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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 1 World Financial Center, 42nd Floor New York, NY 10281

MEMORANDUM

Matter No.: 1045-00005

Date: January 30, 2026

To:

Catherine A. Royce, General Counsel & Corporate Secretary, Belmont Ridge Bank NA

Beatrice Holloway, Responsible Partner, M&A, Calderwood & Harkness LLP

James Prentice, Billing Partner, M&A, Calderwood & Harkness LLP

Andrew Fitzpatrick, Lead Associate, M&A, Calderwood & Harkness LLP

Naomi Petersen, Working Associate, M&A, Calderwood & Harkness LLP

From: Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP

Re: Federal, State, and Local Tax Structuring Analysis — Proposed Reverse Triangular Merger Acquisition of Tessera Lending, Inc. by Belmont Ridge Bank NA

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I. Executive Summary

This memorandum sets forth our preliminary analysis of the federal, state, and local income tax consequences of the proposed acquisition of Tessera Lending, Inc. ("Tessera" or "TLI"), a Delaware corporation (EIN 83-2649107; Delaware file number 6847312), by Belmont Ridge Bank NA ("BRB") (EIN 13-4517820; OCC charter number 24-00781). This memorandum has been prepared at the request of Catherine A. Royce, General Counsel and Corporate Secretary of BRB, in coordination with the Calderwood & Harkness M&A deal team led by Beatrice Holloway and James Prentice, in connection with the proposed acquisition.

The contemplated transaction is structured as a reverse triangular merger under the Delaware General Corporation Law ("DGCL"). Specifically, BRB Acquisition Sub, Inc. ("Acquisition Sub"), a to-be-formed Delaware wholly owned subsidiary of BRB, will merge with and into Tessera, with Tessera surviving the merger as a wholly owned subsidiary of BRB. The aggregate merger consideration is $48,000,000, payable entirely in cash, with a per-share merger consideration of $4.00 per share based on 12,000,000 fully diluted shares of Tessera common stock outstanding. No equity component of any kind is contemplated.

Our key conclusions and observations are summarized as follows:

Taxable Transaction Characterization. Because the merger consideration consists entirely of cash, the proposed transaction is a fully taxable transaction to all Tessera stockholders. The transaction does not and cannot qualify as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the "IRC" or the "Code"). Each Tessera stockholder will recognize gain or loss on the exchange of their shares for cash, with the character of that gain or loss generally treated as capital in nature, subject to the qualifications discussed below.

Section 338(h)(10) Election Opportunity. We recommend that BRB explore a joint election under Section 338(h)(10) of the Code with the Tessera stockholders. If made, this election would cause the transaction to be treated for federal income tax purposes as a deemed sale of all of Tessera's assets at fair market value, followed by a deemed liquidation of Tessera. The principal benefit to BRB would be a stepped-up tax basis in Tessera's assets — including intangible assets such as Tessera's proprietary lending technology platform, customer relationships, lending licenses in 42 states and the District of Columbia, and goodwill — which would generate increased depreciation and amortization deductions for BRB in post-closing periods. A detailed cost-benefit analysis will be required, and the election will necessitate negotiation with the Tessera stockholder group regarding the allocation of the incremental corporate-level tax cost.

Employee Equity Considerations. Special attention is required for the treatment of 900,000 shares in Tessera's employee stock option and restricted stock unit ("RSU") pool. In particular, compliance with Section 409A of the Code (governing nonqualified deferred compensation) must be confirmed for all outstanding stock options, and the treatment of RSU cashouts under Section 83 must be properly structured. Additionally, the acceleration of equity awards in connection with the change of control may trigger excess parachute payment issues under Section 280G, particularly for Tessera's co-founders and senior officers.

State and Local Tax Consequences. State and local tax consequences appear favorable on a preliminary basis. Texas, where Tessera maintains its principal offices, does not impose a state income tax on individuals or corporations; the Texas franchise (margin) tax applies to Tessera but should not be materially affected by the transaction. Delaware franchise tax implications for Tessera and Acquisition Sub are manageable and routine. A comprehensive state tax nexus study will be required to address Tessera's lending activities across 42 states and the District of Columbia.

Post-Closing Matters. Intercompany tax-sharing arrangements between BRB and Tessera will need to be established following the closing, consistent with regulatory requirements of the Office of the Comptroller of the Currency ("OCC") for national bank subsidiaries. The tax treatment of Tessera's existing bank-partnership arrangement with Ridgeline Community Bank will require review in light of the change of ownership.

This memorandum is intended for internal discussion purposes only and does not constitute a formal tax opinion. All conclusions and recommendations set forth herein are preliminary and subject to confirmation through the due diligence process. We anticipate updating this analysis as additional information becomes available during the diligence phase, which is expected to commence in late February 2026.

II. Transaction Overview and Parties

A. Description of Proposed Transaction

The proposed transaction is structured as a reverse triangular merger under Section 251 of the DGCL. In this structure, BRB will cause a newly formed, wholly owned Delaware subsidiary — BRB Acquisition Sub, Inc. ("Acquisition Sub") — to merge with and into Tessera. Tessera will be the surviving entity in the merger, and upon consummation of the merger, Tessera will become a direct, wholly owned subsidiary of BRB. Acquisition Sub will cease to exist as a separate legal entity upon the effectiveness of the merger.

At the effective time of the merger, all outstanding shares of Tessera common stock — 12,000,000 shares on a fully diluted basis, including shares issuable upon the exercise of vested stock options and settlement of vested RSUs — will be automatically converted into the right to receive $4.00 per share in cash, without interest, for aggregate merger consideration of $48,000,000. There is no equity component to the merger consideration. The consideration is being funded entirely from BRB's available cash on hand and existing credit facilities.

Based on information provided to date by Tessera's counsel, Kessler, Aldrich & Voss LLP, Tessera is debt-free as of the date of this memorandum. No net-debt adjustment to the merger consideration is anticipated at this stage; however, this is subject to confirmatory diligence, and the merger agreement is expected to contain customary closing adjustments for working capital, indebtedness, and transaction expenses.

The parties contemplate a general indemnification escrow of $4,800,000, representing 10% of the aggregate merger consideration. The escrow funds will be held by Caravel Trust Company, N.A. as escrow agent for a period of eighteen (18) months following the closing date. The escrow is intended to serve as a source of recovery for BRB in connection with post-closing indemnification claims for breaches of representations, warranties, and covenants in the definitive merger agreement.

In addition to the general indemnification escrow, BRB is pursuing a buyer-side representations and warranties ("R&W") insurance policy from Meridian Indemnity Group, Inc. The contemplated policy would have a coverage limit of $9,600,000 (representing 20% of deal value) with a retention of $960,000 (representing 2% of deal value). The R&W insurance policy is intended to provide BRB with additional protection against losses arising from breaches of Tessera's representations and warranties, over and above the indemnification escrow amount, and will be subject to customary exclusions and policy terms.

The merger consideration is structured as 100% cash. No shares of BRB common stock, BRB preferred stock, or any other equity securities of BRB or any BRB affiliate will be issued as part of the merger consideration. This structural decision has significant federal income tax implications, as discussed in detail in Section III below.

B. Identification of Parties and Tax Identification Numbers

The following is a summary of the principal parties to the proposed transaction and their relevant identifying information:

Buyer: Belmont Ridge Bank NA. BRB is a national banking association organized under the laws of the United States, with its principal executive offices located in New York, New York. BRB's Employer Identification Number ("EIN") is 13-4517820, and it operates under OCC charter number 24-00781. BRB's common stock is publicly traded on the New York Stock Exchange under the ticker symbol "BRMG." As of December 31, 2025, BRB reported total consolidated assets of approximately $14.7 billion and cash and cash equivalents of approximately $1.03 billion, based on its most recent publicly filed financial statements. BRB files a consolidated federal income tax return as the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Code.

Target: Tessera Lending, Inc. Tessera is a corporation organized under the laws of the State of Delaware. Tessera's EIN is 83-2649107, and its Delaware file number is 6847312. Tessera's principal executive offices are located at 2400 Shoal Creek Boulevard, Suite 500, Austin, Texas 78756. Tessera operates a digital consumer lending platform and holds lending licenses in 42 states and the District of Columbia. For the fiscal year ended December 31, 2025 ("FY2025"), Tessera reported revenue of approximately $38,400,000 and adjusted EBITDA of approximately $5,100,000, based on preliminary unaudited financial information provided by Tessera's management. Tessera is a C corporation for federal income tax purposes and does not file as part of any consolidated or affiliated group.

Acquisition Sub: BRB Acquisition Sub, Inc. Acquisition Sub is a Delaware corporation to be formed as a direct, wholly owned subsidiary of BRB for the sole purpose of facilitating the reverse triangular merger. Acquisition Sub has not yet been incorporated, and accordingly, an EIN has not yet been obtained. Upon formation, Acquisition Sub's registered agent will be Crowne Albany Corporation, located at Cobalt Ridge Technologies, 1209 Orange Street, Wilmington, Delaware 19801. Acquisition Sub will have nominal capitalization and no operations or employees. Acquisition Sub will cease to exist upon the effectiveness of the merger.

Auditors. Tessera's independent auditor is Whitfield Thorpe LLP, based in Austin, Texas. BRB's independent auditor is Graystone & Albright LLP, based in Philadelphia, Pennsylvania. Both firms are expected to play roles in the diligence process and, if applicable, in connection with any purchase price allocation study.

C. Capitalization of Tessera (Fully Diluted)

Based on information provided by Tessera's counsel, the fully diluted capitalization of Tessera as of the date of this memorandum is as set forth in the table below. All share numbers are presented on a fully diluted basis, reflecting shares of common stock outstanding and shares issuable upon the exercise of all vested and unvested stock options and settlement of all vested and unvested RSUs.

The co-founders, Vikram S. Narayan and Elena M. Castillo, together hold 6,480,000 shares representing 54.0% of the fully diluted capitalization, for aggregate merger consideration of $25,920,000. The two institutional investors, Pinnacle Ventures Fund III, LP and Broadleaf Growth Capital, LLC, together hold 4,620,000 shares representing 38.5% of the fully diluted capitalization, for aggregate merger consideration of $18,480,000. The employee and angel investor pool consists of 900,000 shares (7.5%), comprising a mixture of incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), and RSUs granted under Tessera's 2018 Equity Incentive Plan, as amended. The treatment of the employee equity pool is discussed in detail in Section V below.

We note that the foregoing capitalization table is preliminary and subject to confirmation through diligence. In particular, we will need to obtain a complete capitalization table from Tessera (or its counsel) detailing the specific number of ISOs, NQSOs, and RSUs outstanding, the grant dates and exercise prices for each option tranche, the vesting schedules applicable to each award, and any early exercise or Section 83(b) elections that may have been filed. This information is critical to the tax analysis set forth in Sections III and V of this memorandum.

III. Federal Income Tax Analysis — Taxable Transaction Characterization

A. Inapplicability of Tax-Free Reorganization Under Section 368

A threshold question in any acquisition is whether the transaction may be structured to qualify as a tax-free reorganization under Section 368 of the Code, thereby deferring the recognition of gain by the target's stockholders. We have analyzed each potentially applicable subsection of Section 368 and conclude that none applies to the proposed transaction as currently structured. Our analysis is set forth below.

Section 368(a)(1)(A) — Statutory Merger. Section 368(a)(1)(A) of the Code provides that a statutory merger or consolidation may qualify as a tax-free reorganization if it satisfies certain judicial and regulatory requirements. Among the most significant of these requirements is the "continuity of interest" ("COI") requirement, codified in Treasury Regulations Section 1.368-1(e). The COI requirement mandates that a substantial portion of the value of the proprietary interests in the target be preserved through the issuance of stock of the acquiring corporation to the target's stockholders. Under Treasury Regulations Section 1.368-1(e)(2)(v), Example 1, the IRS has generally required that at least 40% of the total merger consideration consist of acquiring corporation stock in order to satisfy the COI requirement. The proposed all-cash merger consideration of $48,000,000, with no equity component whatsoever, fails the COI requirement by a wide margin. Accordingly, the proposed merger cannot qualify as a tax-free reorganization under Section 368(a)(1)(A).

Section 368(a)(2)(E) — Reverse Triangular Merger Reorganization. Section 368(a)(2)(E) of the Code permits a reverse triangular merger — in which a subsidiary of the acquiring corporation merges into the target, with the target surviving — to qualify as a tax-free reorganization, provided that certain conditions are satisfied. Among the most critical of these conditions is the requirement that, in the merger, the former stockholders of the target exchange, for "voting stock" of the controlling corporation (i.e., the acquiring corporation's parent), an amount of target stock constituting "control" of the target (within the meaning of Section 368(c), i.e., at least 80% by vote and value). The IRS has consistently interpreted this requirement to mean that at least 80% of the total merger consideration must consist of voting stock of the parent corporation. The proposed transaction provides for 100% cash consideration, with zero percent stock consideration. The proposed merger therefore fails the stock consideration requirement of Section 368(a)(2)(E) and cannot qualify thereunder.

Section 368(a)(1)(B) — Stock-for-Stock Exchange. Section 368(a)(1)(B) applies to acquisitions in which the acquiring corporation acquires "control" (80% by vote and value) of the target solely in exchange for voting stock of the acquiring corporation. This provision requires that the acquisition be made "solely for voting stock" and does not permit any cash or other non-stock consideration, subject to a narrow exception for fractional share cash. The proposed all-cash merger is fundamentally incompatible with Section 368(a)(1)(B).

Section 368(a)(1)(C) — Practical Merger / Asset Acquisition. Section 368(a)(1)(C) applies to acquisitions of "substantially all" of the target's assets in exchange for voting stock of the acquiring corporation. While a limited amount of non-stock consideration ("boot") is permitted, the transaction must still satisfy an 80% stock test. This provision is inapplicable to the proposed all-cash transaction. Additionally, Section 368(a)(1)(C) contemplates a direct asset acquisition, not a stock acquisition or reverse triangular merger.

Section 368(a)(2)(D) — Forward Triangular Merger. Section 368(a)(2)(D) permits a forward triangular merger (target merges into a subsidiary of the acquiring corporation) to qualify as a tax-free reorganization under certain conditions. This provision is inapplicable because the proposed transaction is structured as a reverse triangular merger (Acquisition Sub merges into Tessera, with Tessera surviving), and in any event, the all-cash consideration would fail the applicable stock consideration requirements.

Conclusion. Based on the foregoing analysis, the proposed reverse triangular merger, with all-cash consideration of $48,000,000, is a fully taxable transaction and cannot qualify as a tax-free reorganization under any provision of Section 368 of the Code. All Tessera stockholders will recognize gain or loss upon the exchange of their shares for cash in the merger, as discussed in Section III.B below.

Recommendation Against Restructuring as a Section 368 Reorganization. We considered whether it would be advisable for BRB to restructure the proposed transaction to include a sufficient equity component (i.e., at least 80% of the consideration in BRB voting stock) in order to qualify the merger as a tax-free reorganization under Section 368(a)(2)(E). After consultation with the deal team and Ms. Royce, we do not recommend this approach for the following reasons:

First, BRB's fundamental strategic objective is an all-cash acquisition. BRB has ample cash and cash equivalents (approximately $1.03 billion as of December 31, 2025) to fund the $48,000,000 acquisition, and the issuance of BRB stock as merger consideration is not consistent with BRB's stated capital allocation strategy.

Second, the issuance of BRB common stock in the merger would dilute existing BRB shareholders. Even at BRB's current market capitalization, the issuance of stock representing $38,400,000 or more of value (80% of the $48,000,000 consideration) would create a non-trivial dilutive impact that the BRB board of directors has indicated it wishes to avoid in a transaction of this size.

Third, the issuance of BRB stock to Tessera's stockholders — which include two institutional venture capital funds — would trigger federal and state securities law registration and disclosure obligations for BRB as a publicly traded NYSE-listed company. The costs and timing associated with preparing and filing a registration statement on Form S-4 (or relying on an available exemption) could materially delay the transaction timeline.

Fourth, as discussed in Section IV below, the tax benefits of a stepped-up basis in Tessera's assets (achievable through a Section 338(h)(10) election in a taxable transaction) may, depending on the results of the cost-benefit analysis, exceed the tax costs of a taxable transaction relative to a tax-free reorganization. In a tax-free reorganization, no step-up in asset basis would be available, and BRB would inherit Tessera's historical cost basis in its assets with no ability to claim additional depreciation or amortization deductions.

For all of these reasons, we recommend proceeding with the all-cash, fully taxable transaction structure as currently contemplated.

B. Consequences to Tessera Stockholders

Each holder of Tessera common stock will be treated for federal income tax purposes as having sold their Tessera shares in exchange for cash in a fully taxable transaction. The specific consequences are as follows:

Recognition of Gain or Loss. Each Tessera stockholder will recognize gain or loss equal to the difference between the per-share merger consideration of $4.00 and the stockholder's adjusted tax basis in each share of Tessera common stock. A stockholder whose adjusted basis is less than $4.00 per share will recognize gain; a stockholder whose adjusted basis exceeds $4.00 per share will recognize loss.

Character of Gain or Loss. The gain or loss recognized by each stockholder will generally be characterized as capital gain or capital loss, provided that the Tessera shares are held as a "capital asset" within the meaning of Section 1221 of the Code. For stockholders who have held their shares for more than one year as of the closing date, the gain will be long-term capital gain, currently taxable at a maximum federal rate of 20% (plus the 3.8% net investment income tax under Section 1411, for a combined maximum rate of 23.8%). For stockholders who have held their shares for one year or less, the gain will be short-term capital gain, taxable at ordinary income rates (currently up to 37%, plus the 3.8% net investment income tax).

Institutional Holders. Pinnacle Ventures Fund III, LP (EIN 85-3921047) and Broadleaf Growth Capital, LLC (EIN 37-4862153) are pass-through entities for federal income tax purposes. Pinnacle Ventures Fund III, LP is organized as a Delaware limited partnership and will not be subject to entity-level federal income tax; instead, each limited partner of Pinnacle Ventures will report its allocable share of the gain or loss recognized by the fund on the sale of its Tessera shares. Similarly, Broadleaf Growth Capital, LLC, if treated as a partnership for federal income tax purposes (or as a disregarded entity if it has a single member), will pass through its gain or loss to its members. The character and holding period of the gain at the partner/member level will generally be determined at the entity level. Both institutional holders invested in Tessera's Series B and/or Series C preferred stock rounds, which converted to common stock; the holding period and adjusted basis of those shares will depend on the specific terms of the preferred stock conversion and the dates and amounts of the original investment.

Co-Founders. Vikram S. Narayan and Elena M. Castillo co-founded Tessera in 2018. Given the 2018 founding date, the co-founders have likely held their shares for more than one year, and their gain will likely qualify as long-term capital gain. However, we note that if any portion of the co-founders' shares were received in exchange for the performance of services to Tessera (as is common for founders), we must confirm (i) whether those shares were subject to a vesting schedule or other "substantial risk of forfeiture" within the meaning of Section 83 of the Code, (ii) whether either co-founder filed an election under Section 83(b) of the Code with respect to such shares, and (iii) the fair market value of the shares at the time of the relevant taxable event (grant, vesting, or Section 83(b) election). If a Section 83(b) election was timely filed, the co-founders' basis in the shares would be equal to the amount (if any) paid for the shares at the time of the election, and the holding period would commence on the date the shares were transferred. If no Section 83(b) election was filed with respect to shares subject to vesting, the co-founders would have recognized ordinary income upon vesting equal to the fair market value of the shares at the time of vesting less any amount paid, and their basis would include that ordinary income amount. These facts need to be confirmed during diligence.

Withholding Obligations. BRB, as the acquiring corporation, or the paying agent engaged to facilitate the payment of merger consideration, must comply with applicable federal tax withholding and reporting obligations. Specifically:

Backup Withholding. Under Section 3406 of the Code, the payor is required to withhold federal income tax at the rate of 24% on reportable payments (including merger consideration payments) made to U.S. persons who fail to provide a correct taxpayer identification number on IRS Form W-9, or who are otherwise subject to backup withholding. The paying agent should obtain a properly completed IRS Form W-9 from each Tessera stockholder prior to or at the time of payment.

Information Reporting. Under Section 6045 of the Code, the payor is required to file information returns (IRS Form 1099-B) reporting the gross proceeds paid to each Tessera stockholder in connection with the merger. These forms must be filed with the IRS and furnished to the stockholders by the applicable due dates (generally January 31 of the year following payment for the stockholder copy, and February 28 or March 31 for the IRS filing, depending on whether paper or electronic filing is used).

FIRPTA Withholding. Section 1445 of the Code generally requires a transferee to withhold 15% of the amount realized on the disposition of a "United States real property interest" ("USRPI") by a foreign person. A USRPI includes stock of a "United States real property holding corporation" ("USRPHC"). Tessera is a fintech company operating a digital lending platform and, based on the information available to us, does not hold significant interests in U.S. real property. Accordingly, Tessera is unlikely to be a USRPHC, and Section 1445 withholding should not apply. This conclusion is subject to confirmation during diligence, and we recommend that Tessera provide a certification of non-USRPHC status for inclusion in the closing deliverables.

C. Consequences to Tessera Lending, Inc. (Target)

Tessera, as the surviving corporation in the reverse triangular merger, will not recognize gain or loss on the exchange of its stock for cash to its stockholders at the effective time of the merger. This result follows from the general principle of Section 1032 of the Code, which provides that no gain or loss is recognized by a corporation on the receipt of money or other property in exchange for its own stock. Although the mechanics of the reverse triangular merger are such that Tessera itself does not directly issue or exchange its stock (rather, the stockholders surrender their shares, which are cancelled in the merger), the transaction is treated for federal income tax purposes in a manner consistent with Section 1032, and no entity-level gain or loss is triggered by the merger standing alone.

Following the closing of the merger, Tessera will become a direct, wholly owned subsidiary of BRB. As discussed in Section VII.A below, Tessera will be included in BRB's federal consolidated income tax return for taxable periods beginning after the acquisition date, and Tessera's taxable year will close on the acquisition date.

Any built-in gains in Tessera's assets — that is, the excess of fair market value over Tessera's historical cost basis — will remain unrecognized at the corporate level absent a Section 338(h)(10) election. In the absence of such an election, Tessera's assets will retain their historical cost basis in Tessera's hands (and on BRB's consolidated balance sheet for tax purposes), and BRB will not be entitled to additional depreciation or amortization deductions attributable to any excess of the purchase price over historical asset basis. The implications of this result, and the potential benefits of a Section 338(h)(10) election, are discussed at length in Section IV below.

D. Consequences to Belmont Ridge Bank NA (Buyer)

In the absence of a Section 338(h)(10) election, the principal federal income tax consequences to BRB of the proposed merger are as follows:

Stock Basis. BRB will receive a cost basis in the Tessera stock equal to the aggregate merger consideration paid — $48,000,000 — under Section 1012 of the Code. This basis will be relevant if BRB subsequently disposes of the Tessera stock (e.g., in a future sale or spin-off of Tessera) or if Tessera is later liquidated into BRB.

Asset Basis. Without a Section 338(h)(10) election, BRB's acquisition of the Tessera stock does not result in any change to the tax basis of Tessera's underlying assets. Tessera's assets will continue to have the same historical cost basis they had prior to the merger. This is a significant consideration because Tessera, as a fintech company, likely has substantial intangible asset value — including its proprietary lending technology platform, customer relationships, lending licenses, trade name, and assembled workforce — that is not reflected on Tessera's balance sheet at fair market value for tax purposes. To the extent that the fair market value of these intangible assets exceeds their tax basis (which, for internally developed intangibles, may be zero or near-zero), BRB will not be able to claim depreciation or amortization deductions on that excess value in a stock acquisition without a Section 338(h)(10) election.

Goodwill and Intangibles. Goodwill and other Section 197 intangible assets acquired in connection with an asset purchase are amortizable on a straight-line basis over 15 years under Section 197 of the Code. However, this amortization benefit is available only if the intangible assets are "acquired" in a transaction that results in a new tax basis — i.e., an asset purchase or a stock purchase that is treated as an asset purchase by reason of a Section 338 election. In a straight stock acquisition without a Section 338 election, no new basis is created in the target's assets, and goodwill inherent in the purchase price is not separately recognized or amortizable for tax purposes. This is one of the primary reasons we recommend exploring the Section 338(h)(10) election, as discussed in Section IV.

IV. Section 338(h)(10) Election Analysis and Recommendation

A. Overview of Section 338(h)(10)

Section 338(h)(10) of the Code and Treasury Regulations Section 1.338(h)(10)-1 provide a mechanism by which the buyer and the selling stockholders of a target may jointly elect to treat a qualifying stock purchase as a deemed asset sale for federal income tax purposes. The election is designed to provide the economic and tax benefits of an asset acquisition while preserving the legal and structural benefits of a stock acquisition (including the survival of the target as a legal entity with its contracts, licenses, and other rights intact — a particularly important consideration for a regulated lending business like Tessera).

The Section 338(h)(10) election is available in the following circumstances: (i) the target is an S corporation; (ii) the target is a member of a consolidated group (i.e., a subsidiary whose stock is sold by a common parent or other member of the group); or (iii) in certain cases, the target is a C corporation where the target has a single corporate parent or where all of the target's stockholders consent to the election. In the case of Tessera, the company is a stand-alone C corporation that is not a member of any consolidated group. The election may still be available if all of Tessera's stockholders agree to join in the election, as contemplated by Treasury Regulations Section 1.338(h)(10)-1(c)(1). Alternatively, BRB may consider a unilateral Section 338(g) election, though the economic consequences of a Section 338(g) election differ materially from those of a Section 338(h)(10) election and are generally less favorable to the buyer due to the absence of the "old target/new target" paradigm.

For the election to be available, the stock acquisition must constitute a "qualified stock purchase" ("QSP") within the meaning of Section 338(d)(3) of the Code. A QSP requires the acquisition of at least 80% of the target's stock (by vote and value) by the purchasing corporation (or a member of its affiliated group) within a 12-month period. In the proposed transaction, BRB (through Acquisition Sub) will acquire 100% of Tessera's outstanding stock in a single transaction at the effective time of the merger. The reverse triangular merger, when treated as a stock acquisition for federal income tax purposes (i.e., BRB is treated as acquiring the Tessera stock in exchange for cash), should constitute a QSP. We note that the characterization of a reverse triangular merger as a stock acquisition (rather than an asset acquisition) for federal income tax purposes is well established in published guidance and consistent with the approach taken by the IRS in Revenue Ruling 90-95, 1990-2 C.B. 67.

B. Tax Effects of a Section 338(h)(10) Election

If BRB and the Tessera stockholders jointly make a Section 338(h)(10) election, the transaction will be treated for federal income tax purposes as follows:

Step 1 — Deemed Asset Sale. Tessera (referred to as "old target") is treated as having sold all of its assets to an unrelated person at fair market value in a single transaction on the "acquisition date" (the closing date of the merger) while still a member of the selling consolidated group (or, in Tessera's case, while its stockholders still own the stock). This deemed asset sale triggers the recognition of gain or loss at the corporate level on each of Tessera's assets, as if Tessera had actually sold all of its assets in a taxable transaction.

Step 2 — Deemed Liquidation. Immediately after the deemed asset sale, Tessera (old target) is treated as having distributed all of the deemed sale proceeds and its remaining assets to its stockholders in complete liquidation under Section 331 of the Code. The stockholders are treated as receiving liquidating distributions in exchange for their Tessera stock.

Step 3 — New Target. A "new target" is deemed to be created, which acquires the assets of old target with a new, stepped-up tax basis equal to the "adjusted grossed-up basis" ("AGUB") — generally, the purchase price ($48,000,000) plus the liabilities assumed by the buyer. New target is treated as a new corporation that has purchased all of the assets of old target.

The primary benefit to BRB is that, under Step 3, BRB (through Tessera as new target) receives a stepped-up tax basis in all of Tessera's assets — both tangible and intangible — equal to the AGUB. This stepped-up basis allows BRB to claim depreciation deductions on tangible assets and amortization deductions on intangible assets (including goodwill) based on the fair market values assigned through the purchase price allocation process, rather than Tessera's historical cost basis. For a fintech company like Tessera, where a significant portion of the enterprise value is attributable to intangible assets with low or zero historical tax basis, the step-up can generate substantial tax benefits over the recovery period (15 years for Section 197 intangibles, varying periods for other asset classes).

C. Allocation of Purchase Price (Preliminary)

If a Section 338(h)(10) election is made, the AGUB must be allocated among Tessera's assets in accordance with the residual method prescribed by Section 1060 of the Code and Treasury Regulations Section 1.338-6. Under the residual method, the AGUB is allocated among seven classes of assets, in the following order of priority:

The allocation of the AGUB among these classes will require a formal purchase price allocation study, which should be prepared by a qualified valuation specialist. We recommend that BRB engage Graystone & Albright LLP (BRB's independent auditor) or a specialized valuation firm to prepare the allocation study. Additionally, Whitfield Thorpe LLP (Tessera's independent auditor) should be asked to provide asset-level detail, including historical cost basis and depreciation schedules for all tangible and intangible assets on Tessera's books.

Based on our preliminary understanding of Tessera's business and assets, we expect that a significant portion of the AGUB will be allocated to Class VI (Section 197 intangibles) and Class VII (goodwill), given the nature of Tessera's business as a technology-driven consumer lending platform. The key intangible assets that would benefit from the stepped-up basis include:

• Proprietary Lending Technology Platform. Tessera has developed a proprietary technology platform for underwriting, originating, and servicing consumer loans. This platform is a core intangible asset with significant fair market value.

• Customer Relationships. Tessera has an established base of consumer borrowers and institutional lending partners, including Ridgeline Community Bank.

• Lending Licenses. Tessera holds consumer lending licenses in 42 states and the District of Columbia. These licenses have regulatory and commercial value, and obtaining new licenses in these jurisdictions would involve significant cost and time.

• Brand and Trade Name. The "Tessera Lending" trade name has recognition in the digital lending market.

• Assembled Workforce. While assembled workforce is generally not a separately amortizable Section 197 intangible (as it is subsumed into goodwill), it contributes to the overall enterprise value that would be allocated to Class VII.

The allocation of AGUB to Class VI intangibles is particularly significant because Section 197 intangibles are amortizable on a straight-line basis over 15 years, beginning in the month of the acquisition. Assuming a material allocation to Class VI, BRB would be entitled to annual amortization deductions that could materially reduce its post-acquisition taxable income attributable to the Tessera business.

D. Impact on Tessera Stockholders

The principal disadvantage of a Section 338(h)(10) election for a C corporation target is the "double tax" that results from the deemed asset sale at the corporate level combined with the deemed liquidating distribution at the stockholder level.

Corporate-Level Tax. Under the Section 338(h)(10) election, Tessera (old target) is treated as having sold all of its assets at fair market value. To the extent that the deemed sale price exceeds Tessera's adjusted tax basis in its assets, Tessera will recognize gain at the corporate level, which will be subject to federal corporate income tax at the current rate of 21%. The amount of the corporate-level gain, and consequently the corporate-level tax, will depend on the extent to which Tessera's assets have a fair market value in excess of their adjusted tax basis — i.e., the "built-in gain" in Tessera's assets.

For internally developed intangible assets (such as Tessera's proprietary technology platform and customer relationships), the adjusted tax basis is likely zero or near-zero, because the costs of developing these assets were likely expensed as incurred for tax purposes (e.g., under Section 174 research and experimental expenditure provisions, as amended by the Tax Cuts and Jobs Act of 2017). Accordingly, the corporate-level gain on the deemed sale of these intangible assets could be substantial.

In addition, Tessera will recognize gain to the extent that the deemed sale price of its tangible assets (such as computer equipment and office furnishings) exceeds their adjusted tax basis, which may give rise to depreciation recapture under Section 1245 (taxable as ordinary income) or Section 1250 (for real property, if applicable).

Stockholder-Level Tax. After the deemed asset sale, Tessera is treated as having distributed the deemed sale proceeds to its stockholders in a complete liquidation under Section 331. Each stockholder recognizes gain or loss on the deemed liquidating distribution in an amount equal to the difference between the amount received (or deemed received) and the stockholder's adjusted tax basis in the Tessera stock. In most cases, the net after-tax amount realized by the stockholders under the Section 338(h)(10) election will be lower than the net after-tax amount realized in a straight stock sale, because the stockholders bear the economic burden of the corporate-level tax (which reduces the net distributable proceeds).

Double Tax Considerations. The combination of the corporate-level tax on the deemed asset sale and the stockholder-level tax on the deemed liquidation constitutes a "double tax" that is the hallmark of the Section 338(h)(10) election for C corporation targets. This double tax is the primary reason that Section 338(h)(10) elections are far more common for S corporation targets (where no entity-level tax applies, and the deemed asset sale gain flows through to the stockholders) than for C corporation targets.

However, the double tax may be mitigated or offset if Tessera has significant net operating loss ("NOL") carryforwards that can be used to offset the corporate-level gain on the deemed asset sale. Additionally, if the built-in gain in Tessera's assets is relatively modest (e.g., because Tessera has relatively few appreciated assets), the incremental corporate-level tax cost of the election may be manageable.

Negotiation Dynamics. As a practical matter, the Tessera stockholders will bear the economic burden of the corporate-level tax resulting from the Section 338(h)(10) election (because the corporate-level tax is paid by Tessera prior to the deemed liquidating distribution, reducing the net proceeds available for distribution to stockholders). The Tessera stockholders will therefore likely resist the election unless BRB agrees to compensate them for the incremental tax cost — typically through a gross-up payment or an upward adjustment to the merger consideration. The amount of the gross-up or adjustment, if any, and the allocation of the cost and benefit between buyer and sellers, is a negotiation point that must be addressed in the definitive merger agreement. The cost-benefit analysis described below will provide the data necessary to evaluate the economics of this negotiation.

E. Recommendation

We recommend that BRB explore the Section 338(h)(10) election through a detailed cost-benefit analysis, to be conducted once full due diligence data on Tessera's asset bases, intangible asset values, and any NOL carryforwards is available. Based on our preliminary understanding of Tessera's business — in particular, the significant intangible asset value represented by Tessera's proprietary lending technology platform, its customer relationships, and its lending licenses in 42 states and the District of Columbia, together with approximately $1.2 billion in cumulative loan originations since Tessera's founding in 2018 — we believe that the present value of the stepped-up amortization deductions over a 15-year period could be substantial and could potentially exceed the incremental corporate-level tax cost of the election, even after accounting for a gross-up payment to the Tessera stockholders.

Specifically, the cost-benefit analysis should model the following variables:

(i) The incremental corporate-level tax cost to Tessera (old target) on the deemed asset sale, based on the difference between the fair market value and the adjusted tax basis of each category of Tessera's assets, multiplied by the applicable federal (and state, if applicable) corporate tax rates;

(ii) The present value of the additional depreciation and amortization deductions available to BRB over the applicable recovery periods (15 years for Section 197 intangibles, varying periods for tangible assets), discounted at an appropriate after-tax rate reflective of BRB's cost of capital;

(iii) The amount, if any, of any gross-up or purchase price adjustment that BRB would need to pay to the Tessera stockholders to compensate them for the incremental tax cost, and the resulting net present value benefit to BRB after the gross-up;

(iv) The interaction of the Section 338(h)(10) election with BRB's existing consolidated tax position, including BRB's effective tax rate, existing NOL carryforwards (if any), and the impact of the additional amortization deductions on BRB's consolidated taxable income.

We target completion of the preliminary Section 338(h)(10) modeling by March 2026, concurrent with the commencement of the formal diligence phase. We will coordinate with Graystone & Albright LLP and any valuation specialist engaged by BRB to ensure that the necessary asset-level information is collected and analyzed during the diligence process.

V. Treatment of Tessera Employee Stock Options and RSUs

A. Overview of Employee Equity Pool

As set forth in Section II.C above, 900,000 shares of Tessera common stock on a fully diluted basis (representing 7.5% of the total fully diluted capitalization) are attributable to Tessera's employee and angel investor equity pool. Based on the information available to us, these 900,000 shares consist of a combination of incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), and restricted stock units ("RSUs"), all granted under Tessera's 2018 Equity Incentive Plan, as amended (the "Equity Plan"). At the per-share merger consideration of $4.00, the aggregate payout to holders in the employee and angel pool would be $3,600,000 (subject, in the case of stock options, to reduction by the applicable exercise price).

The treatment of these equity awards in connection with the merger raises several significant federal income tax issues, which are addressed in the subsections below. During diligence, we will need to obtain a complete schedule of all outstanding equity awards, including the type of award (ISO, NQSO, or RSU), the grant date, exercise price (for options), vesting schedule, number of shares, and the identity of each holder.

B. Section 409A — Nonqualified Deferred Compensation Compliance

Section 409A of the Code imposes stringent requirements on "nonqualified deferred compensation" arrangements. Stock options may be treated as nonqualified deferred compensation subject to Section 409A if they are granted with an exercise price that is less than the fair market value of the underlying stock on the date of grant. Under Treasury Regulations Section 1.409A-1(b)(5)(i)(A), a stock option is exempt from Section 409A if, among other things, the exercise price is not less than the fair market value of the underlying stock on the date of grant. The fair market value for this purpose must be determined using a "reasonable valuation method" as described in Treasury Regulations Section 1.409A-1(b)(5)(iv).

For privately held companies like Tessera, fair market value is typically established through independent third-party valuations, commonly referred to as "409A valuations." These valuations are generally performed at least annually and at the time of significant events such as equity financing rounds (e.g., Tessera's Series B round in 2021 and any subsequent rounds). If Tessera's stock options were granted at exercise prices that were below the 409A fair market value of the underlying stock at the time of grant — i.e., if the options were granted at a "Discount" — those options could be treated as nonqualified deferred compensation subject to Section 409A, with severe adverse tax consequences for the option holders.

If any Tessera stock options are determined to be Section 409A non-compliant (i.e., granted at below-FMV exercise prices without proper exemption), the consequences under Section 409A(a)(1)(B) are as follows:

(i) The option holder would be required to include in income, in the year the option vests (rather than the year of exercise), the excess of the fair market value of the underlying stock over the exercise price;

(ii) The option holder would be subject to an additional tax of 20% on the amount includible in income under Section 409A; and

(iii) The option holder would be subject to an interest penalty calculated from the date the income should have been included (i.e., the vesting date).

These penalties apply at the individual option holder level and could create significant personal tax exposure for affected employees. In the context of the merger, this is a material concern because any Section 409A non-compliance discovered post-closing could give rise to indemnification claims by affected employees against Tessera (and, post-closing, against BRB as Tessera's parent).

The merger itself constitutes a "change in control" event, and payment of the merger consideration in cancellation of outstanding options and RSUs at the effective time of the merger is generally permissible under Section 409A, provided that the merger qualifies as a "change in control event" within the meaning of Treasury Regulations Section 1.409A-3(i)(5). We believe that the proposed reverse triangular merger — in which BRB acquires 100% of the outstanding Tessera stock — should satisfy the definition of a "change in control event" under these regulations. However, the specific language of Tessera's Equity Plan and the individual award agreements must be reviewed to confirm that the plan and award documents properly define and reference a "change in control" or "change in control event" in a manner consistent with the Section 409A regulations.

Recommendation: We recommend that the deal team obtain and review, as part of the due diligence process, (i) all Section 409A valuation reports prepared for Tessera since the company's inception in 2018, (ii) the complete option grant schedule for all outstanding stock options (including grant dates and exercise prices for each tranche), and (iii) Tessera's Equity Plan and form of award agreements. This review should be conducted by the diligence team (Andrew Fitzpatrick and Naomi Petersen), with tax review by our group, to confirm that all outstanding options were granted at exercise prices at or above the then-current 409A fair market value, and to identify any potential Section 409A compliance issues.

C. Section 83 — Restricted Stock and RSU Treatment

Section 83 of the Code governs the taxation of property (including stock) transferred in connection with the performance of services. RSUs are a form of compensatory equity award that are generally subject to Section 83 at the time of settlement (i.e., when the underlying shares are delivered to the holder or when the RSUs are settled in cash).

Unvested RSUs at the Time of Merger. The treatment of unvested RSUs at the effective time of the merger depends on whether the merger agreement provides for acceleration of vesting (so that all RSUs become fully vested at or prior to the effective time) or, alternatively, for assumption or substitution of the unvested RSUs by BRB.

If RSUs are cashed out — that is, if all outstanding RSUs (whether vested or unvested) are cancelled at the effective time of the merger in exchange for the right to receive the per-share merger consideration of $4.00 per share (less applicable withholding) — then the holders will recognize ordinary income under Section 83 at the time of settlement in an amount equal to the fair market value of the consideration received. BRB (or Tessera, as the surviving corporation) would be entitled to a corresponding compensation deduction under Section 162 of the Code, subject to the limitations discussed in Section V.D below.

If, alternatively, the unvested RSUs are assumed or substituted by BRB — that is, if the unvested RSUs are converted into replacement RSU awards referencing BRB common stock with equivalent terms and conditions — then no taxable event occurs at the closing. Instead, taxation is deferred until the replacement awards vest and are settled in accordance with their terms.

Based on our review of the preliminary draft merger agreement circulated by the deal team on January 24, 2026, we understand that the current proposal is for all outstanding RSUs and in-the-money stock options to be cancelled at the effective time of the merger and converted into the right to receive the per-share merger consideration of $4.00 per share (in the case of RSUs) or $4.00 per share less the applicable exercise price (in the case of stock options). This cashout treatment is the simplest and most common approach in an all-cash merger and avoids the complexities associated with assumption or substitution of equity awards.

Withholding Obligations. To the extent that option or RSU cashout payments are treated as compensation income to the holders (which will be the case for NQSOs and RSUs), BRB (or Tessera, as the surviving corporation and the employer of the affected employees) is required to withhold applicable federal income tax (at the supplemental wage withholding rate, currently 22% for payments up to $1,000,000 and 37% for payments in excess of $1,000,000 per payee per year), FICA taxes (Social Security tax at 6.2% up to the applicable wage base and Medicare tax at 1.45%, plus the Additional Medicare Tax of 0.9% for wages in excess of $200,000), and applicable state and local income taxes. These withholding obligations must be properly accounted for in the merger consideration payment mechanics set forth in the merger agreement.

Section 280G — Excess Parachute Payments. The acceleration of vesting of stock options and RSUs in connection with the merger may trigger the "golden parachute" provisions of Section 280G of the Code. Under Section 280G, if a "disqualified individual" — generally, an officer, highly compensated employee, or greater-than-1% shareholder of the target — receives "parachute payments" in connection with a "change in ownership or control" that exceed three times the individual's "base amount" (generally, the individual's average annual taxable compensation over the five preceding years), the excess over one times the base amount is treated as an "excess parachute payment." The consequences of excess parachute payments are twofold:

(i) The corporation (Tessera / BRB post-closing) loses its deduction for the excess parachute payments under Section 280G(a); and

(ii) The recipient is subject to a 20% excise tax on the excess parachute payments under Section 4999, in addition to regular income tax.

In the proposed transaction, the following individuals are likely "disqualified individuals" for Section 280G purposes:

• Vikram S. Narayan (Co-Founder, CEO), holding 3,744,000 shares (31.2% of Tessera); as a greater-than-1% shareholder and officer, he is a disqualified individual.

• Elena M. Castillo (Co-Founder, CTO), holding 2,736,000 shares (22.8% of Tessera); as a greater-than-1% shareholder and officer, she is a disqualified individual.

• Other officers and highly compensated employees of Tessera who may hold stock options or RSUs in the employee pool and whose total compensation (including equity award cashouts) in connection with the merger could trigger the Section 280G threshold.

For each disqualified individual, we will need to calculate the total parachute payments (including the value of any accelerated vesting of equity awards, severance payments, and any other payments contingent on the change of control), compare the total to the applicable three-times-base-amount threshold, and determine whether excess parachute payments exist.

Recommendation: We recommend performing Section 280G calculations for all disqualified individuals during the diligence phase. In addition, the deal team should consider whether to include a Section 280G stockholder vote provision in the merger agreement. Under Section 280G(b)(5)(B), if the target is an entity that is not publicly traded (as Tessera is not), the disqualified individual may avoid the Section 280G excise tax and the corporation may preserve its deduction if the parachute payments are approved by a vote of more than 75% of the outstanding stock of the target (after clear disclosure of all material facts). Given that the co-founders hold more than 54% of the outstanding stock, a stockholder vote may be a viable option if structured correctly (noting that the disqualified individual whose payments are being approved may not vote their own shares). Alternatively, the deal team should consider including waiver or cutback provisions in the merger agreement under which the total parachute payments to any disqualified individual are reduced to the safe harbor amount (three times the base amount, minus $1) if doing so would result in a greater after-tax benefit to the individual.

D. Section 162(m) — Limitation on Deductibility of Compensation

Section 162(m) of the Code limits the deductibility of compensation paid by a "publicly held corporation" to its "covered employees" to $1,000,000 per employee per taxable year. For taxable years beginning after December 31, 2026, Section 162(m) applies to the corporation's current and former principal executive officer, principal financial officer, and the three other highest-compensated officers, as well as any individual who was a covered employee in any prior taxable year beginning after December 31, 2016. There are no longer any exceptions for performance-based compensation following the repeal of the performance-based compensation exception by the Tax Cuts and Jobs Act of 2017.

Post-merger, Tessera will become a subsidiary of BRB, which is a publicly held corporation traded on the NYSE under ticker symbol BRMG. To the extent that compensation paid in connection with the merger — including option and RSU cashout payments — is paid to individuals who are or become "covered employees" of the combined BRB/Tessera entity, the deductibility of such compensation may be limited to $1,000,000 per individual per year under Section 162(m). This limitation could affect the timing and amount of BRB's compensation deductions for payments made to Tessera's senior executives in connection with the merger.

We note that the application of Section 162(m) to compensation paid by a privately held target to its employees in the year of acquisition by a publicly held acquirer is a complex and evolving area. The IRS has issued proposed regulations addressing the identification of covered employees in certain transaction contexts, and the specific facts — including whether the Tessera employees are treated as BRB employees for Section 162(m) purposes in the year of the merger — will need to be analyzed.

Recommendation: We recommend evaluating the applicability of Section 162(m) to the merger-related compensation payments during the diligence phase, with a view toward maximizing the deductibility of such payments to the extent permissible under applicable law.

VI. State and Local Tax Implications

A. Texas

Tessera's principal executive offices are located at 2400 Shoal Creek Boulevard, Suite 500, Austin, Texas 78756. The State of Texas does not impose a state income tax on individuals or corporations. Accordingly, neither the Tessera stockholders (to the extent they are Texas residents) nor Tessera itself will be subject to Texas state income tax in connection with the merger.

Texas does, however, impose a franchise tax (also known as the "margin tax") on entities doing business in Texas, including corporations, limited partnerships, limited liability companies, and other legal entities formed in or doing business in the state. The Texas franchise tax is applicable to Tessera as a Texas-nexus corporation. The franchise tax is computed based on the entity's total revenue, with certain deductions permitted (the entity may generally deduct the greater of cost of goods sold, compensation, 30% of total revenue, or $1,000,000). The current tax rate is 0.375% for qualifying wholesalers and retailers and 0.75% for all other entities. As a fintech lending company, Tessera would be subject to the 0.75% rate.

Impact on the Transaction. With respect to a Section 338(h)(10) election, the deemed asset sale under the election is a federal income tax concept and should not trigger incremental Texas franchise tax. The Texas franchise tax is no

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1 World Financial Center, 42nd Floor New York, NY 10281
MEMORANDUM
Matter No.: 1045-00005
Date: January 30, 2026
To:
Catherine A. Royce, General Counsel & Corporate Secretary, Belmont Ridge Bank NA
Beatrice Holloway, Responsible Partner, M&A, Calderwood & Harkness LLP
James Prentice, Billing Partner, M&A, Calderwood & Harkness LLP
Andrew Fitzpatrick, Lead Associate, M&A, Calderwood & Harkness LLP
Naomi Petersen, Working Associate, M&A, Calderwood & Harkness LLP
From: Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP
Re: Federal, State, and Local Tax Structuring Analysis — Proposed Reverse Triangular Merger Acquisition of Tessera Lending, Inc. by Belmont Ridge Bank NA
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I. Executive Summary
This memorandum sets forth our preliminary analysis of the federal, state, and local income tax consequences of the proposed acquisition of Tessera Lending, Inc. ("Tessera" or "TLI"), a Delaware corporation (EIN 83-2649107; Delaware file number 6847312), by Belmont Ridge Bank NA ("BRB") (EIN 13-4517820; OCC charter number 24-00781). This memorandum has been prepared at the request of Catherine A. Royce, General Counsel and Corporate Secretary of BRB, in coordination with the Calderwood & Harkness M&A deal team led by Beatrice Holloway and James Prentice, in connection with the proposed acquisition.
The contemplated transaction is structured as a reverse triangular merger under the Delaware General Corporation Law ("DGCL"). Specifically, BRB Acquisition Sub, Inc. ("Acquisition Sub"), a to-be-formed Delaware wholly owned subsidiary of BRB, will merge with and into Tessera, with Tessera surviving the merger as a wholly owned subsidiary of BRB. The aggregate merger consideration is $48,000,000, payable entirely in cash, with a per-share merger consideration of $4.00 per share based on 12,000,000 fully diluted shares of Tessera common stock outstanding. No equity component of any kind is contemplated.
Our key conclusions and observations are summarized as follows:
Taxable Transaction Characterization. Because the merger consideration consists entirely of cash, the proposed transaction is a fully taxable transaction to all Tessera stockholders. The transaction does not and cannot qualify as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the "IRC" or the "Code"). Each Tessera stockholder will recognize gain or loss on the exchange of their shares for cash, with the character of that gain or loss generally treated as capital in nature, subject to the qualifications discussed below.
Section 338(h)(10) Election Opportunity. We recommend that BRB explore a joint election under Section 338(h)(10) of the Code with the Tessera stockholders. If made, this election would cause the transaction to be treated for federal income tax purposes as a deemed sale of all of Tessera's assets at fair market value, followed by a deemed liquidation of Tessera. The principal benefit to BRB would be a stepped-up tax basis in Tessera's assets — including intangible assets such as Tessera's proprietary lending technology platform, customer relationships, lending licenses in 42 states and the District of Columbia, and goodwill — which would generate increased depreciation and amortization deductions for BRB in post-closing periods. A detailed cost-benefit analysis will be required, and the election will necessitate negotiation with the Tessera stockholder group regarding the allocation of the incremental corporate-level tax cost.
Employee Equity Considerations. Special attention is required for the treatment of 900,000 shares in Tessera's employee stock option and restricted stock unit ("RSU") pool. In particular, compliance with Section 409A of the Code (governing nonqualified deferred compensation) must be confirmed for all outstanding stock options, and the treatment of RSU cashouts under Section 83 must be properly structured. Additionally, the acceleration of equity awards in connection with the change of control may trigger excess parachute payment issues under Section 280G, particularly for Tessera's co-founders and senior officers.
State and Local Tax Consequences. State and local tax consequences appear favorable on a preliminary basis. Texas, where Tessera maintains its principal offices, does not impose a state income tax on individuals or corporations; the Texas franchise (margin) tax applies to Tessera but should not be materially affected by the transaction. Delaware franchise tax implications for Tessera and Acquisition Sub are manageable and routine. A comprehensive state tax nexus study will be required to address Tessera's lending activities across 42 states and the District of Columbia.
Post-Closing Matters. Intercompany tax-sharing arrangements between BRB and Tessera will need to be established following the closing, consistent with regulatory requirements of the Office of the Comptroller of the Currency ("OCC") for national bank subsidiaries. The tax treatment of Tessera's existing bank-partnership arrangement with Ridgeline Community Bank will require review in light of the change of ownership.
This memorandum is intended for internal discussion purposes only and does not constitute a formal tax opinion. All conclusions and recommendations set forth herein are preliminary and subject to confirmation through the due diligence process. We anticipate updating this analysis as additional information becomes available during the diligence phase, which is expected to commence in late February 2026.
II. Transaction Overview and Parties
A. Description of Proposed Transaction
The proposed transaction is structured as a reverse triangular merger under Section 251 of the DGCL. In this structure, BRB will cause a newly formed, wholly owned Delaware subsidiary — BRB Acquisition Sub, Inc. ("Acquisition Sub") — to merge with and into Tessera. Tessera will be the surviving entity in the merger, and upon consummation of the merger, Tessera will become a direct, wholly owned subsidiary of BRB. Acquisition Sub will cease to exist as a separate legal entity upon the effectiveness of the merger.
At the effective time of the merger, all outstanding shares of Tessera common stock — 12,000,000 shares on a fully diluted basis, including shares issuable upon the exercise of vested stock options and settlement of vested RSUs — will be automatically converted into the right to receive $4.00 per share in cash, without interest, for aggregate merger consideration of $48,000,000. There is no equity component to the merger consideration. The consideration is being funded entirely from BRB's available cash on hand and existing credit facilities.
Based on information provided to date by Tessera's counsel, Kessler, Aldrich & Voss LLP, Tessera is debt-free as of the date of this memorandum. No net-debt adjustment to the merger consideration is anticipated at this stage; however, this is subject to confirmatory diligence, and the merger agreement is expected to contain customary closing adjustments for working capital, indebtedness, and transaction expenses.
The parties contemplate a general indemnification escrow of $4,800,000, representing 10% of the aggregate merger consideration. The escrow funds will be held by Caravel Trust Company, N.A. as escrow agent for a period of eighteen (18) months following the closing date. The escrow is intended to serve as a source of recovery for BRB in connection with post-closing indemnification claims for breaches of representations, warranties, and covenants in the definitive merger agreement.
In addition to the general indemnification escrow, BRB is pursuing a buyer-side representations and warranties ("R&W") insurance policy from Meridian Indemnity Group, Inc. The contemplated policy would have a coverage limit of $9,600,000 (representing 20% of deal value) with a retention of $960,000 (representing 2% of deal value). The R&W insurance policy is intended to provide BRB with additional protection against losses arising from breaches of Tessera's representations and warranties, over and above the indemnification escrow amount, and will be subject to customary exclusions and policy terms.
The merger consideration is structured as 100% cash. No shares of BRB common stock, BRB preferred stock, or any other equity securities of BRB or any BRB affiliate will be issued as part of the merger consideration. This structural decision has significant federal income tax implications, as discussed in detail in Section III below.
B. Identification of Parties and Tax Identification Numbers
The following is a summary of the principal parties to the proposed transaction and their relevant identifying information:
Buyer: Belmont Ridge Bank NA. BRB is a national banking association organized under the laws of the United States, with its principal executive offices located in New York, New York. BRB's Employer Identification Number ("EIN") is 13-4517820, and it operates under OCC charter number 24-00781. BRB's common stock is publicly traded on the New York Stock Exchange under the ticker symbol "BRMG." As of December 31, 2025, BRB reported total consolidated assets of approximately $14.7 billion and cash and cash equivalents of approximately $1.03 billion, based on its most recent publicly filed financial statements. BRB files a consolidated federal income tax return as the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Code.
Target: Tessera Lending, Inc. Tessera is a corporation organized under the laws of the State of Delaware. Tessera's EIN is 83-2649107, and its Delaware file number is 6847312. Tessera's principal executive offices are located at 2400 Shoal Creek Boulevard, Suite 500, Austin, Texas 78756. Tessera operates a digital consumer lending platform and holds lending licenses in 42 states and the District of Columbia. For the fiscal year ended December 31, 2025 ("FY2025"), Tessera reported revenue of approximately $38,400,000 and adjusted EBITDA of approximately $5,100,000, based on preliminary unaudited financial information provided by Tessera's management. Tessera is a C corporation for federal income tax purposes and does not file as part of any consolidated or affiliated group.
Acquisition Sub: BRB Acquisition Sub, Inc. Acquisition Sub is a Delaware corporation to be formed as a direct, wholly owned subsidiary of BRB for the sole purpose of facilitating the reverse triangular merger. Acquisition Sub has not yet been incorporated, and accordingly, an EIN has not yet been obtained. Upon formation, Acquisition Sub's registered agent will be Crowne Albany Corporation, located at Cobalt Ridge Technologies, 1209 Orange Street, Wilmington, Delaware 19801. Acquisition Sub will have nominal capitalization and no operations or employees. Acquisition Sub will cease to exist upon the effectiveness of the merger.
Auditors. Tessera's independent auditor is Whitfield Thorpe LLP, based in Austin, Texas. BRB's independent auditor is Graystone & Albright LLP, based in Philadelphia, Pennsylvania. Both firms are expected to play roles in the diligence process and, if applicable, in connection with any purchase price allocation study.
C. Capitalization of Tessera (Fully Diluted)
Based on information provided by Tessera's counsel, the fully diluted capitalization of Tessera as of the date of this memorandum is as set forth in the table below. All share numbers are presented on a fully diluted basis, reflecting shares of common stock outstanding and shares issuable upon the exercise of all vested and unvested stock options and settlement of all vested and unvested RSUs.
The co-founders, Vikram S. Narayan and Elena M. Castillo, together hold 6,480,000 shares representing 54.0% of the fully diluted capitalization, for aggregate merger consideration of $25,920,000. The two institutional investors, Pinnacle Ventures Fund III, LP and Broadleaf Growth Capital, LLC, together hold 4,620,000 shares representing 38.5% of the fully diluted capitalization, for aggregate merger consideration of $18,480,000. The employee and angel investor pool consists of 900,000 shares (7.5%), comprising a mixture of incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), and RSUs granted under Tessera's 2018 Equity Incentive Plan, as amended. The treatment of the employee equity pool is discussed in detail in Section V below.
We note that the foregoing capitalization table is preliminary and subject to confirmation through diligence. In particular, we will need to obtain a complete capitalization table from Tessera (or its counsel) detailing the specific number of ISOs, NQSOs, and RSUs outstanding, the grant dates and exercise prices for each option tranche, the vesting schedules applicable to each award, and any early exercise or Section 83(b) elections that may have been filed. This information is critical to the tax analysis set forth in Sections III and V of this memorandum.
III. Federal Income Tax Analysis — Taxable Transaction Characterization
A. Inapplicability of Tax-Free Reorganization Under Section 368
A threshold question in any acquisition is whether the transaction may be structured to qualify as a tax-free reorganization under Section 368 of the Code, thereby deferring the recognition of gain by the target's stockholders. We have analyzed each potentially applicable subsection of Section 368 and conclude that none applies to the proposed transaction as currently structured. Our analysis is set forth below.
Section 368(a)(1)(A) — Statutory Merger. Section 368(a)(1)(A) of the Code provides that a statutory merger or consolidation may qualify as a tax-free reorganization if it satisfies certain judicial and regulatory requirements. Among the most significant of these requirements is the "continuity of interest" ("COI") requirement, codified in Treasury Regulations Section 1.368-1(e). The COI requirement mandates that a substantial portion of the value of the proprietary interests in the target be preserved through the issuance of stock of the acquiring corporation to the target's stockholders. Under Treasury Regulations Section 1.368-1(e)(2)(v), Example 1, the IRS has generally required that at least 40% of the total merger consideration consist of acquiring corporation stock in order to satisfy the COI requirement. The proposed all-cash merger consideration of $48,000,000, with no equity component whatsoever, fails the COI requirement by a wide margin. Accordingly, the proposed merger cannot qualify as a tax-free reorganization under Section 368(a)(1)(A).
Section 368(a)(2)(E) — Reverse Triangular Merger Reorganization. Section 368(a)(2)(E) of the Code permits a reverse triangular merger — in which a subsidiary of the acquiring corporation merges into the target, with the target surviving — to qualify as a tax-free reorganization, provided that certain conditions are satisfied. Among the most critical of these conditions is the requirement that, in the merger, the former stockholders of the target exchange, for "voting stock" of the controlling corporation (i.e., the acquiring corporation's parent), an amount of target stock constituting "control" of the target (within the meaning of Section 368(c), i.e., at least 80% by vote and value). The IRS has consistently interpreted this requirement to mean that at least 80% of the total merger consideration must consist of voting stock of the parent corporation. The proposed transaction provides for 100% cash consideration, with zero percent stock consideration. The proposed merger therefore fails the stock consideration requirement of Section 368(a)(2)(E) and cannot qualify thereunder.
Section 368(a)(1)(B) — Stock-for-Stock Exchange. Section 368(a)(1)(B) applies to acquisitions in which the acquiring corporation acquires "control" (80% by vote and value) of the target solely in exchange for voting stock of the acquiring corporation. This provision requires that the acquisition be made "solely for voting stock" and does not permit any cash or other non-stock consideration, subject to a narrow exception for fractional share cash. The proposed all-cash merger is fundamentally incompatible with Section 368(a)(1)(B).
Section 368(a)(1)(C) — Practical Merger / Asset Acquisition. Section 368(a)(1)(C) applies to acquisitions of "substantially all" of the target's assets in exchange for voting stock of the acquiring corporation. While a limited amount of non-stock consideration ("boot") is permitted, the transaction must still satisfy an 80% stock test. This provision is inapplicable to the proposed all-cash transaction. Additionally, Section 368(a)(1)(C) contemplates a direct asset acquisition, not a stock acquisition or reverse triangular merger.
Section 368(a)(2)(D) — Forward Triangular Merger. Section 368(a)(2)(D) permits a forward triangular merger (target merges into a subsidiary of the acquiring corporation) to qualify as a tax-free reorganization under certain conditions. This provision is inapplicable because the proposed transaction is structured as a reverse triangular merger (Acquisition Sub merges into Tessera, with Tessera surviving), and in any event, the all-cash consideration would fail the applicable stock consideration requirements.
Conclusion. Based on the foregoing analysis, the proposed reverse triangular merger, with all-cash consideration of $48,000,000, is a fully taxable transaction and cannot qualify as a tax-free reorganization under any provision of Section 368 of the Code. All Tessera stockholders will recognize gain or loss upon the exchange of their shares for cash in the merger, as discussed in Section III.B below.
Recommendation Against Restructuring as a Section 368 Reorganization. We considered whether it would be advisable for BRB to restructure the proposed transaction to include a sufficient equity component (i.e., at least 80% of the consideration in BRB voting stock) in order to qualify the merger as a tax-free reorganization under Section 368(a)(2)(E). After consultation with the deal team and Ms. Royce, we do not recommend this approach for the following reasons:
First, BRB's fundamental strategic objective is an all-cash acquisition. BRB has ample cash and cash equivalents (approximately $1.03 billion as of December 31, 2025) to fund the $48,000,000 acquisition, and the issuance of BRB stock as merger consideration is not consistent with BRB's stated capital allocation strategy.
Second, the issuance of BRB common stock in the merger would dilute existing BRB shareholders. Even at BRB's current market capitalization, the issuance of stock representing $38,400,000 or more of value (80% of the $48,000,000 consideration) would create a non-trivial dilutive impact that the BRB board of directors has indicated it wishes to avoid in a transaction of this size.
Third, the issuance of BRB stock to Tessera's stockholders — which include two institutional venture capital funds — would trigger federal and state securities law registration and disclosure obligations for BRB as a publicly traded NYSE-listed company. The costs and timing associated with preparing and filing a registration statement on Form S-4 (or relying on an available exemption) could materially delay the transaction timeline.
Fourth, as discussed in Section IV below, the tax benefits of a stepped-up basis in Tessera's assets (achievable through a Section 338(h)(10) election in a taxable transaction) may, depending on the results of the cost-benefit analysis, exceed the tax costs of a taxable transaction relative to a tax-free reorganization. In a tax-free reorganization, no step-up in asset basis would be available, and BRB would inherit Tessera's historical cost basis in its assets with no ability to claim additional depreciation or amortization deductions.
For all of these reasons, we recommend proceeding with the all-cash, fully taxable transaction structure as currently contemplated.
B. Consequences to Tessera Stockholders
Each holder of Tessera common stock will be treated for federal income tax purposes as having sold their Tessera shares in exchange for cash in a fully taxable transaction. The specific consequences are as follows:
Recognition of Gain or Loss. Each Tessera stockholder will recognize gain or loss equal to the difference between the per-share merger consideration of $4.00 and the stockholder's adjusted tax basis in each share of Tessera common stock. A stockholder whose adjusted basis is less than $4.00 per share will recognize gain; a stockholder whose adjusted basis exceeds $4.00 per share will recognize loss.
Character of Gain or Loss. The gain or loss recognized by each stockholder will generally be characterized as capital gain or capital loss, provided that the Tessera shares are held as a "capital asset" within the meaning of Section 1221 of the Code. For stockholders who have held their shares for more than one year as of the closing date, the gain will be long-term capital gain, currently taxable at a maximum federal rate of 20% (plus the 3.8% net investment income tax under Section 1411, for a combined maximum rate of 23.8%). For stockholders who have held their shares for one year or less, the gain will be short-term capital gain, taxable at ordinary income rates (currently up to 37%, plus the 3.8% net investment income tax).
Institutional Holders. Pinnacle Ventures Fund III, LP (EIN 85-3921047) and Broadleaf Growth Capital, LLC (EIN 37-4862153) are pass-through entities for federal income tax purposes. Pinnacle Ventures Fund III, LP is organized as a Delaware limited partnership and will not be subject to entity-level federal income tax; instead, each limited partner of Pinnacle Ventures will report its allocable share of the gain or loss recognized by the fund on the sale of its Tessera shares. Similarly, Broadleaf Growth Capital, LLC, if treated as a partnership for federal income tax purposes (or as a disregarded entity if it has a single member), will pass through its gain or loss to its members. The character and holding period of the gain at the partner/member level will generally be determined at the entity level. Both institutional holders invested in Tessera's Series B and/or Series C preferred stock rounds, which converted to common stock; the holding period and adjusted basis of those shares will depend on the specific terms of the preferred stock conversion and the dates and amounts of the original investment.
Co-Founders. Vikram S. Narayan and Elena M. Castillo co-founded Tessera in 2018. Given the 2018 founding date, the co-founders have likely held their shares for more than one year, and their gain will likely qualify as long-term capital gain. However, we note that if any portion of the co-founders' shares were received in exchange for the performance of services to Tessera (as is common for founders), we must confirm (i) whether those shares were subject to a vesting schedule or other "substantial risk of forfeiture" within the meaning of Section 83 of the Code, (ii) whether either co-founder filed an election under Section 83(b) of the Code with respect to such shares, and (iii) the fair market value of the shares at the time of the relevant taxable event (grant, vesting, or Section 83(b) election). If a Section 83(b) election was timely filed, the co-founders' basis in the shares would be equal to the amount (if any) paid for the shares at the time of the election, and the holding period would commence on the date the shares were transferred. If no Section 83(b) election was filed with respect to shares subject to vesting, the co-founders would have recognized ordinary income upon vesting equal to the fair market value of the shares at the time of vesting less any amount paid, and their basis would include that ordinary income amount. These facts need to be confirmed during diligence.
Withholding Obligations. BRB, as the acquiring corporation, or the paying agent engaged to facilitate the payment of merger consideration, must comply with applicable federal tax withholding and reporting obligations. Specifically:
Backup Withholding. Under Section 3406 of the Code, the payor is required to withhold federal income tax at the rate of 24% on reportable payments (including merger consideration payments) made to U.S. persons who fail to provide a correct taxpayer identification number on IRS Form W-9, or who are otherwise subject to backup withholding. The paying agent should obtain a properly completed IRS Form W-9 from each Tessera stockholder prior to or at the time of payment.
Information Reporting. Under Section 6045 of the Code, the payor is required to file information returns (IRS Form 1099-B) reporting the gross proceeds paid to each Tessera stockholder in connection with the merger. These forms must be filed with the IRS and furnished to the stockholders by the applicable due dates (generally January 31 of the year following payment for the stockholder copy, and February 28 or March 31 for the IRS filing, depending on whether paper or electronic filing is used).
FIRPTA Withholding. Section 1445 of the Code generally requires a transferee to withhold 15% of the amount realized on the disposition of a "United States real property interest" ("USRPI") by a foreign person. A USRPI includes stock of a "United States real property holding corporation" ("USRPHC"). Tessera is a fintech company operating a digital lending platform and, based on the information available to us, does not hold significant interests in U.S. real property. Accordingly, Tessera is unlikely to be a USRPHC, and Section 1445 withholding should not apply. This conclusion is subject to confirmation during diligence, and we recommend that Tessera provide a certification of non-USRPHC status for inclusion in the closing deliverables.
C. Consequences to Tessera Lending, Inc. (Target)
Tessera, as the surviving corporation in the reverse triangular merger, will not recognize gain or loss on the exchange of its stock for cash to its stockholders at the effective time of the merger. This result follows from the general principle of Section 1032 of the Code, which provides that no gain or loss is recognized by a corporation on the receipt of money or other property in exchange for its own stock. Although the mechanics of the reverse triangular merger are such that Tessera itself does not directly issue or exchange its stock (rather, the stockholders surrender their shares, which are cancelled in the merger), the transaction is treated for federal income tax purposes in a manner consistent with Section 1032, and no entity-level gain or loss is triggered by the merger standing alone.
Following the closing of the merger, Tessera will become a direct, wholly owned subsidiary of BRB. As discussed in Section VII.A below, Tessera will be included in BRB's federal consolidated income tax return for taxable periods beginning after the acquisition date, and Tessera's taxable year will close on the acquisition date.
Any built-in gains in Tessera's assets — that is, the excess of fair market value over Tessera's historical cost basis — will remain unrecognized at the corporate level absent a Section 338(h)(10) election. In the absence of such an election, Tessera's assets will retain their historical cost basis in Tessera's hands (and on BRB's consolidated balance sheet for tax purposes), and BRB will not be entitled to additional depreciation or amortization deductions attributable to any excess of the purchase price over historical asset basis. The implications of this result, and the potential benefits of a Section 338(h)(10) election, are discussed at length in Section IV below.
D. Consequences to Belmont Ridge Bank NA (Buyer)
In the absence of a Section 338(h)(10) election, the principal federal income tax consequences to BRB of the proposed merger are as follows:
Stock Basis. BRB will receive a cost basis in the Tessera stock equal to the aggregate merger consideration paid — $48,000,000 — under Section 1012 of the Code. This basis will be relevant if BRB subsequently disposes of the Tessera stock (e.g., in a future sale or spin-off of Tessera) or if Tessera is later liquidated into BRB.
Asset Basis. Without a Section 338(h)(10) election, BRB's acquisition of the Tessera stock does not result in any change to the tax basis of Tessera's underlying assets. Tessera's assets will continue to have the same historical cost basis they had prior to the merger. This is a significant consideration because Tessera, as a fintech company, likely has substantial intangible asset value — including its proprietary lending technology platform, customer relationships, lending licenses, trade name, and assembled workforce — that is not reflected on Tessera's balance sheet at fair market value for tax purposes. To the extent that the fair market value of these intangible assets exceeds their tax basis (which, for internally developed intangibles, may be zero or near-zero), BRB will not be able to claim depreciation or amortization deductions on that excess value in a stock acquisition without a Section 338(h)(10) election.
Goodwill and Intangibles. Goodwill and other Section 197 intangible assets acquired in connection with an asset purchase are amortizable on a straight-line basis over 15 years under Section 197 of the Code. However, this amortization benefit is available only if the intangible assets are "acquired" in a transaction that results in a new tax basis — i.e., an asset purchase or a stock purchase that is treated as an asset purchase by reason of a Section 338 election. In a straight stock acquisition without a Section 338 election, no new basis is created in the target's assets, and goodwill inherent in the purchase price is not separately recognized or amortizable for tax purposes. This is one of the primary reasons we recommend exploring the Section 338(h)(10) election, as discussed in Section IV.
IV. Section 338(h)(10) Election Analysis and Recommendation
A. Overview of Section 338(h)(10)
Section 338(h)(10) of the Code and Treasury Regulations Section 1.338(h)(10)-1 provide a mechanism by which the buyer and the selling stockholders of a target may jointly elect to treat a qualifying stock purchase as a deemed asset sale for federal income tax purposes. The election is designed to provide the economic and tax benefits of an asset acquisition while preserving the legal and structural benefits of a stock acquisition (including the survival of the target as a legal entity with its contracts, licenses, and other rights intact — a particularly important consideration for a regulated lending business like Tessera).
The Section 338(h)(10) election is available in the following circumstances: (i) the target is an S corporation; (ii) the target is a member of a consolidated group (i.e., a subsidiary whose stock is sold by a common parent or other member of the group); or (iii) in certain cases, the target is a C corporation where the target has a single corporate parent or where all of the target's stockholders consent to the election. In the case of Tessera, the company is a stand-alone C corporation that is not a member of any consolidated group. The election may still be available if all of Tessera's stockholders agree to join in the election, as contemplated by Treasury Regulations Section 1.338(h)(10)-1(c)(1). Alternatively, BRB may consider a unilateral Section 338(g) election, though the economic consequences of a Section 338(g) election differ materially from those of a Section 338(h)(10) election and are generally less favorable to the buyer due to the absence of the "old target/new target" paradigm.
For the election to be available, the stock acquisition must constitute a "qualified stock purchase" ("QSP") within the meaning of Section 338(d)(3) of the Code. A QSP requires the acquisition of at least 80% of the target's stock (by vote and value) by the purchasing corporation (or a member of its affiliated group) within a 12-month period. In the proposed transaction, BRB (through Acquisition Sub) will acquire 100% of Tessera's outstanding stock in a single transaction at the effective time of the merger. The reverse triangular merger, when treated as a stock acquisition for federal income tax purposes (i.e., BRB is treated as acquiring the Tessera stock in exchange for cash), should constitute a QSP. We note that the characterization of a reverse triangular merger as a stock acquisition (rather than an asset acquisition) for federal income tax purposes is well established in published guidance and consistent with the approach taken by the IRS in Revenue Ruling 90-95, 1990-2 C.B. 67.
B. Tax Effects of a Section 338(h)(10) Election
If BRB and the Tessera stockholders jointly make a Section 338(h)(10) election, the transaction will be treated for federal income tax purposes as follows:
Step 1 — Deemed Asset Sale. Tessera (referred to as "old target") is treated as having sold all of its assets to an unrelated person at fair market value in a single transaction on the "acquisition date" (the closing date of the merger) while still a member of the selling consolidated group (or, in Tessera's case, while its stockholders still own the stock). This deemed asset sale triggers the recognition of gain or loss at the corporate level on each of Tessera's assets, as if Tessera had actually sold all of its assets in a taxable transaction.
Step 2 — Deemed Liquidation. Immediately after the deemed asset sale, Tessera (old target) is treated as having distributed all of the deemed sale proceeds and its remaining assets to its stockholders in complete liquidation under Section 331 of the Code. The stockholders are treated as receiving liquidating distributions in exchange for their Tessera stock.
Step 3 — New Target. A "new target" is deemed to be created, which acquires the assets of old target with a new, stepped-up tax basis equal to the "adjusted grossed-up basis" ("AGUB") — generally, the purchase price ($48,000,000) plus the liabilities assumed by the buyer. New target is treated as a new corporation that has purchased all of the assets of old target.
The primary benefit to BRB is that, under Step 3, BRB (through Tessera as new target) receives a stepped-up tax basis in all of Tessera's assets — both tangible and intangible — equal to the AGUB. This stepped-up basis allows BRB to claim depreciation deductions on tangible assets and amortization deductions on intangible assets (including goodwill) based on the fair market values assigned through the purchase price allocation process, rather than Tessera's historical cost basis. For a fintech company like Tessera, where a significant portion of the enterprise value is attributable to intangible assets with low or zero historical tax basis, the step-up can generate substantial tax benefits over the recovery period (15 years for Section 197 intangibles, varying periods for other asset classes).
C. Allocation of Purchase Price (Preliminary)
If a Section 338(h)(10) election is made, the AGUB must be allocated among Tessera's assets in accordance with the residual method prescribed by Section 1060 of the Code and Treasury Regulations Section 1.338-6. Under the residual method, the AGUB is allocated among seven classes of assets, in the following order of priority:
The allocation of the AGUB among these classes will require a formal purchase price allocation study, which should be prepared by a qualified valuation specialist. We recommend that BRB engage Graystone & Albright LLP (BRB's independent auditor) or a specialized valuation firm to prepare the allocation study. Additionally, Whitfield Thorpe LLP (Tessera's independent auditor) should be asked to provide asset-level detail, including historical cost basis and depreciation schedules for all tangible and intangible assets on Tessera's books.
Based on our preliminary understanding of Tessera's business and assets, we expect that a significant portion of the AGUB will be allocated to Class VI (Section 197 intangibles) and Class VII (goodwill), given the nature of Tessera's business as a technology-driven consumer lending platform. The key intangible assets that would benefit from the stepped-up basis include:
•  Proprietary Lending Technology Platform. Tessera has developed a proprietary technology platform for underwriting, originating, and servicing consumer loans. This platform is a core intangible asset with significant fair market value.
•  Customer Relationships. Tessera has an established base of consumer borrowers and institutional lending partners, including Ridgeline Community Bank.
•  Lending Licenses. Tessera holds consumer lending licenses in 42 states and the District of Columbia. These licenses have regulatory and commercial value, and obtaining new licenses in these jurisdictions would involve significant cost and time.
•  Brand and Trade Name. The "Tessera Lending" trade name has recognition in the digital lending market.
•  Assembled Workforce. While assembled workforce is generally not a separately amortizable Section 197 intangible (as it is subsumed into goodwill), it contributes to the overall enterprise value that would be allocated to Class VII.
The allocation of AGUB to Class VI intangibles is particularly significant because Section 197 intangibles are amortizable on a straight-line basis over 15 years, beginning in the month of the acquisition. Assuming a material allocation to Class VI, BRB would be entitled to annual amortization deductions that could materially reduce its post-acquisition taxable income attributable to the Tessera business.
D. Impact on Tessera Stockholders
The principal disadvantage of a Section 338(h)(10) election for a C corporation target is the "double tax" that results from the deemed asset sale at the corporate level combined with the deemed liquidating distribution at the stockholder level.
Corporate-Level Tax. Under the Section 338(h)(10) election, Tessera (old target) is treated as having sold all of its assets at fair market value. To the extent that the deemed sale price exceeds Tessera's adjusted tax basis in its assets, Tessera will recognize gain at the corporate level, which will be subject to federal corporate income tax at the current rate of 21%. The amount of the corporate-level gain, and consequently the corporate-level tax, will depend on the extent to which Tessera's assets have a fair market value in excess of their adjusted tax basis — i.e., the "built-in gain" in Tessera's assets.
For internally developed intangible assets (such as Tessera's proprietary technology platform and customer relationships), the adjusted tax basis is likely zero or near-zero, because the costs of developing these assets were likely expensed as incurred for tax purposes (e.g., under Section 174 research and experimental expenditure provisions, as amended by the Tax Cuts and Jobs Act of 2017). Accordingly, the corporate-level gain on the deemed sale of these intangible assets could be substantial.
In addition, Tessera will recognize gain to the extent that the deemed sale price of its tangible assets (such as computer equipment and office furnishings) exceeds their adjusted tax basis, which may give rise to depreciation recapture under Section 1245 (taxable as ordinary income) or Section 1250 (for real property, if applicable).
Stockholder-Level Tax. After the deemed asset sale, Tessera is treated as having distributed the deemed sale proceeds to its stockholders in a complete liquidation under Section 331. Each stockholder recognizes gain or loss on the deemed liquidating distribution in an amount equal to the difference between the amount received (or deemed received) and the stockholder's adjusted tax basis in the Tessera stock. In most cases, the net after-tax amount realized by the stockholders under the Section 338(h)(10) election will be lower than the net after-tax amount realized in a straight stock sale, because the stockholders bear the economic burden of the corporate-level tax (which reduces the net distributable proceeds).
Double Tax Considerations. The combination of the corporate-level tax on the deemed asset sale and the stockholder-level tax on the deemed liquidation constitutes a "double tax" that is the hallmark of the Section 338(h)(10) election for C corporation targets. This double tax is the primary reason that Section 338(h)(10) elections are far more common for S corporation targets (where no entity-level tax applies, and the deemed asset sale gain flows through to the stockholders) than for C corporation targets.
However, the double tax may be mitigated or offset if Tessera has significant net operating loss ("NOL") carryforwards that can be used to offset the corporate-level gain on the deemed asset sale. Additionally, if the built-in gain in Tessera's assets is relatively modest (e.g., because Tessera has relatively few appreciated assets), the incremental corporate-level tax cost of the election may be manageable.
Negotiation Dynamics. As a practical matter, the Tessera stockholders will bear the economic burden of the corporate-level tax resulting from the Section 338(h)(10) election (because the corporate-level tax is paid by Tessera prior to the deemed liquidating distribution, reducing the net proceeds available for distribution to stockholders). The Tessera stockholders will therefore likely resist the election unless BRB agrees to compensate them for the incremental tax cost — typically through a gross-up payment or an upward adjustment to the merger consideration. The amount of the gross-up or adjustment, if any, and the allocation of the cost and benefit between buyer and sellers, is a negotiation point that must be addressed in the definitive merger agreement. The cost-benefit analysis described below will provide the data necessary to evaluate the economics of this negotiation.
E. Recommendation
We recommend that BRB explore the Section 338(h)(10) election through a detailed cost-benefit analysis, to be conducted once full due diligence data on Tessera's asset bases, intangible asset values, and any NOL carryforwards is available. Based on our preliminary understanding of Tessera's business — in particular, the significant intangible asset value represented by Tessera's proprietary lending technology platform, its customer relationships, and its lending licenses in 42 states and the District of Columbia, together with approximately $1.2 billion in cumulative loan originations since Tessera's founding in 2018 — we believe that the present value of the stepped-up amortization deductions over a 15-year period could be substantial and could potentially exceed the incremental corporate-level tax cost of the election, even after accounting for a gross-up payment to the Tessera stockholders.
Specifically, the cost-benefit analysis should model the following variables:
(i) The incremental corporate-level tax cost to Tessera (old target) on the deemed asset sale, based on the difference between the fair market value and the adjusted tax basis of each category of Tessera's assets, multiplied by the applicable federal (and state, if applicable) corporate tax rates;
(ii) The present value of the additional depreciation and amortization deductions available to BRB over the applicable recovery periods (15 years for Section 197 intangibles, varying periods for tangible assets), discounted at an appropriate after-tax rate reflective of BRB's cost of capital;
(iii) The amount, if any, of any gross-up or purchase price adjustment that BRB would need to pay to the Tessera stockholders to compensate them for the incremental tax cost, and the resulting net present value benefit to BRB after the gross-up;
(iv) The interaction of the Section 338(h)(10) election with BRB's existing consolidated tax position, including BRB's effective tax rate, existing NOL carryforwards (if any), and the impact of the additional amortization deductions on BRB's consolidated taxable income.
We target completion of the preliminary Section 338(h)(10) modeling by March 2026, concurrent with the commencement of the formal diligence phase. We will coordinate with Graystone & Albright LLP and any valuation specialist engaged by BRB to ensure that the necessary asset-level information is collected and analyzed during the diligence process.
V. Treatment of Tessera Employee Stock Options and RSUs
A. Overview of Employee Equity Pool
As set forth in Section II.C above, 900,000 shares of Tessera common stock on a fully diluted basis (representing 7.5% of the total fully diluted capitalization) are attributable to Tessera's employee and angel investor equity pool. Based on the information available to us, these 900,000 shares consist of a combination of incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), and restricted stock units ("RSUs"), all granted under Tessera's 2018 Equity Incentive Plan, as amended (the "Equity Plan"). At the per-share merger consideration of $4.00, the aggregate payout to holders in the employee and angel pool would be $3,600,000 (subject, in the case of stock options, to reduction by the applicable exercise price).
The treatment of these equity awards in connection with the merger raises several significant federal income tax issues, which are addressed in the subsections below. During diligence, we will need to obtain a complete schedule of all outstanding equity awards, including the type of award (ISO, NQSO, or RSU), the grant date, exercise price (for options), vesting schedule, number of shares, and the identity of each holder.
B. Section 409A — Nonqualified Deferred Compensation Compliance
Section 409A of the Code imposes stringent requirements on "nonqualified deferred compensation" arrangements. Stock options may be treated as nonqualified deferred compensation subject to Section 409A if they are granted with an exercise price that is less than the fair market value of the underlying stock on the date of grant. Under Treasury Regulations Section 1.409A-1(b)(5)(i)(A), a stock option is exempt from Section 409A if, among other things, the exercise price is not less than the fair market value of the underlying stock on the date of grant. The fair market value for this purpose must be determined using a "reasonable valuation method" as described in Treasury Regulations Section 1.409A-1(b)(5)(iv).
For privately held companies like Tessera, fair market value is typically established through independent third-party valuations, commonly referred to as "409A valuations." These valuations are generally performed at least annually and at the time of significant events such as equity financing rounds (e.g., Tessera's Series B round in 2021 and any subsequent rounds). If Tessera's stock options were granted at exercise prices that were below the 409A fair market value of the underlying stock at the time of grant — i.e., if the options were granted at a "Discount" — those options could be treated as nonqualified deferred compensation subject to Section 409A, with severe adverse tax consequences for the option holders.
If any Tessera stock options are determined to be Section 409A non-compliant (i.e., granted at below-FMV exercise prices without proper exemption), the consequences under Section 409A(a)(1)(B) are as follows:
(i) The option holder would be required to include in income, in the year the option vests (rather than the year of exercise), the excess of the fair market value of the underlying stock over the exercise price;
(ii) The option holder would be subject to an additional tax of 20% on the amount includible in income under Section 409A; and
(iii) The option holder would be subject to an interest penalty calculated from the date the income should have been included (i.e., the vesting date).
These penalties apply at the individual option holder level and could create significant personal tax exposure for affected employees. In the context of the merger, this is a material concern because any Section 409A non-compliance discovered post-closing could give rise to indemnification claims by affected employees against Tessera (and, post-closing, against BRB as Tessera's parent).
The merger itself constitutes a "change in control" event, and payment of the merger consideration in cancellation of outstanding options and RSUs at the effective time of the merger is generally permissible under Section 409A, provided that the merger qualifies as a "change in control event" within the meaning of Treasury Regulations Section 1.409A-3(i)(5). We believe that the proposed reverse triangular merger — in which BRB acquires 100% of the outstanding Tessera stock — should satisfy the definition of a "change in control event" under these regulations. However, the specific language of Tessera's Equity Plan and the individual award agreements must be reviewed to confirm that the plan and award documents properly define and reference a "change in control" or "change in control event" in a manner consistent with the Section 409A regulations.
Recommendation: We recommend that the deal team obtain and review, as part of the due diligence process, (i) all Section 409A valuation reports prepared for Tessera since the company's inception in 2018, (ii) the complete option grant schedule for all outstanding stock options (including grant dates and exercise prices for each tranche), and (iii) Tessera's Equity Plan and form of award agreements. This review should be conducted by the diligence team (Andrew Fitzpatrick and Naomi Petersen), with tax review by our group, to confirm that all outstanding options were granted at exercise prices at or above the then-current 409A fair market value, and to identify any potential Section 409A compliance issues.
C. Section 83 — Restricted Stock and RSU Treatment
Section 83 of the Code governs the taxation of property (including stock) transferred in connection with the performance of services. RSUs are a form of compensatory equity award that are generally subject to Section 83 at the time of settlement (i.e., when the underlying shares are delivered to the holder or when the RSUs are settled in cash).
Unvested RSUs at the Time of Merger. The treatment of unvested RSUs at the effective time of the merger depends on whether the merger agreement provides for acceleration of vesting (so that all RSUs become fully vested at or prior to the effective time) or, alternatively, for assumption or substitution of the unvested RSUs by BRB.
If RSUs are cashed out — that is, if all outstanding RSUs (whether vested or unvested) are cancelled at the effective time of the merger in exchange for the right to receive the per-share merger consideration of $4.00 per share (less applicable withholding) — then the holders will recognize ordinary income under Section 83 at the time of settlement in an amount equal to the fair market value of the consideration received. BRB (or Tessera, as the surviving corporation) would be entitled to a corresponding compensation deduction under Section 162 of the Code, subject to the limitations discussed in Section V.D below.
If, alternatively, the unvested RSUs are assumed or substituted by BRB — that is, if the unvested RSUs are converted into replacement RSU awards referencing BRB common stock with equivalent terms and conditions — then no taxable event occurs at the closing. Instead, taxation is deferred until the replacement awards vest and are settled in accordance with their terms.
Based on our review of the preliminary draft merger agreement circulated by the deal team on January 24, 2026, we understand that the current proposal is for all outstanding RSUs and in-the-money stock options to be cancelled at the effective time of the merger and converted into the right to receive the per-share merger consideration of $4.00 per share (in the case of RSUs) or $4.00 per share less the applicable exercise price (in the case of stock options). This cashout treatment is the simplest and most common approach in an all-cash merger and avoids the complexities associated with assumption or substitution of equity awards.
Withholding Obligations. To the extent that option or RSU cashout payments are treated as compensation income to the holders (which will be the case for NQSOs and RSUs), BRB (or Tessera, as the surviving corporation and the employer of the affected employees) is required to withhold applicable federal income tax (at the supplemental wage withholding rate, currently 22% for payments up to $1,000,000 and 37% for payments in excess of $1,000,000 per payee per year), FICA taxes (Social Security tax at 6.2% up to the applicable wage base and Medicare tax at 1.45%, plus the Additional Medicare Tax of 0.9% for wages in excess of $200,000), and applicable state and local income taxes. These withholding obligations must be properly accounted for in the merger consideration payment mechanics set forth in the merger agreement.
Section 280G — Excess Parachute Payments. The acceleration of vesting of stock options and RSUs in connection with the merger may trigger the "golden parachute" provisions of Section 280G of the Code. Under Section 280G, if a "disqualified individual" — generally, an officer, highly compensated employee, or greater-than-1% shareholder of the target — receives "parachute payments" in connection with a "change in ownership or control" that exceed three times the individual's "base amount" (generally, the individual's average annual taxable compensation over the five preceding years), the excess over one times the base amount is treated as an "excess parachute payment." The consequences of excess parachute payments are twofold:
(i) The corporation (Tessera / BRB post-closing) loses its deduction for the excess parachute payments under Section 280G(a); and
(ii) The recipient is subject to a 20% excise tax on the excess parachute payments under Section 4999, in addition to regular income tax.
In the proposed transaction, the following individuals are likely "disqualified individuals" for Section 280G purposes:
•  Vikram S. Narayan (Co-Founder, CEO), holding 3,744,000 shares (31.2% of Tessera); as a greater-than-1% shareholder and officer, he is a disqualified individual.
•  Elena M. Castillo (Co-Founder, CTO), holding 2,736,000 shares (22.8% of Tessera); as a greater-than-1% shareholder and officer, she is a disqualified individual.
•  Other officers and highly compensated employees of Tessera who may hold stock options or RSUs in the employee pool and whose total compensation (including equity award cashouts) in connection with the merger could trigger the Section 280G threshold.
For each disqualified individual, we will need to calculate the total parachute payments (including the value of any accelerated vesting of equity awards, severance payments, and any other payments contingent on the change of control), compare the total to the applicable three-times-base-amount threshold, and determine whether excess parachute payments exist.
Recommendation: We recommend performing Section 280G calculations for all disqualified individuals during the diligence phase. In addition, the deal team should consider whether to include a Section 280G stockholder vote provision in the merger agreement. Under Section 280G(b)(5)(B), if the target is an entity that is not publicly traded (as Tessera is not), the disqualified individual may avoid the Section 280G excise tax and the corporation may preserve its deduction if the parachute payments are approved by a vote of more than 75% of the outstanding stock of the target (after clear disclosure of all material facts). Given that the co-founders hold more than 54% of the outstanding stock, a stockholder vote may be a viable option if structured correctly (noting that the disqualified individual whose payments are being approved may not vote their own shares). Alternatively, the deal team should consider including waiver or cutback provisions in the merger agreement under which the total parachute payments to any disqualified individual are reduced to the safe harbor amount (three times the base amount, minus $1) if doing so would result in a greater after-tax benefit to the individual.
D. Section 162(m) — Limitation on Deductibility of Compensation
Section 162(m) of the Code limits the deductibility of compensation paid by a "publicly held corporation" to its "covered employees" to $1,000,000 per employee per taxable year. For taxable years beginning after December 31, 2026, Section 162(m) applies to the corporation's current and former principal executive officer, principal financial officer, and the three other highest-compensated officers, as well as any individual who was a covered employee in any prior taxable year beginning after December 31, 2016. There are no longer any exceptions for performance-based compensation following the repeal of the performance-based compensation exception by the Tax Cuts and Jobs Act of 2017.
Post-merger, Tessera will become a subsidiary of BRB, which is a publicly held corporation traded on the NYSE under ticker symbol BRMG. To the extent that compensation paid in connection with the merger — including option and RSU cashout payments — is paid to individuals who are or become "covered employees" of the combined BRB/Tessera entity, the deductibility of such compensation may be limited to $1,000,000 per individual per year under Section 162(m). This limitation could affect the timing and amount of BRB's compensation deductions for payments made to Tessera's senior executives in connection with the merger.
We note that the application of Section 162(m) to compensation paid by a privately held target to its employees in the year of acquisition by a publicly held acquirer is a complex and evolving area. The IRS has issued proposed regulations addressing the identification of covered employees in certain transaction contexts, and the specific facts — including whether the Tessera employees are treated as BRB employees for Section 162(m) purposes in the year of the merger — will need to be analyzed.
Recommendation: We recommend evaluating the applicability of Section 162(m) to the merger-related compensation payments during the diligence phase, with a view toward maximizing the deductibility of such payments to the extent permissible under applicable law.
VI. State and Local Tax Implications
A. Texas
Tessera's principal executive offices are located at 2400 Shoal Creek Boulevard, Suite 500, Austin, Texas 78756. The State of Texas does not impose a state income tax on individuals or corporations. Accordingly, neither the Tessera stockholders (to the extent they are Texas residents) nor Tessera itself will be subject to Texas state income tax in connection with the merger.
Texas does, however, impose a franchise tax (also known as the "margin tax") on entities doing business in Texas, including corporations, limited partnerships, limited liability companies, and other legal entities formed in or doing business in the state. The Texas franchise tax is applicable to Tessera as a Texas-nexus corporation. The franchise tax is computed based on the entity's total revenue, with certain deductions permitted (the entity may generally deduct the greater of cost of goods sold, compensation, 30% of total revenue, or $1,000,000). The current tax rate is 0.375% for qualifying wholesalers and retailers and 0.75% for all other entities. As a fintech lending company, Tessera would be subject to the 0.75% rate.
Impact on the Transaction. With respect to a Section 338(h)(10) election, the deemed asset sale under the election is a federal income tax concept and should not trigger incremental Texas franchise tax. The Texas franchise tax is no

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