Contract analysis

I. PURPOSE AND BACKGROUND The purpose of this memorandum is to memorialize the fee arrangement, budget structure, billing protocols, and financial controls governing the firm's engagement by Belmont Ridge Bank National Association ("BRB" or the "Bank") in connection with the BSA/AML and sanctions compliance-program uplift mandated by OCC Consent Order No. OCC-2025-003 (the "Consent Order"), issued on January 15, 2025

II. ENGAGEMENT STRUCTURE — TWO-PHASE APPROACH The engagement is structured in two distinct phases, reflecting the natural progression of the remediation effort from an initial period of intensive assessment and planning to a subsequent period of implementation and monitoring. The phased structure facilitates budget management, resource allocation, and quarterly reconciliation, and provides a natural inflection point

1. Consent Order Analysis. Preparation of a comprehensive analysis of OCC Consent Order No. OCC-2025-003, including an annotated article-by-article breakdown of each provision, identification of specific compliance obligations and deadlines, and assessment of the Bank's current posture relative to each requirement. This analysis will serve as the foundational reference document for the remediation effort.

2. Regulatory Risk Assessment. Preparation of a multi-agency regulatory risk assessment addressing: (a) FinCEN enforcement exposure, including the risk of a separate FinCEN enforcement action based on the same underlying BSA/AML deficiencies; (b) Department of Justice criminal referral risk, including analysis of the factors that historically influence the OCC's referral decisions and the current enforcement posture

3. Prior Examination Findings Comparison. Preparation of a detailed comparison mapping the findings in the prior Matter Requiring Attention ("MRA") issued in June 2022 and the Matter Requiring Immediate Attention ("MRIA") issued in November 2023 against the deficiencies cited in the Consent Order. This analysis will identify areas where prior supervisory concerns were not adequately addressed, which is a factor that

4. Privilege Protocol. Development and implementation of an attorney-client privilege protocol governing communications related to the remediation effort. Given the involvement of multiple parties — including outside counsel, the independent consultant, internal compliance personnel, the Board, and technology vendors — it is essential to establish clear guidelines regarding the creation, handling, and protection of p

5. Board Resolution and Compliance Committee. Drafting of a Board Resolution for Consent Order acknowledgment and establishment of a dedicated Compliance Committee of the Board, with a target completion date of February 28, 2025. This deliverable includes the preparation of a Compliance Committee charter that defines the Committee's mandate, membership, meeting cadence, reporting obligations, and authority with respe

6. Board Presentation. Preparation and delivery of a comprehensive Board presentation on the BSA/AML remediation overview, including the scope of the Consent Order, the proposed remediation strategy, the timeline, the budget, and the roles and responsibilities of the various parties involved.

7. Independent Consultant Engagement. Legal support for the selection and engagement of the independent consultant required by the Consent Order, including: (a) analysis of potential candidates and preparation of a recommendation memorandum; (b) preparation of the OCC non-objection letter for the selected consultant; and (c) negotiation, drafting, and finalization of the engagement agreement with Thornfield Consultin

8. Comprehensive Remediation Action Plan. Preparation of the Comprehensive Remediation Action Plan for submission to the OCC by the May 15, 2025 deadline. The RAP will encompass five integrated workstreams: Workstream 1 — OFAC Sanctions Screening Remediation. Remediation of deficiencies in OFAC sanctions screening, with particular emphasis on the BaaS partner channels through which a significant volume of transaction

9. Technology Vendor Analysis. Preparation of a comparative analysis of the two principal technology alternatives under consideration: (a) upgrade of the existing Veridian Analytics Inc. transaction monitoring system from v.8.3 to v.10.0; and (b) full replacement with Ridgeline Data Systems LLC's competing platform. This analysis will address functionality, implementation risk, timeline, cost, regulatory consideratio

10. Vendor Agreements. Negotiation, drafting, and finalization of the following vendor agreements: (a) Veridian Analytics Inc. — Amendment to the existing Master Services Agreement (Contract No. VA-BRB-2023-0044) to incorporate the TMS v.10.0 upgrade scope of work, with implementation costs of $2,800,000 and incremental annual licensing fees of $1,900,000 per year (bringing total annual contract value from $4,100,000

11. Interim SAR Backlog Status Report. Preparation of an interim status report on SAR backlog clearance for submission to the OCC on or before March 31, 2025. This report will address the status of the alert backlog, the triage methodology being employed, the staffing resources deployed, and the projected timeline for full disposition.

12. CMP Payment Logistics Memorandum. Preparation of a memorandum addressing the logistics and legal considerations associated with the payment of the $14,500,000 civil money penalty, which is due on March 16, 2025 pursuant to the terms of the Consent Order. This memorandum will address payment mechanics, tax treatment, accounting classification, and any related disclosure obligations.

13. OFAC Compliance Analysis. Preparation of a comprehensive OFAC compliance gap analysis, including: (a) assessment of the current state of OFAC screening across all BRB channels, with particular emphasis on BaaS partner channels; (b) drafting of a revised OFAC policy; and (c) analysis of whether a voluntary self-disclosure to OFAC is advisable in connection with the NovaPay sanctions screening gaps, which resulted

14. Securities Disclosure Obligations Analysis. Preparation of a memorandum analyzing BRFG's securities disclosure obligations arising from the Consent Order, including Form 8-K filing requirements, the treatment of the Consent Order and related remediation costs in BRFG's Annual Report on Form 10-K, and any required disclosure in the proxy statement. This analysis will be coordinated with BRFG's securities counsel a

15. Shareholder Communication Talking Points. Preparation of talking points for use by BRB/BRFG management in communications with significant shareholders, with particular focus on Brindoval Capital Partners LP, which holds an approximately 8.3% stake in BRFG. These talking points will be designed to provide factual, non-misleading information regarding the Consent Order and remediation efforts while maintaining appr

1. Thornfield Consulting Group Oversight. Ongoing oversight of Thornfield Consulting Group LLC's independent assessment and validation activities. Thornfield's on-site assessment commenced on March 1, 2025, with its preliminary gap assessment report due on or about April 15, 2025 and its final validation report due on or about February 15, 2026. C&H's role will include reviewing Thornfield's work product, advising BR

2. Remediation Workstream Monitoring. Ongoing monitoring of and advising on remediation workstream execution across all five workstreams identified in the Remediation Action Plan. This includes regular engagement with BRB's internal remediation project management team, the BSA/AML compliance function, the technology team, and the Pinnacle Compliance Solutions temporary staff.

3. SAR Backlog Clearance Support. Continued legal support for the SAR backlog clearance effort, with a target of full disposition of all 2,400 alerts by June 30, 2025. This includes advising on alert triage methodology, SAR filing quality, and any unusual or complex investigative findings that arise during the lookback and disposition process.

4. CDD/EDD Remediation Oversight. Oversight of the CDD/EDD remediation project for the population of 47,000 high-risk accounts, with a 50% milestone target of 23,500 accounts completed by July 15, 2025 and 100% completion of all 47,000 accounts by January 15, 2026. C&H's role will include advising on the remediation methodology, reviewing statistical sampling of remediated accounts, and assisting with any account exi

5. Veridian TMS v.10.0 Deployment Support. Legal and regulatory advisory support for the deployment of Veridian TMS v.10.0, including review of the upgraded system's compliance with BSA/AML regulatory requirements, oversight of the user acceptance testing process (UAT targeted for completion by August 1, 2025), and coordination with the independent model validation (targeted for completion by October 1, 2025).

6. OFAC Screening Operationalization. Advisory support for the full operationalization of OFAC screening across all BaaS channels, with a target completion date of November 1, 2025. This includes reviewing the screening logic, advising on the treatment of historical screening gaps, and supporting any interactions with OFAC that may arise.

7. Quarterly OCC Progress Reports. Preparation and submission of quarterly progress reports to the OCC as required by the Consent Order: (a) First quarterly progress report — due September 15, 2025. (b) Second quarterly progress report — due December 15, 2025.

8. Compliance Self-Certification. Drafting of the compliance self-certification to be submitted to the OCC on or about February 15, 2026, certifying BRB's compliance with the requirements of the Consent Order and requesting termination or modification of the Order as appropriate.

9. BaaS Partner Compliance. Preparation and delivery of compliance remediation letters to BRB's BaaS partner fintech companies, and implementation of an ongoing fintech oversight framework designed to ensure that BaaS partner activities are subject to appropriate BSA/AML and sanctions compliance controls going forward.

10. Training and Policy Finalization. Advisory support for the finalization and rollout of BRB's updated BSA/AML training program and comprehensive policy suite, including review and approval of training materials, policy documents, and procedures manuals.

11. OCC Examination Preparedness. Guidance and preparation for anticipated OCC examinations during the remediation period, including preparation of examination-ready documentation, mock examination exercises, and advice on interactions with examination staff.

12. FinCEN Coordination. Ongoing monitoring of FinCEN's posture with respect to BRB and coordination with FinCEN as appropriate. The Firm's primary liaison at FinCEN for this matter is Angela Drummond, Associate Director, Enforcement Division. C&H will monitor for any indications that FinCEN may pursue a separate enforcement action and will advise BRB accordingly. Billing Intensity. Phase 2 is characterized by a lowe

III. BILLING RATES — ENGAGEMENT TEAM A. 2025 Hourly Rates The following table sets forth the hourly billing rates for the members of the engagement team currently assigned to this matter. These rates are effective for calendar year 2025. B. Rate Notes The rates set forth above are the Firm's standard 2025 rates for each timekeeper. No discount, reduction, or alternative fee arrangement has been applied to this engage

IV. FEE COLLAR MECHANISM The fee estimates set forth in this memorandum are subject to a ±15% variance (the "Fee Collar") without requiring re-approval from the client. The Fee Collar provides a zone of flexibility around the $8,000,000 aggregate estimate to accommodate the inherent uncertainty in projecting fees for a complex, multi-workstream regulatory remediation engagement of this nature. Upper Threshold. The up

V. RETAINER Amount. BRB has deposited an evergreen retainer in the amount of $500,000 with Calderwood & Harkness. Deposit Date. The retainer was deposited on February 12, 2025, and its receipt into the Firm's client trust account (an Interest on Lawyer Account, or "IOLA" account, maintained in compliance with New York Judiciary Law § 497 and the applicable rules of the Appellate Division) has been confirmed by the Fi

VI. EXPENSE REIMBURSEMENT AND CAP Expense Cap. Total reimbursable expenses for the duration of the engagement (Phase 1 and Phase 2 combined) are subject to a cap of $250,000. This cap covers Calderwood & Harkness's out-of-pocket costs and disbursements incurred in connection with the engagement and passed through to BRB on monthly invoices. Covered Expenses. The following categories of expenses are included within th

VII. BILLING CADENCE AND PAYMENT TERMS A. Monthly Billing Cycle Calderwood & Harkness will issue invoices on a monthly basis, on or about the tenth (10th) business day following the close of each calendar month. This billing cadence is consistent with the Firm's standard practice and provides sufficient time for pre-bill review and approval by the billing partner before invoices are issued. First Invoice. The first i

VIII. BUDGET CONTEXT — BRB'S TOTAL REMEDIATION EXPENDITURE For context and to assist the engagement team in understanding the Firm's fees within the broader framework of BRB's remediation expenditures, this section summarizes BRB's total board-approved remediation budget. Calderwood & Harkness's estimated fees of $8,000,000 represent one component of BRB's board-approved total remediation budget of $42,500,000, which

IX. BUDGET MONITORING AND QUARTERLY RECONCILIATION A. Internal Tracking Marcus Delgado, as billing partner, will maintain a running budget tracker that is updated on a monthly basis following the close of each billing period. The budget tracker will compare actual fees and expenses billed to date against the Phase 1 and Phase 2 estimates, and will project the remaining fees and expenses through the anticipated comple

1. Cumulative Fees vs. Budget. A comparison of cumulative fees billed to date against the estimated budget for Phase 1 and Phase 2, expressed in both dollar and percentage terms.

2. Cumulative Expenses vs. Cap. A comparison of cumulative expenses incurred to date against the $250,000 expense cap, including an assessment of whether the cap is at risk of being exceeded.

3. Forward Projection. A projection of remaining fees and expenses through the anticipated completion of the engagement on February 15, 2026, based on current staffing levels, billing rates, and the anticipated pace of work.

4. Fee Collar Assessment. An assessment of whether the ±15% Fee Collar is at risk of being exceeded, including identification of any trends or factors that could drive cumulative fees above the $9,200,000 upper threshold.

5. Scope Change Identification. Identification of any scope changes, unanticipated issues, or new matters that have arisen during the quarter and that may affect the fee estimate, including any matters that could trigger the scope change protocol described in Section IX.C below. The quarterly reconciliation memorandum will be shared with Philip Hartmann, as responsible partner. At Mr. Hartmann's discretion, the recon

X. RELATIONSHIP TO THIRD-PARTY COSTS This memorandum addresses only Calderwood & Harkness's professional fees and out-of-pocket expenses. It does not govern, and should not be read to encompass, the fees and costs of third-party professionals, consultants, technology vendors, or service providers that BRB has engaged or will engage in connection with the remediation effort. BRB has entered into, or is in the process

XI. BILLING PARTNER RESPONSIBILITIES Marcus Delgado, as billing partner on this engagement, is responsible for the following administrative and financial functions:

1. Pre-Bill Review and Approval. Monthly review and approval of pre-bills before invoices are issued to BRB. Pre-bill review includes verification that all time entries contain appropriate narrative detail, that rates are correctly applied, that any necessary write-downs or adjustments are identified, and that the invoice is consistent with the engagement letter terms.

2. Fee Collar Compliance. Ensuring ongoing compliance with the engagement letter fee terms, including monitoring cumulative fees against the ±15% Fee Collar and the $9,200,000 upper threshold. If cumulative fees approach the upper threshold, the billing partner will promptly notify the responsible partner and initiate the overrun approval process described in Section IV.

3. Expense Cap Monitoring. Monitoring cumulative expenses against the $250,000 expense cap and advising the engagement team if expenses are approaching the cap, so that appropriate measures can be taken to manage costs or, if necessary, to seek an increase in the cap.

4. Quarterly Budget Reconciliation. Preparation of the quarterly budget reconciliation memoranda described in Section IX.B, including the analysis of actual-to-budget variances, forward projections, and fee collar assessments.

5. Retainer Management. Coordination with the Firm's Finance Department on retainer management and trust account administration, including monitoring the retainer balance, initiating replenishment requests when the balance falls below $250,000, and ensuring compliance with IOLA requirements.

6. Client Billing Inquiries. Serving as the primary point of contact for any billing inquiries or disputes raised by BRB, through Gregory Nardone or his designee. The billing partner will work with the responsible partner and the Firm's Finance Department to resolve any billing issues promptly and professionally.

7. Time Entry Quality. Ensuring that all time entries on the engagement contain sufficient narrative detail to satisfy client billing guidelines and to withstand potential scrutiny in the event of a fee dispute. Time entries should describe the specific task performed (e.g., "Drafted Section 3 of the OFAC compliance gap analysis addressing NovaPay screening deficiencies") rather than generic descriptions (e.g., "Rese

XII. KEY FINANCIAL CONTROLS — SUMMARY TABLE The following table summarizes the key financial parameters governing this engagement for ease of reference:

XIII. CONCLUSION AND DISTRIBUTION This memorandum has been prepared to provide a comprehensive internal reference for the fee arrangement, budget structure, billing protocols, and financial controls governing the Firm's engagement by Belmont Ridge Bank National Association in connection with the BSA/AML and sanctions compliance-program uplift mandated by OCC Consent Order No. OCC-2025-003. It is intended to ensure th