last known address is available, the state of incorporation of the holder.
In the context of the Merger, the merger consideration of $20.00 per share will be payable through Atlas Shareholder Services Inc. (the "Paying Agent"), a New York corporation. Any uncashed checks or undelivered merger consideration will constitute unclaimed property subject to state escheat laws. The applicable dormancy period in Delaware is generally five years for most categories of intangible property, including uncashed checks and unpaid dividends or distributions.
Because Luminex Holdings is incorporated in Delaware, Delaware may assert an escheat claim under its Abandoned Property Law with respect to unclaimed merger consideration payable to shareholders for whom no last known address is reflected in the Paying Agent's or Luminex Holdings' records. To the extent that the Paying Agent (Atlas Shareholder Services Inc.) is a New York corporation, New York's unclaimed property law could also be implicated as a secondary rule for shareholders with no last known address, depending on the application of the priority rules and any applicable intermediary holder analysis.
We recommend coordinating with Atlas Shareholder Services Inc. (contact: Dennis Carmichael) to ensure that:
(a) the Paying Agent's records maintain current addresses for all Luminex Holdings shareholders entitled to receive merger consideration;
(b) a compliance timeline is established to track dormancy periods in all applicable states;
(c) the Paying Agent's procedures for handling returned mail, uncashed checks, and undelivered consideration comply with Delaware and New York unclaimed property reporting requirements; and
(d) any unclaimed amounts are properly reported and remitted to the applicable state escheat authority upon expiration of the relevant dormancy period.
IV. VIRGINIA TAX CONSIDERATIONS
A. Corporate Income Tax
Virginia imposes a corporate income tax at a rate of 6% on the Virginia taxable income of corporations doing business in the Commonwealth. Virginia taxable income is generally computed by reference to federal taxable income, with certain Virginia-specific additions and subtractions.
Both Luminex Systems Holdings Inc. and Luminex Systems Inc. have substantial nexus with Virginia. The operational headquarters of the Luminex enterprise are located at 2100 Reston Gateway Drive, Suite 800, Reston, Virginia 20191, and the majority of Luminex US's approximately 1,650 U.S. employees are based in Virginia. This physical presence — including the maintenance of offices, the employment of a substantial workforce, and the conduct of business operations from Virginia — clearly establishes Virginia corporate income tax nexus for both entities.
For tax years beginning on or after January 1, 2022, Virginia employs a single-sales-factor apportionment formula for most corporate taxpayers. Under this formula, the percentage of a corporation's income apportioned to Virginia is determined solely by reference to the ratio of the corporation's Virginia sales to its total sales everywhere. For purposes of the sales factor, Virginia uses market-based sourcing for receipts from services. Under market-based sourcing, revenue from services is sourced to the state where the benefit of the service is received by the customer, rather than where the service is performed. This means that Luminex US's revenue from its SaaS platform is sourced to Virginia to the extent that its customers are located in Virginia and receive the benefit of the Luminex One platform in Virginia.
Luminex US's total U.S. revenue for 2024 was approximately $194,800,000. The portion of that revenue sourced to Virginia customers will determine Luminex US's Virginia apportionment percentage under the single-sales-factor formula. Based on our preliminary review, and given the enterprise SaaS nature of the Luminex One platform, we expect that Virginia-sourced revenues represent a meaningful but not dominant share of total U.S. revenues, though the exact percentage will depend on the geographic distribution of Luminex US's customer base, which we have requested from management.
Following the closing of the Merger, the surviving corporation (Luminex Holdings) and its subsidiary (Luminex US) will continue their pre-existing Virginia income tax filing obligations without interruption. If Ardent Apex Holdings Inc. has no independent Virginia nexus (i.e., no employees, property, or sales sourced to Virginia), Apex Holdings should not itself be subject to Virginia corporate income tax. However, this determination should be confirmed based on the post-closing activities and management structure of Apex Holdings. If Apex Holdings establishes Virginia nexus (for example, if board meetings or management activities are conducted in Virginia), it could become subject to Virginia income tax filing requirements.
B. Virginia Conformity to Section 338(h)(10)
Virginia generally conforms to the Internal Revenue Code as amended through a fixed-date conformity provision. Under this approach, Virginia's General Assembly enacts legislation annually (or as needed) to update the date through which Virginia conforms to the IRC. As of the date of this memorandum, Virginia conforms to the IRC as of a date that includes Section 338 and the regulations thereunder. However, because Virginia's conformity is on a fixed-date basis, any future amendments to the IRC affecting Section 338 would not automatically be recognized for Virginia purposes until Virginia enacts new conformity legislation.
If the Section 338(h)(10) election is made, Virginia should recognize the deemed asset sale for Virginia corporate income tax purposes, consistent with its general conformity to the IRC. This means that:
(a) "Old target" (Luminex US, as the member of the selling consolidated group whose assets are deemed sold) would recognize gain on the deemed asset sale for Virginia purposes;
(b) "New target" would be treated as having purchased all of its assets at fair market value as of the closing date, resulting in a stepped-up basis in those assets for Virginia tax purposes; and
(c) the stepped-up basis in amortizable intangible assets (estimated at approximately $620,000,000 at the federal level) would generate Virginia-level amortization deductions over a 15-year period, reducing Luminex US's Virginia taxable income in each year of the amortization period.
To quantify the Virginia-specific benefit, we apply the 6% Virginia corporate income tax rate to the Virginia-apportioned share of the annual federal amortization deduction. If the annual federal amortization deduction is approximately $8,680,000 (based on a 15-year straight-line amortization of $620,000,000 in intangibles divided by the total step-up allocation, with further adjustment for assets amortizable on an accelerated or different basis), the Virginia benefit in each year will equal 6% multiplied by the product of $8,680,000 and the Virginia apportionment percentage. For illustration, if the Virginia apportionment percentage is 15%, the annual Virginia tax savings would be approximately $78,120 (6% × $8,680,000 × 15%). This figure is subject to refinement based on the actual Virginia apportionment factors and the detailed asset allocation under the Section 338(h)(10) election, which Pendleton & Associates LLP is currently modeling.
We note that Virginia's fixed-date conformity provision should be monitored going forward to confirm that Virginia continues to conform to the IRC provisions applicable to Section 338 elections.
C. Virginia Sales and Use Tax
Virginia imposes a combined state and local sales tax at a general rate of 5.3% (4.3% state rate plus 1% local rate, with higher rates in certain localities including Northern Virginia, where the rate is 6% inclusive of an additional 0.7% regional tax).
The taxability of SaaS transactions under Virginia law has been the subject of evolving guidance. Under current Virginia Department of Taxation guidance, SaaS that is accessed remotely over the internet and does not involve the delivery of tangible personal property to the customer is generally not subject to Virginia sales and use tax. Virginia distinguishes between the sale of tangible personal property (including prewritten computer software delivered in a tangible medium) and the provision of services accessed electronically. To the extent that the Luminex One platform is a true SaaS offering — delivered entirely through cloud-based access without the transfer of tangible personal property — it should not be subject to Virginia retail sales and use tax under current guidance.
However, analysis is needed to determine whether any aspect of the Luminex One platform could be characterized as a taxable "communications service" under Virginia's Communications Sales and Use Tax (Va. Code § 58.1-648 et seq.), which imposes a 5% tax on communications services. If the platform includes any voice-over-IP, telecommunications, or similar communications components, those components could potentially be subject to the communications tax. We recommend a review of the Luminex One platform's functionality with Luminex management to confirm the appropriate Virginia sales tax classification.
Post-closing operational decisions — including the selection of data center locations, the addition of new product features, or changes in the delivery model — may affect Virginia sales and use tax obligations and should be evaluated as part of the integration planning process.
D. Virginia Transfer / Recording Taxes
Virginia imposes a grantor's tax on the transfer of real property at a rate of $0.50 per $500 of consideration (equivalent to $1.00 per $1,000), plus a recordation tax on deeds of trust and mortgages. Certain counties and cities in Virginia may impose additional local taxes.
The Merger does not involve the direct transfer of real property. Because the Transaction is structured as a reverse triangular merger — a stock-level transaction in which Luminex Holdings survives and its assets (including any real property) remain within the same legal entity — no deed or other instrument conveying real property will be recorded. Accordingly, no Virginia grantor's tax or recordation tax should be triggered by the Merger itself.
Based on our review of the due diligence materials, the Reston, Virginia headquarters at 2100 Reston Gateway Drive, Suite 800, appears to be leased rather than owned by Luminex Holdings or Luminex US. If this is confirmed, no Virginia real property transfer tax analysis is necessary in connection with the Merger. However, if due diligence reveals that any Luminex entity owns real property in Virginia, the transfer tax implications should be revisited.
Virginia does not impose a stock transfer tax. Accordingly, the cancellation and conversion of Luminex Holdings stock in connection with the Merger will not give rise to any Virginia stock transfer tax.
V. CALIFORNIA TAX CONSIDERATIONS
A. Franchise / Income Tax Nexus
California imposes a corporate franchise tax at a rate of 8.84% on the net income of corporations doing business in California, subject to a minimum franchise tax of $800 per year. Corporations that are not doing business in California but that derive income from California sources are subject to the 8.84% corporate income tax on their California-source income.
The threshold question for the Luminex entities is whether any of them have nexus with California — either through physical presence or economic nexus — sufficient to subject them to California's franchise or income tax.
Luminex Systems Inc.: Even if Luminex US does not maintain a physical office or employees in California, it may have established economic nexus with California based on its SaaS revenues sourced to California customers. California has codified the principles of South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), and imposes economic nexus on corporations with California-sourced sales exceeding $610,395 (the threshold for 2024, as adjusted annually for inflation). Given that Luminex US generated approximately $194,800,000 in U.S. revenue in 2024 from an enterprise SaaS customer base, it is highly likely that a material portion of that revenue — potentially tens of millions of dollars — is attributable to California customers. Under California's market-based sourcing rules (Cal. Rev. & Tax. Code § 25136), revenue from services is sourced to California to the extent the customer receives the benefit of the service in California. For a SaaS platform like Luminex One, the benefit is generally received where the customer's users access the platform, which in many cases will include California given its large share of the national economy.
We therefore expect that Luminex US has California franchise tax nexus based on economic nexus principles, and that Luminex US is currently filing (or should be filing) California franchise tax returns. This should be confirmed with Luminex management as part of the due diligence process.
Luminex Systems Holdings Inc.: As a holding company with no independent operations, Luminex Holdings may not have independent California nexus. However, if Luminex Holdings is included in a California combined reporting group with Luminex US (as discussed in Section V.B below), it may be pulled into California filing requirements through the combined report.
Luminex Systems AG: As a Swiss entity, Luminex AG is generally beyond the jurisdiction of California's taxing authority for franchise tax purposes, subject to certain exceptions related to water's-edge elections and intercompany transactions.
Ardent Capital Partners III LP: As a limited partnership, Ardent Fund III is not "doing business" in California solely by virtue of its status as a limited partner in a limited partnership. However, if Ardent Fund III's general partner, Ardent Capital GP III LLC, engages in management activities in California — for example, if any of Ardent GP III LLC's principals or employees travel to California to conduct management activities, attend board meetings, or participate in operational oversight of California-based portfolio companies — such activities could create California nexus for Ardent GP III LLC and, potentially, for Ardent Fund III. We understand that Ardent Fund III is managed from its headquarters at 399 Park Avenue, 42nd Floor, New York, New York, and does not maintain a California office. This should be confirmed, and the frequency and nature of any California-directed management activities should be evaluated.
Vectis Solutions LLC: Vectis Solutions LLC is an existing Ardent Fund II portfolio company headquartered at 4000 Shoreline Court, Suite 300, South San Francisco, California 94080, with 2024 revenue of approximately $68,000,000. Vectis is led by CEO Michael Parekh. The South San Francisco headquarters confirms that Vectis has strong California nexus and is subject to California franchise tax. If post-closing integration of Vectis and Luminex is contemplated — for example, if the entities share management, customers, distribution channels, or technology — combined reporting implications may arise, as discussed below.
B. California Combined / Unitary Reporting
California requires unitary combined reporting for commonly owned or controlled corporations engaged in a unitary business. Under Cal. Rev. & Tax. Code § 25101 et seq., corporations that are members of a unitary group must file a combined report, and their income is apportioned to California based on the combined group's California apportionment factors (single-sales-factor for most taxpayers).
Following the closing of the Merger, Ardent Apex Holdings Inc., Luminex Holdings, and Luminex US will be commonly owned (Apex Holdings will own 100% of Luminex Holdings, which in turn will own 100% of Luminex US). If these entities are engaged in a unitary business — which is likely, given the vertical integration of holding company and operating subsidiary functions — they will be required to file a California combined report.
A critical question is whether Vectis Solutions LLC should also be included in the California combined group. Vectis is controlled by Ardent Fund II (not Ardent Fund III), but if there is common ownership or control at the fund sponsor level and if Vectis and the Luminex entities are engaged in a unitary business (sharing management, distribution, customers, or operational integration), the California Franchise Tax Board ("FTB") could assert that Vectis should be included in the combined group. Factors that the FTB considers in determining unity include centralized management, functional integration, and economies of scale. If post-closing integration plans contemplate cross-selling, shared technology platforms, or management overlap between Vectis and Luminex, the risk of FTB asserting unity increases.
The inclusion or exclusion of Vectis in the combined group would affect California apportionment. If Vectis (with $68,000,000 in revenue and a significant California presence) is included, the combined group's California sales factor could increase, potentially increasing the group's California apportioned income and tax liability. Conversely, if Vectis's California operations are highly profitable relative to the rest of the combined group, inclusion could shift taxable income toward California. This analysis requires detailed financial modeling, which we have requested Pendleton & Associates LLP to perform.
Regarding water's-edge vs. worldwide combined reporting, California's default rule is worldwide combined reporting, which would include Luminex AG and the foreign subsidiaries in the combined report. However, taxpayers may elect water's-edge combined reporting (Cal. Rev. & Tax. Code § 25110 et seq.), which generally excludes foreign entities from the combined group. The water's-edge election requires payment of an annual election fee (currently 0.03% of the taxpayer's California sales plus property and payroll, subject to a minimum and maximum). If a water's-edge election is in effect (or is made post-closing), Luminex AG and the foreign subsidiaries would be excluded from the California combined report, which may be advantageous if the foreign entities' income would otherwise increase the combined group's worldwide income subject to California apportionment.
We recommend that the post-closing combined reporting structure be carefully planned, including a determination of whether to make or maintain a water's-edge election, and a thorough analysis of the unity of Vectis and the Luminex entities.
C. California Conformity to Section 338(h)(10)
California generally conforms to the Internal Revenue Code, including Section 338, through its incorporation of the IRC by reference in Cal. Rev. & Tax. Code § 24451, with certain California-specific modifications. Based on current law, a Section 338(h)(10) election that is made for federal purposes should also be recognized for California franchise tax purposes.
If the Section 338(h)(10) election is made, the deemed asset sale should be recognized for California purposes, and the stepped-up basis in Luminex US's assets should generate California-level amortization deductions. To quantify the California benefit, the 8.84% California franchise tax rate would be applied to the California-apportioned share of the annual amortization deductions. Given that California's tax rate is significantly higher than many other states, the California component of the state-level Section 338(h)(10) benefit may be substantial, particularly if Luminex US has a meaningful California apportionment percentage.
For example, if the annual federal amortization deduction attributable to the step-up is $8,680,000 and the California apportionment percentage (based on combined group sales factor) is 20%, the annual California tax savings would be approximately $153,462 (8.84% × $8,680,000 × 20%). Over a 15-year amortization period, this would generate significant cumulative California tax savings. These figures are illustrative and will be refined by Pendleton & Associates LLP based on actual apportionment data.
D. California Withholding on Nonresident Sellers
California may impose withholding under Cal. Rev. & Tax. Code § 18662 on payments to nonresident sellers of California real property or of a business interest if California-source gain is recognized in connection with the sale. The withholding rate is generally 7% of the total sales price (or, if an election is made, a lower rate based on the seller's expected California tax liability).
The selling stockholders of Luminex Holdings include:
• Ridgeline Growth Equity Fund II LP — receiving approximately $1,456,000,000 in cash consideration (52% × $2,800,000,000)
• Meridian Venture Partners IV LP — receiving approximately $560,000,000 in cash consideration (20% × $2,800,000,000)
• Management and Employee Stockholders — receiving the balance of cash consideration (net of rollover equity)
The analysis of whether California may assert withholding on these payments depends on whether the gain from the sale of Luminex Holdings stock constitutes California-source income. Under general principles, gain from the sale of stock in a corporation is sourced to the seller's state of commercial domicile — not to California — unless the stock has acquired a California "business situs." Stock acquires a California business situs if it is used in the seller's trade or business in California. For passive investors such as Ridgeline and Meridian, the stock of Luminex Holdings generally would not be considered to have a California business situs unless the selling fund maintains its principal operations in California.
Ridgeline Growth Equity Fund II LP is a Delaware limited partnership headquartered in Boston, Massachusetts. Ridgeline's gain from the sale of Luminex Holdings stock should generally not constitute California-source income, absent a finding that Ridgeline's stock had acquired a California business situs.
Meridian Venture Partners IV LP is a Delaware limited partnership headquartered in San Francisco, California. Because Meridian's commercial domicile is in California, Meridian's share of gain from the sale of Luminex Holdings stock may be independently subject to California taxation regardless of the sourcing of the gain from the underlying stock sale. As a California-domiciled entity, Meridian is subject to California tax on its worldwide income, and its partners who are California residents are likewise subject to California tax on their distributive shares of Meridian's income.
Section 338(h)(10) Election Implications: If the Section 338(h)(10) election is made, the transaction is recharacterized for tax purposes as a deemed asset sale by old target. In this scenario, the gain is no longer gain from the sale of stock but rather gain from the deemed sale of assets. Asset sale gain is generally sourced to the states where the assets are located or where the income from the assets is generated. To the extent that Luminex US's assets generate California-source income (because Luminex US has California customers and California-apportioned revenue), the deemed asset sale could create California-source gain — potentially subjecting the selling stockholders (or the deemed selling entity) to California tax on a portion of the gain.
This is a significant risk that must be carefully evaluated. If the Section 338(h)(10) election causes California to assert taxing jurisdiction over a portion of the gain that would not otherwise be California-source income in a straight stock sale, the selling stockholders (particularly Ridgeline and the non-California management holders) could face unexpected California tax liability. The magnitude of this exposure depends on the California apportionment percentage applied to the deemed asset sale gain. This issue should be modeled as part of the Section 338(h)(10) cost-benefit analysis, and the purchase price allocation and escrow provisions should account for any potential state tax exposure.
E. California Transfer Tax
California does not impose a stock transfer tax. The Merger, structured as a stock-level transaction, will not give rise to any California stock transfer tax.
California does impose a documentary transfer tax on transfers of real property. The rate varies by county — the base rate for unincorporated areas is $0.55 per $500 of consideration (or $1.10 per $1,000), but many cities and counties have imposed additional local documentary transfer taxes (e.g., the City of San Francisco imposes rates ranging from $2.50 to $6.00 per $500 depending on the consideration amount; the City of Los Angeles recently enacted a "Measure ULA" transfer tax of up to 5.5% on transfers over $10,000,000).
Based on our review of the due diligence materials, Luminex US does not appear to own real property in California. However, if any post-closing restructuring involves Vectis Solutions LLC and if Vectis owns (rather than leases) its South San Francisco premises, any transfer of Vectis's real property could trigger San Mateo County documentary transfer tax. This should be analyzed if post-closing integration involving Vectis's real property is contemplated.
VI. OTHER NEXUS STATES — KEY ANALYSIS
A. Identification of Nexus States
As a SaaS company with an enterprise customer base spanning the United States, Luminex US has market-based sourcing revenue attributed to virtually every U.S. state. In states that have adopted economic nexus thresholds for corporate income or franchise tax purposes — which, following Wayfair, now includes the vast majority of states — Luminex US's $194,800,000 in annual U.S. revenue almost certainly exceeds the applicable thresholds in every major state.
In addition to economic nexus, Luminex US may have physical presence nexus in states where it maintains employees (whether at offices or working remotely), data centers, or other tangible property. The primary physical presence state is Virginia, but any employees working remotely in other states could establish nexus in those states. A comprehensive nexus study should be conducted post-closing to identify all states in which Luminex US has filing obligations.
Vectis Solutions LLC's nexus states are also relevant if post-closing combined or unitary filing obligations arise. Vectis is headquartered in South San Francisco, California, and its customer footprint will determine its nexus in other states. If Vectis is included in a combined reporting group with Luminex entities in states requiring combined reporting, the combined group's nexus and apportionment would expand accordingly.
The following sections address the key states identified for analysis. This list is non-exhaustive, and additional states may be identified through the post-closing nexus study.
B. New York
New York imposes a Business Corporation Tax (the "BCT") at a rate of 6.5% on the business income of corporations doing business in New York. For taxpayers with business income exceeding $5,000,000, a higher rate of 7.25% applies. New York also imposes a capital base tax (limited to $5,000,000) and a fixed-dollar minimum tax based on New York receipts, with the taxpayer paying the highest of the three calculations.
Ardent Capital Partners III LP maintains its headquarters at 399 Park Avenue, 42nd Floor, New York, New York. As a limited partnership, Ardent Fund III is treated as a transparent entity for New York income tax purposes, and the individual partners' distributive shares of Ardent Fund III income are subject to New York personal income tax to the extent of the partners' New York residency or the New York-source character of the income. Ardent GP III LLC, managing from New York, has New York nexus and may be subject to the New York unincorporated business tax (UBT) at a rate of 4% on its unincorporated business taxable income allocable to New York City, if applicable.
Luminex Holdings / Luminex US: If Luminex US has customers located in New York, it likely has economic nexus with New York based on its New York-sourced receipts. New York uses a single-sales-factor apportionment formula with market-based sourcing for receipts from services, consistent with the national trend.
Post-Closing Combined Reporting: New York requires combined reporting for commonly owned corporations (80% or more common ownership) that are engaged in a unitary business or that meet certain other criteria (including substantial intercorporate transactions or distortion of income). Following the Merger, Apex Holdings, Luminex Holdings, and Luminex US will satisfy the common ownership requirement and are likely engaged in a unitary business. These entities will therefore be required to file a New York combined report.
Section 338(h)(10) Conformity: New York generally conforms to the IRC, including Section 338. A Section 338(h)(10) election should be recognized for New York BCT purposes, and the stepped-up basis should generate New York-level amortization deductions.
C. Texas
Texas does not impose a traditional corporate income tax. Instead, Texas imposes a franchise tax, commonly known as the "margin tax," on taxable entities doing business in Texas. The margin tax is computed on a taxable entity's total revenue (less certain deductions, such as cost of goods sold or compensation), at a rate of 0.75% for most entities (or 0.375% for entities primarily engaged in qualifying wholesale or retail activities).
Luminex US likely has Texas nexus if it has customers in Texas, given Texas's economic nexus standards. The Luminex One SaaS platform, as an enterprise-level cloud-based offering, likely generates revenue from Texas-based customers.
Because the Texas margin tax is based on revenue rather than income, the Section 338(h)(10) election does not provide the same direct benefit as in income-tax states. The election does not generate deductible amortization against a revenue-based tax base. However, the election may affect the computation of the cost-of-goods-sold ("COGS") deduction available under the Texas margin tax, to the extent that the stepped-up basis in acquired assets is includable in COGS. This analysis requires further investigation of the specific assets acquired and their treatment under the Texas COGS computation rules.
D. Massachusetts
Massachusetts imposes a corporate excise tax at a rate of 8% on the taxable net income of corporations doing business in the Commonwealth, plus a non-income measure based on either net worth or tangible property (whichever is greater), subject to certain minimum tax obligations.
Ridgeline Growth Equity Fund II LP is headquartered at 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116. As a limited partnership, Ridgeline itself is not subject to the Massachusetts corporate excise tax, but Ridgeline GP II LLC (the general partner of Ridgeline, presumably organized in Delaware) may have Massachusetts filing obligations based on its management activities in Boston. The individual partners of Ridgeline who are Massachusetts residents will be subject to Massachusetts personal income tax on their distributive shares of Ridgeline's income.
Luminex US: If Luminex US has customers or employees in Massachusetts, it likely has nexus for Massachusetts corporate excise tax purposes. Revenue from the Luminex One platform sourced to Massachusetts customers under market-based sourcing would create economic nexus. Massachusetts uses a three-factor apportionment formula (sales, payroll, property), with the sales factor double-weighted, transitioning to a single-sales-factor for certain taxpayers.
Massachusetts generally conforms to the IRC, and a Section 338(h)(10) election should be recognized for Massachusetts purposes, generating state-level amortization deductions.
E. Illinois
Illinois imposes a combined corporate income tax rate of 9.5%, consisting of a 7% corporate income tax and a 2.5% personal property replacement tax. This combined rate makes Illinois one of the higher-tax states for corporate income purposes.
Summit Ridge Capital Partners LP is headquartered at 161 North Clark Street, Suite 4700, Chicago, Illinois 60601. As a co-investor in the Transaction, Summit Ridge's involvement does not directly create nexus for the Luminex acquisition entities. However, if Summit Ridge's personnel participate in management oversight of the Luminex business from Illinois, this could create an argument for Illinois nexus for certain entities in the post-closing group, though such an argument is unlikely to succeed on these facts alone.
Luminex US: Luminex US has economic nexus with Illinois if it has customers in Illinois, which is highly likely given the size of the Illinois economy and the breadth of Luminex US's enterprise SaaS customer base. Illinois uses a single-sales-factor apportionment formula with market-based sourcing.
Illinois requires combined reporting for commonly owned unitary businesses. Post-closing, Apex Holdings, Luminex Holdings, and Luminex US would likely be required to file a combined report in Illinois. Illinois generally conforms to the IRC, and a Section 338(h)(10) election should be recognized, generating state-level amortization deductions at the 9.5% combined rate.
F. Washington State
Washington does not impose a corporate income tax. Instead, Washington imposes a Business & Occupation ("B&O") tax on gross receipts. SaaS services are generally classified under the "service and other activities" B&O tax classification at a rate of 1.5%. If Luminex US has customers in Washington or employees working in Washington, it is likely subject to the B&O tax on its Washington-sourced receipts.
Because the B&O tax is a gross receipts tax, the Section 338(h)(10) election provides no income-based benefit in Washington. The election does not affect the B&O tax computation, which is based on gross receipts rather than net income.
Washington enacted a capital gains tax effective January 1, 2022, imposing a 7% tax on gains exceeding $250,000 from the sale of long-term capital assets. The tax applies to individuals (not to corporations or other entities), and is sourced based on the taxpayer's domicile. If any management cash-out participants reside in Washington, they may be subject to the Washington capital gains tax on their gain from the sale of Luminex Holdings stock. This analysis is beyond the scope of this memorandum (which addresses entity-level state and local taxes) but should be addressed in a separate individual tax analysis for affected management participants.
G. Other States — Summary Table
The following table summarizes the key state tax characteristics for additional nexus states identified as significant for Luminex US. This summary is preliminary and subject to refinement based on the comprehensive nexus study to be conducted.
Each state listed above should be evaluated in connection with the post-closing nexus study to determine: (i) whether Luminex US has current filing obligations; (ii) whether any delinquent filings exist that should be addressed through voluntary disclosure agreements; (iii) the post-closing combined reporting implications (if applicable); and (iv) the incremental Section 338(h)(10) benefit in each conforming state.
VII. STATE TAX IMPLICATIONS OF THE SECTION 338(h)(10) ELECTION
A. Overview
This Section provides a detailed analysis of the state-level implications of the Section 338(h)(10) election under consideration. The reader should refer to the companion Tax Structure Memorandum (Section 338(h)(10) Election Analysis) for the comprehensive federal analysis.
At the federal level, a Section 338(h)(10) election would cause the Transaction to be treated as a deemed sale by old target of all of its assets at fair market value, followed by a deemed liquidation of old target. The estimated step-up in the tax basis of amortizable intangible assets is approximately $620,000,000. This step-up would generate annual federal amortization deductions of approximately $8,680,000 (assuming straight-line amortization over 15 years under Section 197 of the IRC, with adjustments for certain assets amortizable on different schedules). The present value of the federal tax savings from these amortization deductions is approximately $195,000,000 at an 8% discount rate.
The state-level analysis is critical because the incremental state tax amortization benefits can be substantial — particularly in high-tax states where the Luminex entities have significant apportioned income — and because certain states may not conform to the Section 338(h)(10) election, limiting or eliminating the state-level benefit.
B. Conforming States
The majority of U.S. states conform to the Internal Revenue Code's treatment of Section 338 elections through their general IRC conformity provisions. In these conforming states, the Section 338(h)(10) election will be recognized, the deemed asset sale will be given effect, and the stepped-up basis in Luminex US's assets will generate state-level amortization deductions that reduce apportioned state taxable income in each year of the amortization period.
States with full or substantial conformity to Section 338(h)(10) include (based on our current analysis):
• Virginia
• New York
• California
• Massachusetts
• Illinois
• Pennsylvania
• New Jersey
• Georgia
• North Carolina
• Connecticut
• Maryland
• Florida (subject to verification of fixed-date conformity status, as discussed below)
In each of these conforming states, the annual state tax savings attributable to the Section 338(h)(10) election equals the state tax rate multiplied by the state-apportioned share of the annual amortization deduction. The aggregate state tax benefit over the 15-year amortization period is a function of Luminex US's apportionment percentages in each state, the applicable state tax rates, and the present value discount rate.
C. Non-Conforming or Partially Conforming States
Certain states impose taxes on a basis other than net income, or have specific provisions that limit or eliminate the benefit of a Section 338(h)(10) election. Key non-conforming or partially conforming states

MEMORANDUM

MATTER NO.: 1001-00004

I. EXECUTIVE SUMMARY

II. TRANSACTION STRUCTURE OVERVIEW (STATE TAX PERSPECTIVE)

III. DELAWARE TAX CONSIDERATIONS

IV. VIRGINIA TAX CONSIDERATIONS

V. CALIFORNIA TAX CONSIDERATIONS

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