PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Linda Osei, Responsible Partner
FROM: Carlos Espinoza, Lead Associate
DATE: February 25, 2025
RE: Deposition Preparation — Philip Aaronson (Executive Vice President and Chief Credit Officer, Belmont Ridge Bank NA); Deposition Scheduled for March 4, 2025
CLIENT: Belmont Ridge Bank NA
MATTER: Belmont Ridge Bank NA v. Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, Index No. 654871/2024, New York Supreme Court, New York County, Commercial Division (Hon. Althea Marchetti)
MATTER NO.: 1022-00005
This memorandum is protected attorney work product prepared in anticipation of litigation and is subject to attorney-client privilege. It should not be disclosed to any person outside the Calderwood & Harkness LLP litigation team without prior authorization from Linda Osei. Distribution, copying, or forwarding of this memorandum to any person not authorized to receive it may constitute a waiver of applicable privileges.
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I. Purpose and Overview
This memorandum has been prepared to assist in the deposition preparation of Philip Aaronson, Executive Vice President and Chief Credit Officer of Belmont Ridge Bank NA ("BRB" or the "Bank"), in connection with his deposition noticed by Kestrel Voss & Huang LLP on behalf of defendants and counterclaim-plaintiffs Triton Harbor Industries, LLC ("Triton Harbor"), Marcus J. Kappel, and Elaine D. Kappel (collectively, the "Kappels" or "Defendants"). Kestrel Voss & Huang is led by partner Theodore "Ted" Huang, who is expected to conduct the examination, with senior associate Natasha Orlov assisting. Huang is an experienced commercial litigator who has handled several bank-fraud and lender-liability cases in the Commercial Division and should be expected to conduct a thorough, well-organized, and occasionally aggressive examination.
The deposition is currently scheduled for March 4, 2025. The location has not been finalized as of the date of this memorandum but is expected to be either Calderwood & Harkness LLP's offices at 600 Lexington Avenue, 30th Floor, New York, NY 10022, or Kestrel Voss & Huang LLP's offices at 780 Third Avenue, 24th Floor, New York, NY 10017. We are in communication with opposing counsel's office to confirm the venue and anticipate resolution by February 28, 2025.
Philip Aaronson is a critical witness in this litigation for several reasons, each of which implicates distinct preparation concerns:
(a) Aaronson authored the August 22, 2023 internal memorandum (the "Aaronson Memorandum") that is the centerpiece of Triton Harbor's fraudulent inducement counterclaims. That memorandum, addressed to Derek Whitmore and copied to General Counsel Margaret Linden, recommended a "structured exit from the Triton Harbor relationship within 120 days" and stated that "further extensions of credit are not contemplated under any workout scenario." This language is the single most damaging piece of documentary evidence in the case, and opposing counsel will devote significant time to it.
(b) Aaronson approved the original $22 million credit facility, the March 2023 downgrade of the Triton Harbor credits from "Pass" to "Substandard" (Risk Rating 7), and the October 2023 Forbearance and Modification Agreement terms. His decision-making authority spans the entire arc of the lending relationship, from inception to acceleration.
(c) Internal emails suggest that Aaronson directed the Special Assets Group ("SAG") to pursue acceleration as early as August 2023 — potentially before the forbearance negotiations even commenced. These emails, to the extent they are in evidence, will be used to argue that the forbearance was a tactical device to extract additional collateral rather than a genuine workout effort.
(d) Aaronson's testimony will be used by opposing counsel to construct a narrative that BRB harbored a secret, undisclosed intent to exit the Triton Harbor relationship while simultaneously causing Whitmore and Reeves to hold out the promise of future lending in order to induce the Kappels to pledge additional collateral (equipment leases valued at approximately $2.3 million and the Kappel residence at 14 Birchmont Lane, Westport, Connecticut, valued at approximately $3.1 million) and to convert their personal guaranties from limited to unlimited.
Aaronson's deposition follows the completed depositions of Derek Whitmore (SVP, Head of Special Assets Group), taken on February 18, 2025, and Joanna Reeves (Vice President, Special Assets Group), taken earlier today, February 25, 2025. This memorandum incorporates observations and preliminary assessments from both depositions where relevant to Aaronson's anticipated testimony. A more detailed analysis of the Reeves transcript will be available once the rough transcript is received, which we expect no later than February 27, 2025 — in advance of our first preparation session with Aaronson.
The balance of this memorandum is organized as follows: Section II provides Aaronson's professional background and his role in the Triton Harbor relationship. Section III addresses the August 22, 2023 Aaronson Memorandum in detail, including Triton Harbor's theory regarding the memorandum, its privilege status, and key preparation points. Section IV sets forth the anticipated lines of questioning, organized thematically. Section V catalogs the key documents expected to be used at the deposition. Section VI summarizes relevant observations from the Whitmore and Reeves depositions. Section VII provides recommended testimony guidelines, including specific themes and a "do not" list. Section VIII addresses anticipated problem areas and risk mitigation strategies. Section IX details logistics and the preparation schedule. Section X concludes with next steps.
II. Witness Background
A. Professional Background
Philip Aaronson is 61 years old. He currently holds the title of Executive Vice President and Chief Credit Officer of Belmont Ridge Bank NA. Aaronson has held the Chief Credit Officer position for approximately twelve years, having been appointed to the role in or around 2013. In this capacity, he oversees credit approval for all commercial and industrial lending above delegated authority thresholds, which at BRB are set at $5 million for relationship managers and $10 million for division heads. Credits above $10 million require Aaronson's personal approval as CCO or, in certain cases, the approval of the full credit review committee, which Aaronson chairs.
Belmont Ridge Bank NA is a nationally chartered bank (OCC Charter No. 14-00927) headquartered at 1200 Avenue of the Americas, 38th Floor, New York, NY 10036. BRB is a wholly owned subsidiary of Belmont Ridge Financial Holdings Corp., a publicly traded bank holding company listed on the New York Stock Exchange under ticker symbol BRMR. As of fiscal year-end 2023, BRB had approximately $47.3 billion in total assets and reported net interest income of approximately $1.82 billion. BRB maintains a diversified commercial and industrial lending portfolio, with particular concentrations in middle-market lending, commercial real estate, and asset-based lending in the greater New York metropolitan area and along the Eastern Seaboard.
Within BRB's organizational structure, Aaronson reports directly to the Chief Executive Officer and serves as a member of the Bank's Executive Management Committee. He sits on the internal credit review committee, which he chairs, and exercises final approval authority on credits exceeding $10 million. The credit review committee meets weekly and conducts quarterly portfolio reviews of all classified and criticized assets. Aaronson also participates in BRB's Allowance for Credit Losses ("ACL") estimation process in coordination with the Bank's Chief Financial Officer and Chief Risk Officer.
Prior to joining BRB, Aaronson held senior credit roles at other financial institutions, the details of which are not immediately relevant to this preparation memorandum but may be explored by opposing counsel in an effort to establish Aaronson's deep familiarity with workout and forbearance practices. We should confirm with Aaronson during the first preparation session the specifics of his prior employment history and educational background to ensure he is comfortable providing accurate testimony on these points.
B. Aaronson's Role in the Triton Harbor Relationship
Aaronson's involvement with the Triton Harbor credit relationship spans the full lifecycle of the lending relationship, from origination to acceleration. The key touchpoints are as follows:
Original Credit Facility Approval (June 15, 2021). Aaronson approved the original $22 million credit facility to Triton Harbor Industries, LLC, which consisted of a $14 million Term Loan A and an $8 million Revolving Credit Facility. The credit was originated by BRB's Commercial and Industrial Lending Division and underwritten based on Triton Harbor's financial performance as of fiscal year 2020 and early 2021, with Aaronson signing the final credit approval memorandum. The original Credit Agreement (the "Credit Agreement") was executed on June 15, 2021.
Credit Downgrade (March 8, 2023). Aaronson approved the downgrade of the Triton Harbor credits from "Pass" (Risk Rating 4) to "Substandard" (Risk Rating 7) on March 8, 2023. This downgrade reflected the significant deterioration in Triton Harbor's financial condition, including a sharp decline in EBITDA, breach of financial covenants (the Fixed Charge Coverage Ratio and Total Leverage Ratio), and the loss of two major contracts. The downgrade triggered the transfer of the Triton Harbor relationship from BRB's Relationship Management Division to the Special Assets Group, headed by Senior Vice President Derek Whitmore.
The Aaronson Memorandum (August 22, 2023). Aaronson authored the August 22, 2023 internal memorandum captioned "Triton Harbor — Recommended Disposition Strategy," addressed to Derek Whitmore and copied to General Counsel Margaret Linden. This memorandum is discussed at length in Section III below.
Forbearance Approval (October 2023). Aaronson approved the terms of the Forbearance and Modification Agreement (the "Forbearance Agreement"), which was executed on October 6, 2023. This approval was within Aaronson's delegated authority as CCO, given that the outstanding principal exceeded $10 million.
Communications During the Workout Period. Throughout the period from March 2023 through April 2024, Aaronson communicated regularly with Whitmore regarding the status of the Triton Harbor relationship and the SAG's workout strategy. He also communicated with General Counsel Margaret Linden regarding litigation risk associated with the Triton Harbor credit. The nature and frequency of these communications will be important at the deposition.
Acceleration Decision (April 2024). Aaronson was involved in the decision to issue the Notice of Default and Acceleration on April 15, 2024, following the expiration of the forbearance period on April 3, 2024 and Triton Harbor's failure to satisfy the covenant cure milestone. The precise nature and extent of Aaronson's role in the acceleration decision should be clarified during preparation sessions.
III. The August 22, 2023 Aaronson Memorandum — Central Document
A. Summary of the Document
The August 22, 2023 memorandum (the "Aaronson Memorandum") is the single most important document in the case from the standpoint of the Defendants' counterclaims. Its key attributes are as follows:
• Date: August 22, 2023.
• From: Philip Aaronson, EVP & Chief Credit Officer.
• To: Derek Whitmore, SVP, Head of Special Assets Group.
• CC: Margaret Linden, SVP & General Counsel.
• Subject Line: "Triton Harbor — Recommended Disposition Strategy."
The memorandum is approximately three pages in length and sets forth Aaronson's recommended approach for resolving the Triton Harbor credit. The key language that will be the focus of the deposition is as follows:
The memorandum directed SAG to "pursue a structured exit from the Triton Harbor relationship within 120 days" and stated that "further extensions of credit are not contemplated under any workout scenario."
The timing of this memorandum is critical to Triton Harbor's claims. The memorandum was created approximately five weeks before the September 12, 2023 meeting at which Whitmore allegedly promised the Kappels a new $6.5 million revolving facility and that BRB was "committed to the long-term relationship." It was created approximately six weeks before the October 6, 2023 Forbearance Agreement was executed, which required the Kappels to pledge additional collateral and expand their personal guaranties.
The juxtaposition of the Aaronson Memorandum's directive language with the subsequent conduct of Whitmore and Reeves is the core of Triton Harbor's fraudulent inducement counterclaim.
B. Triton Harbor's Theory Regarding the Memorandum
Triton Harbor's central argument, as set forth in its Verified Counterclaim (filed August 14, 2024) and further developed in Defendants' discovery responses and deposition questioning, is as follows:
BRB, acting through its Chief Credit Officer Philip Aaronson, made a definitive internal decision on or before August 22, 2023 to exit the Triton Harbor relationship and never extend additional credit to Triton Harbor under any circumstances. This decision was memorialized in the Aaronson Memorandum and communicated to SAG leadership. Notwithstanding this decision, BRB — acting through Whitmore and Reeves — simultaneously held out the promise of future lending and a renewed credit relationship to induce Marcus and Elaine Kappel to: (i) pledge additional collateral consisting of equipment leases valued at approximately $2.3 million; (ii) pledge the Kappel residence at 14 Birchmont Lane, Westport, Connecticut, valued at approximately $3.1 million; (iii) convert Marcus Kappel's personal guaranty from a limited guaranty ($4.5 million cap) to an unlimited personal guaranty; and (iv) execute a new unlimited personal guaranty from Elaine Kappel, who had not previously guaranteed any of the Triton Harbor obligations.
According to Triton Harbor's theory, the Aaronson Memorandum is the strongest piece of evidence for scienter — the element of fraudulent inducement requiring proof that the defendant made representations with knowledge of their falsity or with reckless disregard for their truth. The memorandum arguably shows that BRB's actual intent as of August 22, 2023 was flatly inconsistent with the representations allegedly made to the Kappels in September and October 2023. If the trier of fact credits this theory, the memorandum establishes that BRB knew, at the time the alleged misrepresentations were made, that it had no intention of extending additional credit or maintaining the relationship, and that the forbearance was merely a device to extract additional collateral and security before exercising its acceleration rights.
We should anticipate that opposing counsel will devote a substantial portion of the deposition — potentially one to two hours or more — to the Aaronson Memorandum and will approach it from multiple angles: its genesis, its directive language, its distribution, its relationship to subsequent events, and whether Aaronson's stated intent was ever modified or superseded.
C. Privilege Status
The Aaronson Memorandum was logged on BRB's privilege log as part of the initial production on January 15, 2025. The privilege assertion was based on the memorandum's dual-purpose nature as both a business communication and a communication seeking or conveying legal advice, given the CC to General Counsel Margaret Linden. Specifically, BRB's privilege log entry described the document as follows:
"Internal memorandum from P. Aaronson to D. Whitmore, cc: M. Linden (General Counsel), dated August 22, 2023, regarding recommended strategy for the Triton Harbor credit relationship, including assessment of litigation risk and request for legal guidance. Privileged: Attorney-Client Communication; Attorney Work Product."
Triton Harbor has challenged this privilege designation and moved to compel production, arguing that the memorandum is a business document sent to the General Counsel as a matter of routine practice rather than for the purpose of obtaining legal advice. That motion is currently pending before Justice Marchetti.
Per the internal analysis prepared by Hannah Brinkley dated December 18, 2024, we recommended asserting privilege while preparing for the possibility that Justice Marchetti will order an in camera review of the memorandum. The privilege analysis is not free from doubt: while the CC to Linden and the reference to "litigation risk" in the body of the memorandum support a privilege claim, the primary purpose of the memorandum appears to be the communication of a business strategy recommendation to Whitmore, and courts in this jurisdiction have at times applied the "primary purpose" test strictly in the dual-purpose document context. See, e.g., Spectrum Sys. Int'l Corp. v. Granite Harbor Securities, 78 N.Y.2d 371 (1991); Beaumont Group v. Superior Court, 60 A.D.3d 571 (1st Dep't 2009).
The following preparation guidance applies depending on the privilege outcome:
If the memorandum remains privileged at the time of the deposition: Aaronson should not volunteer the memorandum's contents. If asked about the memorandum, Aaronson should acknowledge its existence (which is already disclosed on the privilege log) but should follow counsel's instructions to assert privilege as to its substance. Aaronson should not appear evasive — he should answer factual questions about his own business decisions and thought processes to the extent those questions do not call for the disclosure of privileged communications. For example, Aaronson can testify about his own views regarding the Triton Harbor credit as of August 2023 without disclosing the specific contents of a privileged communication.
If the court has ordered production by the time of the deposition (or if the privilege is otherwise waived): Aaronson must be fully prepared to testify about the memorandum's contents, including the specific language regarding "structured exit," "120 days," and "further extensions of credit are not contemplated." The preparation guidance in Section III.D below is designed for this scenario.
D. Key Preparation Points for Aaronson on the Memorandum
The following testimony themes should be developed and reinforced during preparation sessions:
1. "Recommended Disposition Strategy" Is a Standard Credit Risk Management Tool. Aaronson should explain that the preparation of a recommended disposition strategy is a routine step in the management of a classified or criticized credit within BRB's Special Assets Group. When a credit is downgraded and transferred to SAG, the CCO customarily issues a memorandum setting forth the CCO's recommended approach, which then serves as a starting framework for the SAG team's work. These memoranda are planning documents — they set out a preferred course of action based on available information but do not foreclose alternative outcomes, including a workout, restructuring, or even the restoration of the credit to performing status if circumstances warrant.
2. "Structured Exit" Was a Planning Framework, Not an Irrevocable Decision. Aaronson should characterize the phrase "structured exit" as establishing the SAG's planning framework — the default assumption against which alternative proposals would be evaluated. It was not an irrevocable directive that precluded any other outcome. The 120-day timeline was aspirational, reflecting the CCO's preference for an expeditious resolution, but it was not a binding deadline. BRB's actual conduct — entering into a 180-day forbearance agreement — demonstrates that the 120-day framework was adjusted as circumstances evolved.
3. "Further Extensions of Credit Are Not Contemplated" Reflected the Information Available as of August 22, 2023. This is the most damaging sentence in the memorandum, and Aaronson should be prepared to explain it carefully. The phrase should be placed in context: as of August 22, 2023, BRB had not yet received Triton Harbor's formal workout proposal. The statement reflected the CCO's assessment based on the information then available, which included:
• A sharp deterioration in Triton Harbor's financial performance: trailing twelve-month ("TTM") EBITDA had declined from $9.4 million in FY2022 to approximately $5.1 million, representing a decline of approximately 45.7%.
• Triton Harbor's Fixed Charge Coverage Ratio ("FCCR") had fallen to 0.87x, well below the 1.20x minimum required under the Credit Agreement.
• Triton Harbor's Total Leverage Ratio had risen to 4.92x, substantially above the 3.50x maximum permitted under the Credit Agreement.
• Triton Harbor had lost the Port of Bridgehaven contract (representing approximately $12 million per year in revenue) and the Newark Bay maintenance contract (representing approximately $7.5 million per year in revenue) — collectively representing approximately $19.5 million in annual revenue, or roughly 28.7% of Triton Harbor's FY2022 revenue of approximately $68 million.
• The updated collateral appraisal indicated significant depreciation in the value of the primary collateral, the Long Island City terminal facility.
Based on this information, the CCO's assessment that new extensions of credit were not contemplated was a reasonable, prudent conclusion. However, the assessment was subject to change based on new information — and new information did arrive.
4. The Forbearance Agreement Was a Separate Decision Made in Light of Changed Circumstances. Aaronson should emphasize that the Forbearance Agreement executed on October 6, 2023 — approximately six weeks after the Aaronson Memorandum — was a separate decision, reached after BRB received additional information that warranted reconsideration of the disposition strategy. Specifically, between August 22 and October 6, 2023:
• Triton Harbor engaged Mercer Tidwell & Associates LLC, a reputable restructuring advisory firm (Raymond Mercer, Managing Director), to advise on the workout.
• Mercer Tidwell provided BRB with updated financial projections and a detailed restructuring proposal that included a proposed forbearance framework, milestone-based covenant cure targets, and a pathway to stabilization.
• BRB's Special Assets Group, under Whitmore's leadership, evaluated the Mercer Tidwell proposal on its merits and recommended the forbearance terms ultimately approved by Aaronson.
5. The Forbearance Was Not an Extension of New Credit. Aaronson should be clear that the forbearance agreement did not constitute an extension of new credit to Triton Harbor. It was a modification of existing obligations and a contractual standstill — an agreement by BRB to temporarily forbear from exercising its default remedies under the Credit Agreement. The distinction between forbearance on existing debt and extension of new credit is fundamental and should be emphasized repeatedly.
6. The Forbearance Agreement's Section 9(c) Disclaimer. Aaronson should confirm that he was aware of, and insisted upon, the inclusion of Section 9(c) of the Forbearance Agreement, which provides:
"Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility."
This provision was included precisely to ensure that no party could claim that the forbearance itself represented or implied any commitment to future lending.
7. The CC to General Counsel. If the privilege issue has been resolved or the question is properly framed, Aaronson should testify that he included General Counsel Margaret Linden on the August 22 memorandum because litigation risk was a component of the disposition analysis and it is consistent with prudent banking practice to involve the General Counsel's office when significant credit risk and potential legal exposure are present. Aaronson should be careful not to characterize the specific legal advice sought or received, but the fact of including the General Counsel should be presented as unremarkable and routine.
IV. Anticipated Lines of Questioning
Based on our assessment of Ted Huang's style and approach, the issues raised in Triton Harbor's Verified Counterclaim, the document production to date, and observations from the Whitmore and Reeves depositions, we anticipate the following principal lines of questioning. This section is organized thematically, though Huang is likely to proceed largely chronologically, returning to the Aaronson Memorandum repeatedly from different angles.
A. The Decision-Making Chain (Credit Downgrade Through Acceleration)
We expect Ted Huang to walk Aaronson chronologically through every material decision point in the Triton Harbor relationship, with particular emphasis on Aaronson's personal role, the information available to him at each stage, and the internal deliberations preceding each decision. The key decision points, and the preparation considerations associated with each, are as follows:
1. June 15, 2021 — Original Credit Facility. Aaronson approved the $22 million credit facility (Term Loan A of $14 million and Revolving Facility of $8 million) to Triton Harbor Industries, LLC. Expect questions on the financial metrics and underwriting analysis that justified the approval. At the time of origination, Triton Harbor's financials were strong: FY2020 revenue was approximately $65 million, with trailing performance suggesting FY2022 revenue of approximately $68 million; EBITDA was approximately $9.4 million; the original collateral appraisal by Ridgeline Appraisal Group valued the primary collateral (the Long Island City terminal facility and associated equipment) at $18.7 million, providing a loan-to-value ratio of approximately 1.18x on the total facility. Aaronson should be comfortable testifying that the credit was soundly underwritten at origination.
Huang may also explore whether BRB conducted adequate due diligence on Triton Harbor's contract concentration risk — specifically, the heavy dependence on the Port of Bridgehaven contract and the Newark Bay maintenance contract. This line of questioning is designed to suggest that BRB bears some responsibility for the credit's deterioration. Aaronson should acknowledge that contract concentration was identified and evaluated as a risk factor but was mitigated by the strength of Triton Harbor's historical performance and the long tenure of the relevant contracts.
2. March 8, 2023 — Credit Downgrade. Aaronson approved the downgrade of the Triton Harbor credits from "Pass" to "Substandard" (Risk Rating 7) and the transfer of the relationship from Relationship Management to the Special Assets Group. At the time of the downgrade, total outstanding under the facility was approximately $17,575,000, consisting of $11,375,000 on Term Loan A and $6,200,000 drawn on the Revolving Facility. The FCCR had fallen to 0.87x (against a 1.20x minimum covenant), and the Total Leverage Ratio had risen to 4.92x (against a 3.50x maximum covenant). Triton Harbor had already lost the Port of Bridgehaven contract and the Newark Bay maintenance contract, resulting in the revenue decline discussed above.
Expect Huang to probe whether the downgrade was warranted on the merits or was the first step in a predetermined plan to exit the relationship. Aaronson should testify that the downgrade was required under BRB's credit risk management policies, was consistent with OCC and interagency guidance on credit risk classification, and was the appropriate response to the objective deterioration in Triton Harbor's financial condition and covenant compliance.
3. August 22, 2023 — Aaronson Memorandum. This will be the primary focus of the deposition and is addressed comprehensively in Section III above. Expect Huang to spend significant time on the memorandum's language, the circumstances of its preparation, its distribution, and its relationship to subsequent events.
4. September–October 2023 — Forbearance Negotiations. Aaronson approved the forbearance terms that were ultimately reflected in the October 6, 2023 Forbearance Agreement. Expect questions on the following:
• When did Aaronson first learn that SAG was considering a forbearance?
• What materials were presented to Aaronson in connection with the forbearance approval?
• Did Aaronson participate in any meetings with Triton Harbor or its advisors during the negotiation period? (We believe the answer is no — the negotiations were conducted by Whitmore and Reeves — but this should be confirmed.)
• Was Aaronson's approval of the forbearance consistent with or contradictory to the August 22 memorandum? (This is the core tension, addressed at length in Section IV.C below.)
• Did Aaronson impose any conditions on the forbearance approval?
• Were there dissenting views within BRB regarding the advisability of the forbearance?
5. October 6, 2023 — Forbearance and Modification Agreement Executed. Aaronson should be prepared to discuss the specific terms he approved:
• Forbearance period: 180 days (October 6, 2023 through April 3, 2024).
• Monthly debt service payments: $125,000 per month (total of $750,000 over the forbearance period).
• Additional collateral: Equipment leases valued at approximately $2.3 million; mortgage on the Kappel residence at 14 Birchmont Lane, Westport, Connecticut, valued at approximately $3.1 million.
• Expanded guaranties: Marcus Kappel's personal guaranty converted from a limited guaranty ($4.5 million cap) to an unlimited personal guaranty; Elaine Kappel executed a new unlimited personal guaranty (she had not previously guaranteed any of the Triton Harbor obligations).
• Forbearance fee: $87,500 (calculated at 0.50% of the approximately $17,500,000 then outstanding).
• Covenant cure milestones: Triton Harbor was required to achieve an FCCR of not less than 1.20x by March 31, 2024, as a condition of the forbearance.
• Section 9(c) — No commitment to extend credit.
• Section 12(a) — Integration clause.
6. April 3, 2024 — Forbearance Expiration / Covenant Cure Failure. As of March 31, 2024, Triton Harbor's FCCR was 0.94x — below the 1.20x minimum required under the covenant cure provision of the Forbearance Agreement. Aaronson should explain that the covenant cure milestone was a negotiated condition of the forbearance, agreed to by Triton Harbor and its advisors, and that its failure was an objective, mathematically determinable event that triggered BRB's right to accelerate the outstanding obligations.
7. April 15, 2024 — Notice of Default and Acceleration. BRB issued its formal Notice of Default and Acceleration on April 15, 2024, twelve days after the forbearance expired. The total accelerated amount was $17,456,212, consisting of:
• Term Loan A principal: $10,625,000
• Revolving Facility drawn: $6,200,000
• Accrued interest: $487,322
• Late fees and default interest: $143,890
Aaronson presumably approved or concurred in the acceleration decision. He should be prepared to testify regarding his role and the considerations that informed the decision, including the failed covenant cure, the continuing deterioration of Triton Harbor's business, and the declining collateral value.
8. May 20, 2024 — Commencement of Foreclosure. BRB commenced foreclosure proceedings on the Long Island City terminal facility on May 20, 2024. The updated collateral appraisal by Ridgeline Appraisal Group, completed in September 2023, valued the property at $11,200,000, down from the original appraisal of $18,700,000 — a decline of $7,500,000, or approximately 40.1%. Aaronson should be prepared to discuss the collateral valuation decline and the decision to commence foreclosure as part of the overall recovery strategy.
B. The Alleged Misrepresentations — Aaronson's Knowledge
A critical line of questioning will test whether Aaronson knew about — and sanctioned, directed, or failed to correct — the alleged misrepresentations by Whitmore and Reeves to the Kappels. The three principal alleged misrepresentations, and the preparation considerations for each, are as follows:
1. The September 12, 2023 Meeting. Derek Whitmore and Joanna Reeves met with Marcus and Elaine Kappel at BRB's offices on September 12, 2023. According to Triton Harbor's Verified Counterclaim, Whitmore made the following statements at that meeting:
• BRB was "committed to the long-term relationship" with Triton Harbor.
• BRB would "seriously consider" a new $6.5 million revolving credit facility upon Triton Harbor's successful completion of the forbearance milestones.
• The requirement for additional collateral (the equipment leases and the Kappel residence) was "a formality to satisfy regulators" and did not reflect any concern on BRB's part about the long-term viability of the lending relationship.
Aaronson was not present at the September 12, 2023 meeting. The key questions that Huang will pursue include:
• Was Aaronson aware, in advance of the September 12 meeting, of what Whitmore planned to say to the Kappels?
• Did Whitmore seek Aaronson's authorization or guidance before the meeting?
• Did Whitmore report back to Aaronson after the meeting regarding what was discussed and what representations were made?
• If Aaronson learned after the fact that Whitmore made statements suggesting a commitment to future credit, did Aaronson take any steps to correct or withdraw those statements?
2. The September 18, 2023 Email (Reeves to Marcus Kappel). On September 18, 2023, Joanna Reeves sent an email to Marcus Kappel stating: "We are optimistic about a path forward and believe this forbearance sets the stage for a renewed credit relationship." The key questions for Aaronson include:
• Was this email approved by or known to Aaronson?
• Did Reeves clear this language with Whitmore or with Aaronson before sending it?
• If Aaronson became aware of this email after it was sent, what was his reaction, and did he take any corrective action?
3. The September 29, 2023 Internal Email (Reeves to Whitmore). On September 29, 2023, Reeves sent an internal email to Whitmore forwarding a draft term sheet for a potential new $6.5 million revolving credit facility, marked "for discussion purposes only — not approved." The key questions for Aaronson include:
• Was Aaronson copied on this email?
• Was the draft term sheet forwarded to Aaronson by Whitmore or anyone else?
• Did Aaronson see the draft term sheet at any time?
• If Aaronson saw the draft, did he approve or reject it? What was his reaction?
• Did Aaronson direct or authorize any BRB employee to prepare or share a draft term sheet for new credit with Triton Harbor or its advisors?
Preparation guidance: Aaronson should testify truthfully about what he knew and when he knew it. If he was genuinely unaware of specific Whitmore or Reeves statements, he should say so clearly and without equivocation. If he was aware of the draft term sheet, he should explain that internal exploratory drafts are routine in workout analysis — SAG analysts regularly model various scenarios, including new credit structures, to evaluate the full range of options and to assess the borrower's proposals. The existence of a draft term sheet does not constitute a commitment, an approval, or even a recommendation. It is an analytical exercise. The draft was clearly marked "for discussion purposes only — not approved," which reflects its preliminary and non-binding nature.
Aaronson should avoid the temptation to overstate his lack of awareness if, in fact, he was aware of the substance of these communications. Opposing counsel will have the documents and will be prepared to impeach inconsistent testimony with specific emails and meeting records.
C. Consistency Between the Aaronson Memorandum and the Forbearance Approval
This is the core tension that opposing counsel will exploit, and it is the single most important area of preparation for this deposition. The question Huang will frame, explicitly or implicitly, is straightforward: How could Philip Aaronson write, on August 22, 2023, that "further extensions of credit are not contemplated under any workout scenario" and then, just six weeks later, approve a forbearance agreement that — according to Triton Harbor — was presented to the Kappels as a pathway to new credit?
The following preparation points should be developed and rehearsed with Aaronson:
The forbearance was not an extension of new credit. This point is addressed in Section III.D.5 above but bears repeating. The forbearance was a modification and standstill on existing obligations. It did not extend any new loan proceeds to Triton Harbor. The August 22 memorandum stated that new extensions of credit were not contemplated; the forbearance was consistent with that statement because it was not a new extension of credit. This distinction is clear, legally well-supported, and should be emphasized.
The Forbearance Agreement contained an explicit disclaimer of any commitment to new credit. Section 9(c) of the Forbearance Agreement provided in express terms that nothing in the agreement constituted or was to be deemed a commitment to extend additional credit. Aaronson should confirm that he was aware of this provision and that it was consistent with his own directives as CCO.
The August 22 memorandum and the forbearance were not inconsistent — both were components of a structured exit strategy. Aaronson should explain that a forbearance agreement can be, and often is, a component of a structured exit from a distressed credit relationship. A forbearance that stabilizes the situation, obtains additional collateral and security for the bank, and provides the borrower time to seek alternative financing, identify a buyer, or otherwise effect an orderly resolution is entirely consistent with a structured exit. The alternative — immediate acceleration and foreclosure in August 2023 — would have been disruptive, potentially value-destructive, and would not have secured the additional collateral that the forbearance ultimately yielded.
Aaronson's views evolved as new information became available. Between August 22, 2023 and October 6, 2023, the landscape changed. Triton Harbor engaged Mercer Tidwell & Associates LLC, a respected restructuring advisory firm. Mercer Tidwell provided BRB with updated financial projections and a detailed restructuring proposal. This new information warranted fresh analysis and, in Aaronson's judgment, supported the conclusion that a time-limited forbearance was the optimal path to maximize BRB's recovery. A responsible credit officer does not rigidly adhere to a prior recommendation when new information suggests a better course.
D. Communications with Margaret Linden (General Counsel)
Expect Huang to probe the nature and content of Aaronson's communications with General Counsel Margaret Linden, both in connection with the August 22 memorandum and more generally throughout the workout period. This line of questioning has two objectives from opposing counsel's perspective: (1) to obtain substantive information about what Linden advised or was told, and (2) to challenge the privilege claim by eliciting testimony that Aaronson's communications with Linden were for "business" rather than "legal" purposes.
Instruction to Aaronson on privilege assertion: When asked about communications with Margaret Linden, Aaronson should state the following, or words to this effect:
"I communicated with the General Counsel's office regarding this matter, but I have been instructed by counsel that those communications are privileged, and I am directed not to disclose their substance."
Aaronson should not characterize whether legal advice was sought or given — doing so could waive or undermine the privilege. He should simply confirm or deny the fact that a communication took place and assert privilege as to its substance, following the direction of defending counsel (Linda Osei) in the room.
Caution regarding the "business versus legal" framing: Opposing counsel may attempt to elicit testimony that Aaronson communicated with Linden for "business" rather than "legal" purposes, or that the CC on the August 22 memorandum was a routine business distribution rather than a request for legal input. Aaronson should not accept this framing. He should not volunteer a characterization of the purpose of his communications with Linden. If pressed, he should defer to counsel's privilege instruction and state that he is not in a position to characterize the purpose of those communications without waiving the privilege.
E. Credit Committee Process and Approvals
Expect questions exploring BRB's internal credit approval process, including:
• The composition of the credit review committee — who sits on it, how often it meets, how decisions are documented.
• What materials were presented to the committee (or to Aaronson as CCO) when the forbearance terms were approved.
• Whether there were dissenting views within the committee regarding the advisability of the forbearance or the terms thereof.
• Whether minutes of credit committee meetings were taken, and if so, whether those minutes are in the document production or on the privilege log.
• How Aaronson's individual approval authority as CCO interacts with the committee process.
Aaronson should describe the standard process in general terms without volunteering details of specific deliberations that may implicate deliberative privilege, work product protections, or the substance of privileged communications with counsel. He can describe the process — credits above $10 million require CCO approval, the CCO may consult with the credit review committee, committee meetings typically involve a presentation by the SAG team, review of financial analysis and collateral valuations, and a recommendation — without revealing the specific substance of what was said at any particular meeting.
If asked whether there were dissenting views, Aaronson should consult with defending counsel before answering. Dissenting views within the committee may or may not be privileged depending on whether they involved legal analysis or purely business judgment. In general, the safer approach is for Aaronson to testify that the credit review process involves robust discussion and evaluation of various perspectives, as is appropriate and expected in the management of a classified credit, without characterizing specific individuals' views.
F. The Acceleration Decision
Expect Huang to devote significant time to Aaronson's role in the April 15, 2024 acceleration decision. The objective will be to establish that BRB had planned to accelerate from the outset and that the forbearance was merely a pretext to obtain additional collateral before doing so.
Preparation points:
Aaronson should explain that acceleration was triggered by the failure of the covenant cure milestone: Triton Harbor's FCCR was 0.94x as of March 31, 2024, below the 1.20x minimum required under Section 5(b) of the Forbearance Agreement. This was an objective, mathematically determinable metric — not a discretionary judgment call by BRB. The cure failure gave BRB the contractual right to terminate the forbearance and exercise its remedies under the Credit Agreement, including acceleration of the outstanding obligations.
Aaronson should further note that BRB waited twelve days after the April 3 forbearance expiration date before issuing the Notice of Default and Acceleration on April 15, 2024. This twelve-day interval reflects measured, deliberate action — not precipitous or retaliatory conduct. During that interval, BRB evaluated the situation, considered its options, and made a considered decision to exercise its contractual rights.
Opposing counsel may suggest that BRB was always going to accelerate regardless of whether Triton Harbor met the covenant cure milestone. Aaronson should resist this characterization firmly. He should testify that BRB entered into the forbearance in good faith, that BRB would have evaluated continued forbearance, further modification, or other alternatives had the FCCR covenant been met, and that the acceleration decision was a direct consequence of the covenant cure failure, not a foregone conclusion.
If asked the hypothetical — "Would BRB have extended the forbearance if Triton Harbor had achieved the 1.20x FCCR?" — Aaronson should answer carefully. He should state that the Bank would have evaluated the situation on its merits, including all relevant factors, and that he cannot speculate about what the outcome of that evaluation would have been. He should not commit to a definitive answer in either direction.
G. Knowledge of Triton Harbor's Reliance
Expect questions testing whether Aaronson knew or should have known that the Kappels were relying on BRB's alleged representations about future credit in deciding to pledge additional collateral and expand their personal guaranties. This line of questioning goes to the element of justifiable reliance in the fraudulent inducement claim.
Aaronson should emphasize the following points:
(i) The Kappels were sophisticated commercial parties. Marcus J. Kappel has more than thirty years of experience in the marine industrial services industry and previously served as a senior executive at Atlantic Basin Marine Corp., one of the largest operators in the sector. He is not a naïve borrower unfamiliar with commercial lending practices.
(ii) Elaine D. Kappel served as Chief Financial Officer of Triton Harbor Industries, LLC. In that capacity, she had direct responsibility for the company's financial management, including its banking relationships and debt obligations. She is highly sophisticated in financial matters.
(iii) The Kappels were independently represented by legal counsel in connection with the negotiation and execution of the Forbearance Agreement and the related guaranty amendments and collateral documents. Their counsel had the opportunity to review all documentation and to advise the Kappels regarding the legal implications of the terms they were agreeing to.
(iv) Triton Harbor was advised by Mercer Tidwell & Associates LLC, a restructuring advisory firm, with Raymond Mercer, Managing Director, serving as the lead advisor. Mercer Tidwell's role was specifically to advise Triton Harbor in connection with the workout process, and it is reasonable to assume that Mercer Tidwell advised the Kappels regarding the significance of the forbearance terms and the absence of any commitment to future credit.
(v) The Forbearance Agreement contained explicit disclaimers — Section 9(c) (no commitment to extend credit) and Section 12(a) (integration clause) — that put any reasonable party on notice that no commitment to new credit was being made. Any reliance on oral statements or informal communications that contradicted the express terms of the written agreement would be unreasonable as a matter of law.
V. Key Documents for Deposition
The following documents are expected to feature prominently in the Aaronson deposition. They should be reviewed with Aaronson during the preparation sessions, and copies should be included in the deposition preparation binder. This section is organized by category.
A. Documents Aaronson Authored or Received
1. Aaronson Memorandum (August 22, 2023) — "Triton Harbor — Recommended Disposition Strategy." This is the central document and should be reviewed extensively during preparation, regardless of whether it remains privileged. If privilege is maintained, Aaronson should review the document for his own preparation but should not disclose its contents at the deposition absent direction from counsel. Privilege status is pending and may be subject to in camera review by Justice Marchetti.
2. Credit Approval Memorandum for Original Facility (June 2021) — Aaronson's approval of the $22 million credit facility, including the underwriting analysis, financial metrics, collateral valuation, and risk factors considered at origination.
3. Credit Downgrade Recommendation (March 8, 2023) — The documentation supporting the downgrade of the Triton Harbor credits from "Pass" (Risk Rating 4) to "Substandard" (Risk Rating 7), including the financial analysis, covenant compliance calculations, and narrative discussion of the credit deterioration.
4. Internal Emails Between Aaronson and Whitmore (March–October 2023) — These emails document Aaronson's direction of SAG strategy during the workout period. Any emails directing SAG to pursue acceleration or exit should be identified and reviewed carefully with Aaronson.
5. Forbearance Approval Documentation (Late September/Early October 2023) — Credit committee records or CCO approval memorandum relating to the approval of the forbearance terms. This may include a formal approval memorandum, credit committee minutes, or an email chain documenting Aaronson's approval.
6. Notice of Default and Acceleration (April 15, 2024) — To confirm Aaronson's involvement in the acceleration decision and the circumstances surrounding the issuance of the notice.
B. Documents Authored by Others That Reference Aaronson
1. September 29, 2023 Internal Email from Reeves to Whitmore — Forwarding a draft term sheet for a potential new $6.5 million revolving credit facility, marked "for discussion purposes only — not approved." It is critical to determine whether Aaronson was copied on this email, whether the draft was forwarded to him by Whitmore, and whether he ever saw or reviewed it. This determination should be made before the first preparation session.
2. September 18, 2023 Email from Reeves to Marcus Kappel — "We are optimistic about a path forward and believe this forbearance sets the stage for a renewed credit relationship." We need to determine whether Aaronson was aware of this email at or around the time it was sent.
3. Whitmore's Meeting Notes or Reports Regarding the September 12, 2023 Meeting — Any notes, memoranda, or email reports prepared by Whitmore or Reeves summarizing the September 12, 2023 meeting with the Kappels and the representations allegedly made at that meeting. If such documents exist and reference Aaronson (e.g., "as directed by Phil" or "per Phil's guidance"), they will be highly significant.
C. The Forbearance Agreement Itself (October 6, 2023)
The following provisions of the Forbearance and Modification Agreement are particularly relevant and should be highlighted in Aaronson's preparation binder:
• Section 9(c) — No Commitment to Extend Credit: "Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility."
• Section 12(a) — Integration Clause: Providing that the Forbearance Agreement and the other loan documents constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior oral and written communications.
• Section 4(a) — Monthly debt service payments of $125,000.
• Guaranty Amendments — Marcus Kappel's guaranty converted from limited ($4.5 million cap) to unlimited; Elaine Kappel's new unlimited personal guaranty.
• Additional Collateral Provisions — Equipment leases (valued at approximately $2.3 million); mortgage on the Kappel residence at 14 Birchmont Lane, Westport, Connecticut (valued at approximately $3.1 million).
• Section 5(b) — Covenant cure milestone requiring FCCR of not less than 1.20x by March 31, 2024.
• Forbearance Fee — $87,500 (0.50% of approximately $17,500,000 outstanding).
D. Triton Harbor Financial Statements and Covenant Compliance Certificates
• FY2022 Financials: Revenue of approximately $68 million; EBITDA of approximately $9.4 million.
• Q1 2023 / TTM Financials (as of the time of the credit downgrade): TTM EBITDA of approximately $5.1 million; FCCR of 0.87x (vs. 1.20x covenant minimum); Total Leverage Ratio of 4.92x (vs. 3.50x covenant maximum).
• March 31, 2024 Covenant Compliance Certificate: FCCR of 0.94x — below the 1.20x minimum required under the Forbearance Agreement's covenant cure milestone. This certificate documents the cure failure that triggered the acceleration.
E. Ridgeline Appraisal Group Reports