1045-00004 · Client 1045 · Expert Engagement

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CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 30th Floor New York, New York 10022 Tel: (212) 841-7000

Fax: (212) 841-7001

www.calderwoodharkness.com

December 9, 2024

VIA ELECTRONIC MAIL AND HAND DELIVERY

Dr. Gerald Stokes Wentworth Risk Advisors LLC 55 East 59th Street, Suite 1410 New York, New York 10022

Re: Engagement as Banking Practices Expert — 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

Calderwood & Harkness Matter No.: 1022-00005

Dear Dr. Stokes:

Thank you for your willingness to discuss a potential engagement with our firm. This letter sets forth the terms and conditions under which Calderwood & Harkness LLP proposes to retain you and Wentworth Risk Advisors LLC as a banking practices expert in the above-captioned matter. We ask that you review this letter carefully and, if the terms are acceptable, countersign and return a copy to the undersigned at your earliest convenience.

1. Introduction and Purpose of Engagement

Calderwood & Harkness LLP represents Belmont Ridge Bank NA ("BRB" or the "Bank"), a nationally chartered commercial bank headquartered at 1200 Avenue of the Americas, 38th Floor, New York, New York 10036. BRB is a diversified financial institution with approximately $47.3 billion in total assets as of its most recent reported quarter, engaged in commercial and industrial lending, real estate finance, treasury management, and related banking services.

BRB is the plaintiff and counterclaim defendant in the above-captioned action, which is pending before the Honorable Althea Marchetti in the Commercial Division of the Supreme Court of the State of New York, New York County. BRB commenced this action on August 12, 2024, seeking, among other things, enforcement of a forbearance and modification agreement dated October 6, 2023 (the "Forbearance Agreement") and recovery of an outstanding deficiency balance owed by the defendants in connection with certain credit facilities extended to Triton Harbor Industries, LLC ("Triton Harbor").

On October 18, 2024, the defendants — Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel (collectively, the "Counterclaim Plaintiffs") — filed an Answer with Counterclaims asserting four causes of action against BRB: (i) fraudulent inducement; (ii) negligent misrepresentation; (iii) breach of the implied covenant of good faith and fair dealing; and (iv) rescission of the Forbearance Agreement and the amended personal guaranties of Marcus J. Kappel and Elaine D. Kappel. The Counterclaim Plaintiffs seek compensatory damages in an amount not less than $12,500,000, together with punitive damages in an unspecified amount, attorneys' fees, and costs.

The Counterclaim Plaintiffs are represented by Kestrel Voss & Huang LLP, 780 Third Avenue, 24th Floor, New York, New York 10017. The lead partner on the matter is Theodore ("Ted") Huang, and the senior associate is Natasha Orlov.

BRB filed its Answer to the Counterclaims on November 22, 2024, denying the material allegations and asserting multiple affirmative defenses, as more fully described in Section 2.6 below.

The purpose of this engagement is to retain you as a banking practices expert to provide opinions in support of BRB's defense against the Counterclaims. We believe that your extensive experience as a former bank examiner with the Office of the Comptroller of the Currency, your academic career as a professor of finance at Hartwell University, and your consulting practice at Wentworth Risk Advisors LLC make you uniquely qualified to opine on the industry standards and customary practices at issue in this matter.

The Calderwood & Harkness engagement team for this matter consists of the following attorneys:

• Linda Osei, Partner (Responsible Partner, Litigation)

• Priya Anand, Partner (Billing Partner)

• Carlos Espinoza, Associate (Lead Associate)

• Hannah Brinkley, Associate (Working Associate)

All communications regarding the substance of the engagement should be directed to one or more members of the engagement team listed above.

2. Factual Background Summary

The following summary is intended to provide you with an overview of the relevant facts and circumstances giving rise to this litigation, so as to orient your review of the underlying documentary record. This summary is necessarily a condensation, and we will supplement it with the complete documentary record as described in Section 4 below.

2.1 The Original Credit Facility

On June 15, 2021, BRB extended a credit facility (the "Credit Facility") to Triton Harbor Industries, LLC, a Delaware limited liability company with its principal offices at 47-15 Austell Street, Suite 200, Long Island City, New York 11101. Triton Harbor is engaged in the business of marine terminal operations, harbor maintenance, and related logistics services in the greater New York metropolitan area.

The Credit Facility consisted of two tranches:

• Term Loan A: $14,000,000, with an 84-month term, quarterly amortization, maturing June 15, 2028, bearing interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points.

• Revolving Credit Facility: An $8,000,000 revolving commitment, maturing June 15, 2026, bearing interest at SOFR plus 250 basis points.

The total committed facilities under the Credit Facility were $22,000,000.

The Credit Facility was secured by a first-priority lien on substantially all assets of Triton Harbor, including marine terminal equipment, accounts receivable, inventory, and general intangibles, together with a first mortgage on Triton Harbor's terminal facility located at 50-22 Borden Avenue, Long Island City, New York 11101 (the "Long Island City Terminal Facility"). At origination, the collateral was appraised at approximately $18,700,000 by Ridgeline Appraisal Group, Inc. (the "2021 Appraisal").

In connection with the Credit Facility, Marcus J. Kappel — the founder, Chief Executive Officer, and 72% equity member of Triton Harbor — executed a limited personal guaranty in the amount of $4,500,000 (the "Original Guaranty").

The Credit Facility contained customary financial covenants, including:

• A minimum Fixed Charge Coverage Ratio ("FCCR") of 1.20x, tested quarterly;

• A maximum Total Leverage Ratio of 3.50x, tested quarterly; and

• A minimum liquidity requirement of $2,000,000 at all times.

2.2 Loan Deterioration and Transfer to Special Assets

For fiscal year 2022, Triton Harbor reported revenue of approximately $68 million and adjusted EBITDA of approximately $9.4 million. During this period, the Credit Facility remained in compliance with all financial covenants and debt service obligations.

Beginning in the first quarter of fiscal year 2023, however, Triton Harbor's financial performance deteriorated significantly. By the end of Q1 2023, Triton Harbor's trailing-twelve-month adjusted EBITDA had fallen to approximately $5.1 million. As a consequence, the company's FCCR fell to 0.87x, well below the covenant minimum of 1.20x, and its Total Leverage Ratio rose to 4.92x, exceeding the covenant maximum of 3.50x.

On March 8, 2023, BRB's internal credit review committee conducted a full credit review of the Triton Harbor facilities. Following that review, the committee downgraded the credits from a "Pass" rating to "Substandard" (Risk Rating 7) and directed that the account be transferred from BRB's Relationship Management group to the Bank's Special Assets Group ("SAG"). At the time of transfer, the outstanding balances under the Credit Facility were as follows: Term Loan A — $11,375,000; Revolving Credit Facility — $6,200,000 (fully drawn); for a total outstanding balance of $17,575,000.

The financial deterioration was driven in substantial part by the loss of two significant contracts during the period from March through September 2023. First, Triton Harbor lost its contract with the Port of Bridgehaven, which had generated approximately $12 million in annual revenue. Second, the company lost its Newark Bay maintenance contract, which had accounted for approximately $7.5 million in annual revenue. As a result, Triton Harbor's annualized revenue run-rate dropped to approximately $48 million.

Upon transfer to the SAG, oversight of the Triton Harbor credit relationship was assumed by Derek Whitmore, Senior Vice President and Head of the Special Assets Group. Day-to-day relationship management responsibility was assigned to Joanna Reeves, Vice President within the SAG.

2.3 Internal Disposition Strategy and Forbearance Negotiations

On August 22, 2023, Philip Aaronson, Executive Vice President and Chief Credit Officer of BRB, authored a memorandum addressed to Derek Whitmore, with a copy to Margaret Linden, Senior Vice President and General Counsel (the "Aaronson Memorandum"). In the Aaronson Memorandum, Mr. Aaronson 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." The Counterclaim Plaintiffs have placed the Aaronson Memorandum at the center of their fraudulent inducement theory, contending that BRB had already made the decision to exit the relationship before entering into the Forbearance Agreement.

On September 12, 2023, Whitmore and Reeves met with Marcus and Elaine Kappel at BRB's offices in New York. The content of this meeting is disputed. The Counterclaim Plaintiffs allege that, during the meeting, Whitmore represented that BRB was "committed to the long-term relationship" with Triton Harbor, that the Bank would "seriously consider" a new $6.5 million revolving facility upon the successful completion of the forbearance period, and that the pledge of additional collateral (including the Kappel residence) was "a formality to satisfy regulators." BRB denies that Whitmore made these statements in the manner alleged by the Counterclaim Plaintiffs.

On September 18, 2023, Joanna Reeves sent an email to Marcus Kappel in which she stated: "We are optimistic about a path forward and believe this forbearance sets the stage for a renewed credit relationship." The Counterclaim Plaintiffs rely on this email as further evidence of alleged misrepresentations by BRB.

On September 29, 2023, Reeves forwarded to Whitmore an internal draft term sheet for a potential $6.5 million revolving facility, with the notation "for discussion purposes only — not approved." This document was never shared with the Kappels or with Triton Harbor. It is the Counterclaim Plaintiffs' position that this draft term sheet, when viewed in conjunction with the alleged oral representations and the Reeves email, demonstrates that BRB induced Triton Harbor and the Kappels to enter into the Forbearance Agreement under false pretenses.

In September 2023, BRB obtained an updated collateral appraisal from Ridgeline Appraisal Group, Inc. (the "2023 Appraisal"), which valued the collateral package at $11,200,000 — a decline of $7,500,000, or approximately 40.1%, from the 2021 Appraisal at origination. The substantial decline in collateral value further informed the Bank's risk assessment and workout strategy.

2.4 The Forbearance and Modification Agreement

On October 6, 2023, BRB and Triton Harbor executed the Forbearance and Modification Agreement, with Marcus J. Kappel and Elaine D. Kappel executing as guarantors. The principal terms of the Forbearance Agreement were as follows:

• BRB agreed to forbear from exercising its default remedies under the Credit Facility for a period of 180 days, through and including April 3, 2024 (the "Forbearance Period").

• Triton Harbor agreed to make minimum monthly debt service payments of $125,000 during the Forbearance Period, for an aggregate payment of $750,000 over the six-month term.

• Triton Harbor pledged additional collateral, consisting of: (a) two equipment leases with an appraised value of approximately $2,300,000; and (b) a first mortgage on the personal residence of Marcus and Elaine Kappel located at 14 Birchmont Lane, Westport, Connecticut 06880, which had an appraised value of approximately $3,100,000.

• Marcus Kappel's Original Guaranty was amended from a limited guaranty of $4,500,000 to an unlimited personal guaranty.

• Elaine D. Kappel executed a new unlimited personal guaranty of all obligations of Triton Harbor under the Credit Facility and the Forbearance Agreement.

• Triton Harbor was required to engage an independent financial advisor (Mercer Tidwell & Associates LLC, with managing director Raymond Mercer serving as the lead advisor) and to provide BRB with monthly financial reporting throughout the Forbearance Period.

Critically, the Forbearance Agreement contained an explicit disclaimer at Section 9(c), 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."

In addition, Section 12(a) of the Forbearance Agreement contains a standard integration and merger clause providing that the Forbearance Agreement, together with the Credit Facility documents, constitutes the entire agreement between the parties with respect to the subject matter thereof.

BRB charged a forbearance fee of $87,500 (calculated as 0.50% of the approximately $17,500,000 outstanding at execution), which was paid by Triton Harbor at closing.

The Counterclaim Plaintiffs contend that the Kappels were induced to enter into the Forbearance Agreement — and, in particular, to pledge their personal residence and to assume unlimited personal guaranty liability — by the alleged oral and written misrepresentations described in Section 2.3 above. BRB maintains that the terms of the Forbearance Agreement speak for themselves, that the Section 9(c) disclaimer and Section 12(a) integration clause preclude the Counterclaim Plaintiffs' reliance theories, and that all parties were represented by competent counsel and experienced financial advisors throughout the negotiation and execution of the Forbearance Agreement.

2.5 Acceleration and Litigation

The Forbearance Period expired on April 3, 2024. During the Forbearance Period, Triton Harbor made all six required monthly debt service payments, totaling $750,000 in the aggregate, and pledged the additional collateral as required. However, Triton Harbor failed to cure the financial covenant defaults that had triggered the original transfer to SAG. Specifically, as of March 31, 2024, Triton Harbor's FCCR stood at 0.94x — an improvement from the 0.87x level at the time of the original downgrade, but still materially below the 1.20x covenant minimum.

On April 15, 2024, BRB issued a formal Notice of Default and Acceleration, declaring all amounts outstanding under the Credit Facility immediately due and payable. The total accelerated amount was $17,456,212, consisting of:

On May 20, 2024, BRB commenced foreclosure proceedings against the Long Island City Terminal Facility. Based on the 2023 Appraisal and subsequent internal valuations, the estimated total value of the collateral (including the additional collateral pledged under the Forbearance Agreement) was approximately $16,600,000. The resulting estimated deficiency was $856,212, before accounting for costs of sale, legal fees, and other expenses of realization.

BRB filed the original Complaint on August 12, 2024, seeking enforcement of the Forbearance Agreement, recovery of the deficiency balance, and enforcement of the personal guaranties of Marcus and Elaine Kappel.

2.6 The Counterclaims

On October 18, 2024, the Counterclaim Plaintiffs filed their Answer with Counterclaims, asserting the following causes of action:

1. Fraudulent Inducement (under both the CPLR and common law), alleging that BRB, through Whitmore and Reeves, made material misrepresentations regarding BRB's willingness to continue the credit relationship and to consider extending new credit, with the intent to induce the Kappels to pledge additional collateral and assume unlimited personal guaranty liability;

2. Negligent Misrepresentation, alleging that BRB owed a duty to provide accurate information regarding its intentions with respect to the credit relationship and breached that duty through the alleged statements described above;

3. Breach of the Implied Covenant of Good Faith and Fair Dealing, alleging that BRB's conduct — in allegedly concealing its internal disposition strategy while extracting additional collateral and expanded guaranties — violated the implied covenant inherent in the Credit Facility and the Forbearance Agreement; and

4. Rescission of the Forbearance Agreement and the amended personal guaranties, on the ground that consent was procured through fraud.

The Counterclaim Plaintiffs seek compensatory damages in an amount not less than $12,500,000, together with punitive damages, attorneys' fees, and costs.

BRB's Answer to the Counterclaims, filed November 22, 2024, denies the material allegations and asserts multiple affirmative defenses, including: (a) the integration clause and parol evidence rule bar reliance on the alleged oral and written statements; (b) the Section 9(c) disclaimer expressly negates any commitment to extend credit; (c) the Counterclaim Plaintiffs are sophisticated commercial parties who cannot demonstrate justifiable reliance; (d) the statute of frauds bars enforcement of any alleged oral commitment to extend credit; (e) the Counterclaim Plaintiffs ratified and waived any objections by performing under the Forbearance Agreement; and (f) the Counterclaim Plaintiffs have failed to state a claim for punitive damages.

3. Scope of Expert Engagement

We propose to retain you to provide expert opinions in the following areas. Each topic area is described below in summary form; we will work with you to refine the specific opinions to be addressed as your review of the documentary record progresses.

3.1 Standard Workout and Forbearance Practices Among Commercial Banks

We ask that you opine on the industry norms and customary practices observed by commercial bank special assets groups in managing distressed credits of the type and magnitude involved in this case. Specifically, we anticipate requesting your opinions on the following subjects:

• The typical structures and terms of forbearance and modification agreements in the commercial lending context, including the types of conditions, performance milestones, and collateral enhancements customarily imposed on borrowers as conditions for forbearance.

• The universal or near-universal use of "no commitment to extend credit" disclaimer clauses — substantially similar to Section 9(c) of the Forbearance Agreement — in forbearance agreements among commercial banks operating in the United States.

• Standard practices in the commercial banking industry regarding the extraction of additional collateral and expanded personal guaranties as conditions for a bank's agreement to forbear from exercising default remedies, including whether such conditions are protective and customary measures or, as the Counterclaim Plaintiffs suggest, evidence of overreaching.

• The role and function of SAG departments within commercial banks, including the distinction between the SAG's mandate to maximize recovery for the institution and the relationship management function of building and maintaining long-term client relationships, and whether the transfer of an account to a SAG conveys any particular signal to borrowers regarding the bank's intentions.

• Whether BRB's overall conduct in the workout of the Triton Harbor credit — from the March 2023 downgrade through the October 2023 execution of the Forbearance Agreement and the April 2024 acceleration — was consistent with industry norms and prudent banking practices.

3.2 Reasonableness of BRB's Acceleration Decision

We ask that you opine on whether BRB's decision to accelerate the loan following Triton Harbor's failure to achieve the FCCR covenant cure (0.94x versus the 1.20x minimum) at the expiration of the 180-day Forbearance Period was a reasonable exercise of the Bank's contractual rights in light of prevailing industry standards. We anticipate requesting your opinions on the following specific topics:

• Whether it is standard practice in the commercial banking industry for banks to accelerate indebtedness following a borrower's failure to meet covenant-cure milestones established in forbearance agreements, including where the borrower has complied with payment obligations but failed to achieve financial performance targets.

• Whether a bank's internal exploration of alternative scenarios — including potential new or modified credit facilities — during the pendency of workout negotiations is inconsistent with an ultimate decision to accelerate, or whether such exploration is a normal and expected part of the internal deliberative process of a commercial banking institution.

• Whether BRB's decision to accelerate, given the specific financial metrics and collateral position at the time, was within the range of commercially reasonable responses available to a prudent lender in similar circumstances.

3.3 Industry Norms Regarding Disclaimer Clauses in Forbearance Agreements

We ask that you opine on the purpose, prevalence, and significance of "no commitment" disclaimer clauses such as Section 9(c) of the Forbearance Agreement in the commercial lending industry. Specifically, we anticipate requesting your opinions on the following:

• The standard purpose served by such disclaimer clauses in forbearance agreements, including whether they are understood in the industry as creating a clear boundary between the bank's agreement to forbear and any separate decision to extend, modify, or renew credit facilities.

• Whether borrowers in the commercial middle market — particularly those with annual revenues in the range of $48–$68 million and those represented by independent financial advisors such as Mercer Tidwell & Associates LLC — are expected to understand the legal and practical significance of such disclaimers.

• Whether preliminary or exploratory communications by bank officers — such as the September 18, 2023 Reeves email expressing optimism about "a path forward" and the September 29, 2023 internal draft term sheet circulated for "discussion purposes only" — are understood in the banking industry as creating commitments or obligations to extend credit, or whether such communications are recognized as a routine part of the internal evaluation process that does not give rise to enforceable expectations.

3.4 Borrower Sophistication and Reliance

We ask that you opine on the standards and expectations in the commercial banking industry regarding borrower sophistication and reasonable reliance. Specifically, we anticipate requesting your opinions on:

• The level of sophistication customarily expected of mid-market commercial borrowers with annual revenues in the range of $48–$68 million that maintain borrowing relationships with nationally chartered commercial banks of the size and scope of BRB.

• Industry expectations and standards regarding borrowers that are represented by independent restructuring and financial advisory firms — here, Mercer Tidwell & Associates LLC — including whether the involvement of such an advisor is relevant to the reasonableness of a borrower's claimed reliance on alleged oral or informal representations by bank personnel.

• Whether it is reasonable in the context of standard commercial banking practice for a borrower to rely on oral statements or informal email communications by bank officers in preference to, or in contradiction of, the express terms of executed written agreements containing integration clauses and explicit disclaimers.

• The significance of the borrower's engagement of independent legal counsel to review the Forbearance Agreement prior to execution, and what that engagement implies regarding the borrower's ability to understand and appreciate the terms and consequences of the agreement.

3.5 The Aaronson Memorandum in Context

We ask that you opine on the significance of the August 22, 2023 Aaronson Memorandum in the context of standard commercial banking practices. Specifically, we anticipate requesting your opinions on the following:

• Whether it is typical or common in the commercial banking industry for a bank's chief credit officer to articulate a preferred disposition strategy — including a recommendation for a "structured exit" from a distressed credit relationship — while simultaneously authorizing the bank's SAG to negotiate a forbearance agreement with the borrower, and whether such parallel actions are inconsistent or, instead, reflect the normal internal deliberative process of a prudent banking institution.

• Whether the coexistence of the August 22, 2023 Aaronson Memorandum (recommending a structured exit) and the October 6, 2023 Forbearance Agreement (granting a 180-day forbearance) is inconsistent with standard banking practice, or whether it reflects the kind of ongoing, dynamic internal deliberation that is characteristic of how commercial banks manage distressed credit relationships.

• Whether the language of the Aaronson Memorandum — specifically the statement that "further extensions of credit are not contemplated under any workout scenario" — is a typical internal risk-management directive reflecting a prudent baseline position, or whether it is an unusual instruction that, if concealed from a borrower, would constitute a departure from industry norms.

4. Materials to Be Provided

Calderwood & Harkness will provide you with the following materials for your review and analysis in connection with this engagement:

1. The Original Credit Agreement between BRB and Triton Harbor Industries, LLC, dated June 15, 2021, and all amendments, supplements, and modifications thereto;

2. The Forbearance and Modification Agreement dated October 6, 2023;

3. The original limited personal guaranty of Marcus J. Kappel in the amount of $4,500,000;

4. The amended unlimited personal guaranty of Marcus J. Kappel, dated October 6, 2023;

5. The unlimited personal guaranty of Elaine D. Kappel, dated October 6, 2023;

6. The memorandum dated August 22, 2023, from Philip Aaronson (EVP, Chief Credit Officer) to Derek Whitmore (SVP, Head of SAG), with a copy to Margaret Linden (SVP & General Counsel), to the extent it is not subject to privilege or has been ordered produced in discovery;

7. The email dated September 18, 2023, from Joanna Reeves (VP, SAG) to Marcus Kappel;

8. The internal email dated September 29, 2023, from Joanna Reeves to Derek Whitmore, together with the attached draft term sheet for a potential $6.5 million revolving facility;

9. BRB's internal credit review committee minutes relating to the March 8, 2023 downgrade of the Triton Harbor credit from "Pass" to "Substandard" (Risk Rating 7);

10. BRB's Notice of Default and Acceleration dated April 15, 2024;

11. The collateral appraisals prepared by Ridgeline Appraisal Group, Inc., dated June 2021 and September 2023;

12. Triton Harbor's audited and unaudited financial statements and covenant compliance certificates for all relevant periods;

13. Triton Harbor's engagement letter with Mercer Tidwell & Associates LLC;

14. Deposition transcripts, as they become available, including the depositions of Derek Whitmore, Joanna Reeves, Philip Aaronson, Marcus J. Kappel, and Elaine D. Kappel;

15. The Answer with Counterclaims filed by the Counterclaim Plaintiffs on October 18, 2024;

16. BRB's Answer to the Counterclaims filed on November 22, 2024; and

17. Such other documents, materials, or information as may be relevant and as may be identified during the course of this engagement.

We anticipate that additional materials will be provided to you as fact and expert discovery progresses. All materials will be produced to you subject to the terms and conditions of the stipulated confidentiality and protective order entered in this action on December 20, 2024 by Justice Marchetti (the "Protective Order"), as more fully discussed in Section 8 below.

5. Deliverables

Over the course of this engagement, we will ask you to perform the following:

1. Review of Materials. Review all materials provided by Calderwood & Harkness in connection with this engagement, including the transactional documents, internal bank communications, financial statements, appraisals, and pleadings listed in Section 4, as well as any supplemental materials provided during the discovery period.

2. Expert Report. Prepare a written expert report setting forth your opinions, the bases and reasons therefor, and the data or other information considered in forming your opinions, in compliance with CPLR 3101(d)(1)(i) and any applicable scheduling orders. The report should be comprehensive and self-contained, and should address each of the opinion topics identified in Section 3 above, to the extent supported by the factual record and your professional expertise. We will work with you to establish a timeline for completion of the report that is consistent with the Court's scheduling order.

3. Expert Deposition. Be available for deposition by opposing counsel during the expert discovery period. The current close of expert discovery is June 30, 2025. We will coordinate with you to identify mutually convenient dates and will prepare you thoroughly in advance of any deposition.

4. Trial Testimony. Be available for testimony at trial. No trial date has been set at this time. Summary judgment motions are due September 15, 2025, and we anticipate that trial, if necessary, will be scheduled for a date in late 2025 or early 2026. We will provide you with as much advance notice as practicable once a trial date is set.

5. Preparation Sessions. Participate in preparation sessions with the Calderwood & Harkness litigation team in advance of your deposition and trial testimony. These sessions will be scheduled at mutually convenient times and may be conducted at our offices or by videoconference, as circumstances require.

6. *Daubert/Frye* Compliance

As you are aware, New York state courts apply the Frye standard (Frye v. United States, 293 F. 1013 (D.C. Cir. 1923)) for expert admissibility, which requires that expert testimony be based on principles and methodologies that are "generally accepted" in the relevant scientific or professional community. We note, however, that to the extent any aspect of this matter is removed to federal court or gives rise to federal proceedings, the Daubert standard (Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)) would apply. Accordingly, your opinions should be prepared to satisfy both the Frye and Daubert standards to the extent applicable.

Your opinions must be firmly grounded in your expertise and experience as a former bank examiner with the Office of the Comptroller of the Currency and as a professor of finance at Hartwell University, and must reflect generally accepted principles, standards, and practices in the commercial banking industry. Your methodology should be identifiable and transparent, and your conclusions should be supported by, and traceable to, the factual record and the documentary evidence you have reviewed.

You should be prepared to explain the bases for your opinions in a manner that demonstrates their general acceptance within the banking and financial community, including by reference to regulatory guidance, industry publications, professional standards, and your own professional experience.

In accordance with applicable disclosure requirements, your expert report should include:

• A list of all publications authored by you in the preceding ten (10) years;

• A list of all cases in which you have testified as an expert at trial or by deposition in the preceding four (4) years; and

• A statement of your compensation for this engagement.

7. Compensation

Dr. Stokes and Wentworth Risk Advisors LLC will be compensated for services rendered in connection with this engagement at the following hourly rates:

Invoices shall be submitted monthly to Calderwood & Harkness LLP, to the attention of Priya Anand, Partner (Billing Partner), at the address set forth in the heading of this letter. Each invoice shall include a detailed description of the work performed, the date on which each task was performed, the hours expended on each task, and an itemization of any expenses incurred.

Reasonable and necessary out-of-pocket expenses — including, but not limited to, travel expenses, reproduction costs, courier charges, and research materials — shall be reimbursed at cost upon submission of supporting documentation with the monthly invoice. Air travel shall be at coach/economy class rates unless otherwise approved in advance by the engagement team. Hotel accommodations shall be at reasonable business-class rates.

An initial retainer of $25,000 is requested upon execution of this letter. The retainer will be held by Calderwood & Harkness LLP and applied against future invoices. To the extent the retainer is exhausted, subsequent invoices will be payable in the ordinary course. Any unexpended portion of the retainer will be refunded to Wentworth Risk Advisors LLC upon the conclusion of the engagement.

Payment terms are Net 30 days from the date of each invoice. Calderwood & Harkness LLP will use commercially reasonable efforts to process and remit payment within the stated payment terms.

8. Confidentiality and Privilege

All materials provided to you in connection with this engagement are confidential and proprietary. Certain materials may be designated as "Confidential" or "Highly Confidential — Attorneys' Eyes Only" under the terms of the Protective Order entered in this action on December 20, 2024 by Justice Marchetti. You agree to handle all such materials in strict accordance with the terms of the Protective Order, and you may be required to execute an acknowledgment of the Protective Order as a condition of receiving designated materials.

You agree to maintain the confidentiality of all materials provided to you and all information derived from such materials, and not to disclose or disseminate such materials or information to any third party without the prior written consent of Calderwood & Harkness LLP. All materials shall be stored securely — whether in physical or electronic form — and access shall be limited to you and such members of your staff at Wentworth Risk Advisors LLC as are necessary to perform the engagement and who have been made aware of the confidentiality obligations set forth herein.

Your communications with Calderwood & Harkness LLP regarding the substance of your opinions, litigation strategy, and the mental impressions and conclusions of counsel are protected by the attorney work product doctrine. However, you acknowledge that, under New York law, your expert report and the materials you considered in forming your opinions may be discoverable under CPLR 3101(d). Accordingly, you should be mindful of the distinction between protected attorney work product and discoverable expert materials.

To facilitate compliance with discovery obligations, you agree to maintain a complete and accurate list of all materials reviewed and considered in forming your opinions. You should clearly distinguish between: (a) materials that you considered and relied upon in forming your opinions (which may be discoverable); and (b) materials that you reviewed solely for background or contextual purposes and did not rely upon in forming your opinions. We will provide further guidance on this distinction as the engagement progresses.

All draft expert reports, working notes, and communications regarding the development and refinement of your opinions should be directed only to members of the Calderwood & Harkness engagement team: Linda Osei, Priya Anand, Carlos Espinoza, and Hannah Brinkley. No drafts or working materials should be shared with any other person, including the client, without the prior approval of the engagement team.

9. Independence and Conflicts

The credibility and persuasiveness of your expert testimony will depend in part on your independence and objectivity. Accordingly, we ask that you confirm the following:

• You have no financial interest, direct or indirect, in Belmont Ridge Bank NA, Triton Harbor Industries, LLC, or any other party to this litigation.

• You have no prior personal, professional, or business relationship with any party to this litigation, any attorney of record, or the presiding justice, the Honorable Althea Marchetti, that would affect your independence or create a conflict of interest or the appearance thereof.

• You are not aware of any circumstance that could reasonably be perceived as impairing your objectivity or creating a bias in favor of or against any party.

You agree to promptly notify Calderwood & Harkness LLP if, at any time during the course of this engagement, you become aware of any circumstance — whether arising from a new engagement, a personal relationship, a financial interest, or otherwise — that could affect your independence or give rise to an appearance of bias.

10. Term and Termination

This engagement shall commence upon your execution and return of this letter and shall continue until the conclusion of the litigation (including all appeals, if any) or earlier termination by either party. Either party may terminate this engagement upon thirty (30) days' prior written notice to the other party.

Upon termination of this engagement for any reason, you agree to return promptly to Calderwood & Harkness LLP all materials provided to you in connection with the engagement, and to destroy any copies, reproductions, extracts, or summaries thereof, whether in physical or electronic form, subject to any applicable document retention obligations imposed by law, court order, or the Protective Order. Upon request, you will certify in writing that all such materials have been returned or destroyed.

Termination of the engagement shall not affect your obligation to maintain the confidentiality of all materials and information provided to you, which obligation shall survive termination and continue in perpetuity. Similarly, compensation for all work performed and expenses incurred prior to the effective date of termination shall remain due and payable in accordance with the terms set forth in Section 7 above.

11. Governing Law

This engagement letter and the relationship between the parties shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. Any dispute arising out of or relating to this engagement shall be resolved in the courts of the State of New York, New York County.

12. Acceptance

If the foregoing terms are acceptable to you, please countersign and return a copy of this letter to the undersigned. Upon receipt of your executed copy, we will arrange for the transmission of the initial batch of materials described in Section 4 and will schedule an introductory conference call with the engagement team to discuss the scope of work and preliminary timeline.

We look forward to working with you on this important matter and are confident that your expertise and experience will be of great value to BRB's defense.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Linda Osei

Title: Partner

Date: ________

ACCEPTED AND AGREED:

The undersigned hereby accepts and agrees to the terms and conditions set forth in this engagement letter, confirms the representations set forth in Section 9 (Independence and Conflicts), and acknowledges the confidentiality obligations set forth in Section 8.

WENTWORTH RISK ADVISORS LLC

By: ________

Name: Dr. Gerald Stokes

Title: Managing Principal

Date: ________

13. Enclosures / Attachments

Please note that the initial batch of materials referenced in Section 4 will be transmitted to you separately under cover of a transmittal letter, which will include an index of the enclosed documents. Materials designated under the Protective Order will be clearly marked with the appropriate confidentiality designation.

You may also be required to sign or otherwise formally acknowledge the Stipulated Confidentiality and Protective Order entered on December 20, 2024 by Justice Marchetti as a condition of receiving materials designated "Confidential" or "Highly Confidential — Attorneys' Eyes Only." We will provide you with a copy of the Protective Order and any necessary acknowledgment forms under separate cover.

cc: Margaret Linden, SVP & General Counsel, Belmont Ridge Bank NA Thomas Hargreaves, VP & Associate General Counsel, Belmont Ridge Bank NA Priya Anand, Partner, Calderwood & Harkness LLP Carlos Espinoza, Associate, Calderwood & Harkness LLP Hannah Brinkley, Associate, Calderwood & Harkness LLP

Component	Amount
Term Loan A	$10,625,000
Revolving Credit Facility	$6,200,000
Accrued Interest	$487,322
Late Fees and Default Interest	$143,890
Total	$17,456,212
Service	Hourly Rate
Expert review and analysis	$750 per hour
Report preparation	$750 per hour
Deposition testimony	$850 per hour
Trial testimony	$850 per hour
Travel time	$375 per hour (50% of standard hourly rate)

CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 30th Floor New York, New York 10022 Tel: (212) 841-7000
Fax: (212) 841-7001
www.calderwoodharkness.com
December 9, 2024
VIA ELECTRONIC MAIL AND HAND DELIVERY
Dr. Gerald Stokes Wentworth Risk Advisors LLC 55 East 59th Street, Suite 1410 New York, New York 10022
Re: Engagement as Banking Practices Expert — 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
Calderwood & Harkness Matter No.: 1022-00005
Dear Dr. Stokes:
Thank you for your willingness to discuss a potential engagement with our firm. This letter sets forth the terms and conditions under which Calderwood & Harkness LLP proposes to retain you and Wentworth Risk Advisors LLC as a banking practices expert in the above-captioned matter. We ask that you review this letter carefully and, if the terms are acceptable, countersign and return a copy to the undersigned at your earliest convenience.
1. Introduction and Purpose of Engagement
Calderwood & Harkness LLP represents Belmont Ridge Bank NA ("BRB" or the "Bank"), a nationally chartered commercial bank headquartered at 1200 Avenue of the Americas, 38th Floor, New York, New York 10036. BRB is a diversified financial institution with approximately $47.3 billion in total assets as of its most recent reported quarter, engaged in commercial and industrial lending, real estate finance, treasury management, and related banking services.
BRB is the plaintiff and counterclaim defendant in the above-captioned action, which is pending before the Honorable Althea Marchetti in the Commercial Division of the Supreme Court of the State of New York, New York County. BRB commenced this action on August 12, 2024, seeking, among other things, enforcement of a forbearance and modification agreement dated October 6, 2023 (the "Forbearance Agreement") and recovery of an outstanding deficiency balance owed by the defendants in connection with certain credit facilities extended to Triton Harbor Industries, LLC ("Triton Harbor").
On October 18, 2024, the defendants — Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel (collectively, the "Counterclaim Plaintiffs") — filed an Answer with Counterclaims asserting four causes of action against BRB: (i) fraudulent inducement; (ii) negligent misrepresentation; (iii) breach of the implied covenant of good faith and fair dealing; and (iv) rescission of the Forbearance Agreement and the amended personal guaranties of Marcus J. Kappel and Elaine D. Kappel. The Counterclaim Plaintiffs seek compensatory damages in an amount not less than $12,500,000, together with punitive damages in an unspecified amount, attorneys' fees, and costs.
The Counterclaim Plaintiffs are represented by Kestrel Voss & Huang LLP, 780 Third Avenue, 24th Floor, New York, New York 10017. The lead partner on the matter is Theodore ("Ted") Huang, and the senior associate is Natasha Orlov.
BRB filed its Answer to the Counterclaims on November 22, 2024, denying the material allegations and asserting multiple affirmative defenses, as more fully described in Section 2.6 below.
The purpose of this engagement is to retain you as a banking practices expert to provide opinions in support of BRB's defense against the Counterclaims. We believe that your extensive experience as a former bank examiner with the Office of the Comptroller of the Currency, your academic career as a professor of finance at Hartwell University, and your consulting practice at Wentworth Risk Advisors LLC make you uniquely qualified to opine on the industry standards and customary practices at issue in this matter.
The Calderwood & Harkness engagement team for this matter consists of the following attorneys:
•  Linda Osei, Partner (Responsible Partner, Litigation)
•  Priya Anand, Partner (Billing Partner)
•  Carlos Espinoza, Associate (Lead Associate)
•  Hannah Brinkley, Associate (Working Associate)
All communications regarding the substance of the engagement should be directed to one or more members of the engagement team listed above.
2. Factual Background Summary
The following summary is intended to provide you with an overview of the relevant facts and circumstances giving rise to this litigation, so as to orient your review of the underlying documentary record. This summary is necessarily a condensation, and we will supplement it with the complete documentary record as described in Section 4 below.
2.1 The Original Credit Facility
On June 15, 2021, BRB extended a credit facility (the "Credit Facility") to Triton Harbor Industries, LLC, a Delaware limited liability company with its principal offices at 47-15 Austell Street, Suite 200, Long Island City, New York 11101. Triton Harbor is engaged in the business of marine terminal operations, harbor maintenance, and related logistics services in the greater New York metropolitan area.
The Credit Facility consisted of two tranches:
•  Term Loan A: $14,000,000, with an 84-month term, quarterly amortization, maturing June 15, 2028, bearing interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points.
•  Revolving Credit Facility: An $8,000,000 revolving commitment, maturing June 15, 2026, bearing interest at SOFR plus 250 basis points.
The total committed facilities under the Credit Facility were $22,000,000.
The Credit Facility was secured by a first-priority lien on substantially all assets of Triton Harbor, including marine terminal equipment, accounts receivable, inventory, and general intangibles, together with a first mortgage on Triton Harbor's terminal facility located at 50-22 Borden Avenue, Long Island City, New York 11101 (the "Long Island City Terminal Facility"). At origination, the collateral was appraised at approximately $18,700,000 by Ridgeline Appraisal Group, Inc. (the "2021 Appraisal").
In connection with the Credit Facility, Marcus J. Kappel — the founder, Chief Executive Officer, and 72% equity member of Triton Harbor — executed a limited personal guaranty in the amount of $4,500,000 (the "Original Guaranty").
The Credit Facility contained customary financial covenants, including:
•  A minimum Fixed Charge Coverage Ratio ("FCCR") of 1.20x, tested quarterly;
•  A maximum Total Leverage Ratio of 3.50x, tested quarterly; and
•  A minimum liquidity requirement of $2,000,000 at all times.
2.2 Loan Deterioration and Transfer to Special Assets
For fiscal year 2022, Triton Harbor reported revenue of approximately $68 million and adjusted EBITDA of approximately $9.4 million. During this period, the Credit Facility remained in compliance with all financial covenants and debt service obligations.
Beginning in the first quarter of fiscal year 2023, however, Triton Harbor's financial performance deteriorated significantly. By the end of Q1 2023, Triton Harbor's trailing-twelve-month adjusted EBITDA had fallen to approximately $5.1 million. As a consequence, the company's FCCR fell to 0.87x, well below the covenant minimum of 1.20x, and its Total Leverage Ratio rose to 4.92x, exceeding the covenant maximum of 3.50x.
On March 8, 2023, BRB's internal credit review committee conducted a full credit review of the Triton Harbor facilities. Following that review, the committee downgraded the credits from a "Pass" rating to "Substandard" (Risk Rating 7) and directed that the account be transferred from BRB's Relationship Management group to the Bank's Special Assets Group ("SAG"). At the time of transfer, the outstanding balances under the Credit Facility were as follows: Term Loan A — $11,375,000; Revolving Credit Facility — $6,200,000 (fully drawn); for a total outstanding balance of $17,575,000.
The financial deterioration was driven in substantial part by the loss of two significant contracts during the period from March through September 2023. First, Triton Harbor lost its contract with the Port of Bridgehaven, which had generated approximately $12 million in annual revenue. Second, the company lost its Newark Bay maintenance contract, which had accounted for approximately $7.5 million in annual revenue. As a result, Triton Harbor's annualized revenue run-rate dropped to approximately $48 million.
Upon transfer to the SAG, oversight of the Triton Harbor credit relationship was assumed by Derek Whitmore, Senior Vice President and Head of the Special Assets Group. Day-to-day relationship management responsibility was assigned to Joanna Reeves, Vice President within the SAG.
2.3 Internal Disposition Strategy and Forbearance Negotiations
On August 22, 2023, Philip Aaronson, Executive Vice President and Chief Credit Officer of BRB, authored a memorandum addressed to Derek Whitmore, with a copy to Margaret Linden, Senior Vice President and General Counsel (the "Aaronson Memorandum"). In the Aaronson Memorandum, Mr. Aaronson 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." The Counterclaim Plaintiffs have placed the Aaronson Memorandum at the center of their fraudulent inducement theory, contending that BRB had already made the decision to exit the relationship before entering into the Forbearance Agreement.
On September 12, 2023, Whitmore and Reeves met with Marcus and Elaine Kappel at BRB's offices in New York. The content of this meeting is disputed. The Counterclaim Plaintiffs allege that, during the meeting, Whitmore represented that BRB was "committed to the long-term relationship" with Triton Harbor, that the Bank would "seriously consider" a new $6.5 million revolving facility upon the successful completion of the forbearance period, and that the pledge of additional collateral (including the Kappel residence) was "a formality to satisfy regulators." BRB denies that Whitmore made these statements in the manner alleged by the Counterclaim Plaintiffs.
On September 18, 2023, Joanna Reeves sent an email to Marcus Kappel in which she stated: "We are optimistic about a path forward and believe this forbearance sets the stage for a renewed credit relationship." The Counterclaim Plaintiffs rely on this email as further evidence of alleged misrepresentations by BRB.
On September 29, 2023, Reeves forwarded to Whitmore an internal draft term sheet for a potential $6.5 million revolving facility, with the notation "for discussion purposes only — not approved." This document was never shared with the Kappels or with Triton Harbor. It is the Counterclaim Plaintiffs' position that this draft term sheet, when viewed in conjunction with the alleged oral representations and the Reeves email, demonstrates that BRB induced Triton Harbor and the Kappels to enter into the Forbearance Agreement under false pretenses.
In September 2023, BRB obtained an updated collateral appraisal from Ridgeline Appraisal Group, Inc. (the "2023 Appraisal"), which valued the collateral package at $11,200,000 — a decline of $7,500,000, or approximately 40.1%, from the 2021 Appraisal at origination. The substantial decline in collateral value further informed the Bank's risk assessment and workout strategy.
2.4 The Forbearance and Modification Agreement
On October 6, 2023, BRB and Triton Harbor executed the Forbearance and Modification Agreement, with Marcus J. Kappel and Elaine D. Kappel executing as guarantors. The principal terms of the Forbearance Agreement were as follows:
•  BRB agreed to forbear from exercising its default remedies under the Credit Facility for a period of 180 days, through and including April 3, 2024 (the "Forbearance Period").
•  Triton Harbor agreed to make minimum monthly debt service payments of $125,000 during the Forbearance Period, for an aggregate payment of $750,000 over the six-month term.
•  Triton Harbor pledged additional collateral, consisting of: (a) two equipment leases with an appraised value of approximately $2,300,000; and (b) a first mortgage on the personal residence of Marcus and Elaine Kappel located at 14 Birchmont Lane, Westport, Connecticut 06880, which had an appraised value of approximately $3,100,000.
•  Marcus Kappel's Original Guaranty was amended from a limited guaranty of $4,500,000 to an unlimited personal guaranty.
•  Elaine D. Kappel executed a new unlimited personal guaranty of all obligations of Triton Harbor under the Credit Facility and the Forbearance Agreement.
•  Triton Harbor was required to engage an independent financial advisor (Mercer Tidwell & Associates LLC, with managing director Raymond Mercer serving as the lead advisor) and to provide BRB with monthly financial reporting throughout the Forbearance Period.
Critically, the Forbearance Agreement contained an explicit disclaimer at Section 9(c), 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."
In addition, Section 12(a) of the Forbearance Agreement contains a standard integration and merger clause providing that the Forbearance Agreement, together with the Credit Facility documents, constitutes the entire agreement between the parties with respect to the subject matter thereof.
BRB charged a forbearance fee of $87,500 (calculated as 0.50% of the approximately $17,500,000 outstanding at execution), which was paid by Triton Harbor at closing.
The Counterclaim Plaintiffs contend that the Kappels were induced to enter into the Forbearance Agreement — and, in particular, to pledge their personal residence and to assume unlimited personal guaranty liability — by the alleged oral and written misrepresentations described in Section 2.3 above. BRB maintains that the terms of the Forbearance Agreement speak for themselves, that the Section 9(c) disclaimer and Section 12(a) integration clause preclude the Counterclaim Plaintiffs' reliance theories, and that all parties were represented by competent counsel and experienced financial advisors throughout the negotiation and execution of the Forbearance Agreement.
2.5 Acceleration and Litigation
The Forbearance Period expired on April 3, 2024. During the Forbearance Period, Triton Harbor made all six required monthly debt service payments, totaling $750,000 in the aggregate, and pledged the additional collateral as required. However, Triton Harbor failed to cure the financial covenant defaults that had triggered the original transfer to SAG. Specifically, as of March 31, 2024, Triton Harbor's FCCR stood at 0.94x — an improvement from the 0.87x level at the time of the original downgrade, but still materially below the 1.20x covenant minimum.
On April 15, 2024, BRB issued a formal Notice of Default and Acceleration, declaring all amounts outstanding under the Credit Facility immediately due and payable. The total accelerated amount was $17,456,212, consisting of:
On May 20, 2024, BRB commenced foreclosure proceedings against the Long Island City Terminal Facility. Based on the 2023 Appraisal and subsequent internal valuations, the estimated total value of the collateral (including the additional collateral pledged under the Forbearance Agreement) was approximately $16,600,000. The resulting estimated deficiency was $856,212, before accounting for costs of sale, legal fees, and other expenses of realization.
BRB filed the original Complaint on August 12, 2024, seeking enforcement of the Forbearance Agreement, recovery of the deficiency balance, and enforcement of the personal guaranties of Marcus and Elaine Kappel.
2.6 The Counterclaims
On October 18, 2024, the Counterclaim Plaintiffs filed their Answer with Counterclaims, asserting the following causes of action:
1.  Fraudulent Inducement (under both the CPLR and common law), alleging that BRB, through Whitmore and Reeves, made material misrepresentations regarding BRB's willingness to continue the credit relationship and to consider extending new credit, with the intent to induce the Kappels to pledge additional collateral and assume unlimited personal guaranty liability;
2.  Negligent Misrepresentation, alleging that BRB owed a duty to provide accurate information regarding its intentions with respect to the credit relationship and breached that duty through the alleged statements described above;
3.  Breach of the Implied Covenant of Good Faith and Fair Dealing, alleging that BRB's conduct — in allegedly concealing its internal disposition strategy while extracting additional collateral and expanded guaranties — violated the implied covenant inherent in the Credit Facility and the Forbearance Agreement; and
4.  Rescission of the Forbearance Agreement and the amended personal guaranties, on the ground that consent was procured through fraud.
The Counterclaim Plaintiffs seek compensatory damages in an amount not less than $12,500,000, together with punitive damages, attorneys' fees, and costs.
BRB's Answer to the Counterclaims, filed November 22, 2024, denies the material allegations and asserts multiple affirmative defenses, including: (a) the integration clause and parol evidence rule bar reliance on the alleged oral and written statements; (b) the Section 9(c) disclaimer expressly negates any commitment to extend credit; (c) the Counterclaim Plaintiffs are sophisticated commercial parties who cannot demonstrate justifiable reliance; (d) the statute of frauds bars enforcement of any alleged oral commitment to extend credit; (e) the Counterclaim Plaintiffs ratified and waived any objections by performing under the Forbearance Agreement; and (f) the Counterclaim Plaintiffs have failed to state a claim for punitive damages.
3. Scope of Expert Engagement
We propose to retain you to provide expert opinions in the following areas. Each topic area is described below in summary form; we will work with you to refine the specific opinions to be addressed as your review of the documentary record progresses.
3.1 Standard Workout and Forbearance Practices Among Commercial Banks
We ask that you opine on the industry norms and customary practices observed by commercial bank special assets groups in managing distressed credits of the type and magnitude involved in this case. Specifically, we anticipate requesting your opinions on the following subjects:
•  The typical structures and terms of forbearance and modification agreements in the commercial lending context, including the types of conditions, performance milestones, and collateral enhancements customarily imposed on borrowers as conditions for forbearance.
•  The universal or near-universal use of "no commitment to extend credit" disclaimer clauses — substantially similar to Section 9(c) of the Forbearance Agreement — in forbearance agreements among commercial banks operating in the United States.
•  Standard practices in the commercial banking industry regarding the extraction of additional collateral and expanded personal guaranties as conditions for a bank's agreement to forbear from exercising default remedies, including whether such conditions are protective and customary measures or, as the Counterclaim Plaintiffs suggest, evidence of overreaching.
•  The role and function of SAG departments within commercial banks, including the distinction between the SAG's mandate to maximize recovery for the institution and the relationship management function of building and maintaining long-term client relationships, and whether the transfer of an account to a SAG conveys any particular signal to borrowers regarding the bank's intentions.
•  Whether BRB's overall conduct in the workout of the Triton Harbor credit — from the March 2023 downgrade through the October 2023 execution of the Forbearance Agreement and the April 2024 acceleration — was consistent with industry norms and prudent banking practices.
3.2 Reasonableness of BRB's Acceleration Decision
We ask that you opine on whether BRB's decision to accelerate the loan following Triton Harbor's failure to achieve the FCCR covenant cure (0.94x versus the 1.20x minimum) at the expiration of the 180-day Forbearance Period was a reasonable exercise of the Bank's contractual rights in light of prevailing industry standards. We anticipate requesting your opinions on the following specific topics:
•  Whether it is standard practice in the commercial banking industry for banks to accelerate indebtedness following a borrower's failure to meet covenant-cure milestones established in forbearance agreements, including where the borrower has complied with payment obligations but failed to achieve financial performance targets.
•  Whether a bank's internal exploration of alternative scenarios — including potential new or modified credit facilities — during the pendency of workout negotiations is inconsistent with an ultimate decision to accelerate, or whether such exploration is a normal and expected part of the internal deliberative process of a commercial banking institution.
•  Whether BRB's decision to accelerate, given the specific financial metrics and collateral position at the time, was within the range of commercially reasonable responses available to a prudent lender in similar circumstances.
3.3 Industry Norms Regarding Disclaimer Clauses in Forbearance Agreements
We ask that you opine on the purpose, prevalence, and significance of "no commitment" disclaimer clauses such as Section 9(c) of the Forbearance Agreement in the commercial lending industry. Specifically, we anticipate requesting your opinions on the following:
•  The standard purpose served by such disclaimer clauses in forbearance agreements, including whether they are understood in the industry as creating a clear boundary between the bank's agreement to forbear and any separate decision to extend, modify, or renew credit facilities.
•  Whether borrowers in the commercial middle market — particularly those with annual revenues in the range of $48–$68 million and those represented by independent financial advisors such as Mercer Tidwell & Associates LLC — are expected to understand the legal and practical significance of such disclaimers.
•  Whether preliminary or exploratory communications by bank officers — such as the September 18, 2023 Reeves email expressing optimism about "a path forward" and the September 29, 2023 internal draft term sheet circulated for "discussion purposes only" — are understood in the banking industry as creating commitments or obligations to extend credit, or whether such communications are recognized as a routine part of the internal evaluation process that does not give rise to enforceable expectations.
3.4 Borrower Sophistication and Reliance
We ask that you opine on the standards and expectations in the commercial banking industry regarding borrower sophistication and reasonable reliance. Specifically, we anticipate requesting your opinions on:
•  The level of sophistication customarily expected of mid-market commercial borrowers with annual revenues in the range of $48–$68 million that maintain borrowing relationships with nationally chartered commercial banks of the size and scope of BRB.
•  Industry expectations and standards regarding borrowers that are represented by independent restructuring and financial advisory firms — here, Mercer Tidwell & Associates LLC — including whether the involvement of such an advisor is relevant to the reasonableness of a borrower's claimed reliance on alleged oral or informal representations by bank personnel.
•  Whether it is reasonable in the context of standard commercial banking practice for a borrower to rely on oral statements or informal email communications by bank officers in preference to, or in contradiction of, the express terms of executed written agreements containing integration clauses and explicit disclaimers.
•  The significance of the borrower's engagement of independent legal counsel to review the Forbearance Agreement prior to execution, and what that engagement implies regarding the borrower's ability to understand and appreciate the terms and consequences of the agreement.
3.5 The Aaronson Memorandum in Context
We ask that you opine on the significance of the August 22, 2023 Aaronson Memorandum in the context of standard commercial banking practices. Specifically, we anticipate requesting your opinions on the following:
•  Whether it is typical or common in the commercial banking industry for a bank's chief credit officer to articulate a preferred disposition strategy — including a recommendation for a "structured exit" from a distressed credit relationship — while simultaneously authorizing the bank's SAG to negotiate a forbearance agreement with the borrower, and whether such parallel actions are inconsistent or, instead, reflect the normal internal deliberative process of a prudent banking institution.
•  Whether the coexistence of the August 22, 2023 Aaronson Memorandum (recommending a structured exit) and the October 6, 2023 Forbearance Agreement (granting a 180-day forbearance) is inconsistent with standard banking practice, or whether it reflects the kind of ongoing, dynamic internal deliberation that is characteristic of how commercial banks manage distressed credit relationships.
•  Whether the language of the Aaronson Memorandum — specifically the statement that "further extensions of credit are not contemplated under any workout scenario" — is a typical internal risk-management directive reflecting a prudent baseline position, or whether it is an unusual instruction that, if concealed from a borrower, would constitute a departure from industry norms.
4. Materials to Be Provided
Calderwood & Harkness will provide you with the following materials for your review and analysis in connection with this engagement:
1.  The Original Credit Agreement between BRB and Triton Harbor Industries, LLC, dated June 15, 2021, and all amendments, supplements, and modifications thereto;
2.  The Forbearance and Modification Agreement dated October 6, 2023;
3.  The original limited personal guaranty of Marcus J. Kappel in the amount of $4,500,000;
4.  The amended unlimited personal guaranty of Marcus J. Kappel, dated October 6, 2023;
5.  The unlimited personal guaranty of Elaine D. Kappel, dated October 6, 2023;
6.  The memorandum dated August 22, 2023, from Philip Aaronson (EVP, Chief Credit Officer) to Derek Whitmore (SVP, Head of SAG), with a copy to Margaret Linden (SVP & General Counsel), to the extent it is not subject to privilege or has been ordered produced in discovery;
7.  The email dated September 18, 2023, from Joanna Reeves (VP, SAG) to Marcus Kappel;
8.  The internal email dated September 29, 2023, from Joanna Reeves to Derek Whitmore, together with the attached draft term sheet for a potential $6.5 million revolving facility;
9.  BRB's internal credit review committee minutes relating to the March 8, 2023 downgrade of the Triton Harbor credit from "Pass" to "Substandard" (Risk Rating 7);
10.  BRB's Notice of Default and Acceleration dated April 15, 2024;
11.  The collateral appraisals prepared by Ridgeline Appraisal Group, Inc., dated June 2021 and September 2023;
12.  Triton Harbor's audited and unaudited financial statements and covenant compliance certificates for all relevant periods;
13.  Triton Harbor's engagement letter with Mercer Tidwell & Associates LLC;
14.  Deposition transcripts, as they become available, including the depositions of Derek Whitmore, Joanna Reeves, Philip Aaronson, Marcus J. Kappel, and Elaine D. Kappel;
15.  The Answer with Counterclaims filed by the Counterclaim Plaintiffs on October 18, 2024;
16.  BRB's Answer to the Counterclaims filed on November 22, 2024; and
17.  Such other documents, materials, or information as may be relevant and as may be identified during the course of this engagement.
We anticipate that additional materials will be provided to you as fact and expert discovery progresses. All materials will be produced to you subject to the terms and conditions of the stipulated confidentiality and protective order entered in this action on December 20, 2024 by Justice Marchetti (the "Protective Order"), as more fully discussed in Section 8 below.
5. Deliverables
Over the course of this engagement, we will ask you to perform the following:
1.  Review of Materials. Review all materials provided by Calderwood & Harkness in connection with this engagement, including the transactional documents, internal bank communications, financial statements, appraisals, and pleadings listed in Section 4, as well as any supplemental materials provided during the discovery period.
2.  Expert Report. Prepare a written expert report setting forth your opinions, the bases and reasons therefor, and the data or other information considered in forming your opinions, in compliance with CPLR 3101(d)(1)(i) and any applicable scheduling orders. The report should be comprehensive and self-contained, and should address each of the opinion topics identified in Section 3 above, to the extent supported by the factual record and your professional expertise. We will work with you to establish a timeline for completion of the report that is consistent with the Court's scheduling order.
3.  Expert Deposition. Be available for deposition by opposing counsel during the expert discovery period. The current close of expert discovery is June 30, 2025. We will coordinate with you to identify mutually convenient dates and will prepare you thoroughly in advance of any deposition.
4.  Trial Testimony. Be available for testimony at trial. No trial date has been set at this time. Summary judgment motions are due September 15, 2025, and we anticipate that trial, if necessary, will be scheduled for a date in late 2025 or early 2026. We will provide you with as much advance notice as practicable once a trial date is set.
5.  Preparation Sessions. Participate in preparation sessions with the Calderwood & Harkness litigation team in advance of your deposition and trial testimony. These sessions will be scheduled at mutually convenient times and may be conducted at our offices or by videoconference, as circumstances require.
6. *Daubert/Frye* Compliance
As you are aware, New York state courts apply the Frye standard (Frye v. United States, 293 F. 1013 (D.C. Cir. 1923)) for expert admissibility, which requires that expert testimony be based on principles and methodologies that are "generally accepted" in the relevant scientific or professional community. We note, however, that to the extent any aspect of this matter is removed to federal court or gives rise to federal proceedings, the Daubert standard (Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)) would apply. Accordingly, your opinions should be prepared to satisfy both the Frye and Daubert standards to the extent applicable.
Your opinions must be firmly grounded in your expertise and experience as a former bank examiner with the Office of the Comptroller of the Currency and as a professor of finance at Hartwell University, and must reflect generally accepted principles, standards, and practices in the commercial banking industry. Your methodology should be identifiable and transparent, and your conclusions should be supported by, and traceable to, the factual record and the documentary evidence you have reviewed.
You should be prepared to explain the bases for your opinions in a manner that demonstrates their general acceptance within the banking and financial community, including by reference to regulatory guidance, industry publications, professional standards, and your own professional experience.
In accordance with applicable disclosure requirements, your expert report should include:
•  A list of all publications authored by you in the preceding ten (10) years;
•  A list of all cases in which you have testified as an expert at trial or by deposition in the preceding four (4) years; and
•  A statement of your compensation for this engagement.
7. Compensation
Dr. Stokes and Wentworth Risk Advisors LLC will be compensated for services rendered in connection with this engagement at the following hourly rates:
Invoices shall be submitted monthly to Calderwood & Harkness LLP, to the attention of Priya Anand, Partner (Billing Partner), at the address set forth in the heading of this letter. Each invoice shall include a detailed description of the work performed, the date on which each task was performed, the hours expended on each task, and an itemization of any expenses incurred.
Reasonable and necessary out-of-pocket expenses — including, but not limited to, travel expenses, reproduction costs, courier charges, and research materials — shall be reimbursed at cost upon submission of supporting documentation with the monthly invoice. Air travel shall be at coach/economy class rates unless otherwise approved in advance by the engagement team. Hotel accommodations shall be at reasonable business-class rates.
An initial retainer of $25,000 is requested upon execution of this letter. The retainer will be held by Calderwood & Harkness LLP and applied against future invoices. To the extent the retainer is exhausted, subsequent invoices will be payable in the ordinary course. Any unexpended portion of the retainer will be refunded to Wentworth Risk Advisors LLC upon the conclusion of the engagement.
Payment terms are Net 30 days from the date of each invoice. Calderwood & Harkness LLP will use commercially reasonable efforts to process and remit payment within the stated payment terms.
8. Confidentiality and Privilege
All materials provided to you in connection with this engagement are confidential and proprietary. Certain materials may be designated as "Confidential" or "Highly Confidential — Attorneys' Eyes Only" under the terms of the Protective Order entered in this action on December 20, 2024 by Justice Marchetti. You agree to handle all such materials in strict accordance with the terms of the Protective Order, and you may be required to execute an acknowledgment of the Protective Order as a condition of receiving designated materials.
You agree to maintain the confidentiality of all materials provided to you and all information derived from such materials, and not to disclose or disseminate such materials or information to any third party without the prior written consent of Calderwood & Harkness LLP. All materials shall be stored securely — whether in physical or electronic form — and access shall be limited to you and such members of your staff at Wentworth Risk Advisors LLC as are necessary to perform the engagement and who have been made aware of the confidentiality obligations set forth herein.
Your communications with Calderwood & Harkness LLP regarding the substance of your opinions, litigation strategy, and the mental impressions and conclusions of counsel are protected by the attorney work product doctrine. However, you acknowledge that, under New York law, your expert report and the materials you considered in forming your opinions may be discoverable under CPLR 3101(d). Accordingly, you should be mindful of the distinction between protected attorney work product and discoverable expert materials.
To facilitate compliance with discovery obligations, you agree to maintain a complete and accurate list of all materials reviewed and considered in forming your opinions. You should clearly distinguish between: (a) materials that you considered and relied upon in forming your opinions (which may be discoverable); and (b) materials that you reviewed solely for background or contextual purposes and did not rely upon in forming your opinions. We will provide further guidance on this distinction as the engagement progresses.
All draft expert reports, working notes, and communications regarding the development and refinement of your opinions should be directed only to members of the Calderwood & Harkness engagement team: Linda Osei, Priya Anand, Carlos Espinoza, and Hannah Brinkley. No drafts or working materials should be shared with any other person, including the client, without the prior approval of the engagement team.
9. Independence and Conflicts
The credibility and persuasiveness of your expert testimony will depend in part on your independence and objectivity. Accordingly, we ask that you confirm the following:
•  You have no financial interest, direct or indirect, in Belmont Ridge Bank NA, Triton Harbor Industries, LLC, or any other party to this litigation.
•  You have no prior personal, professional, or business relationship with any party to this litigation, any attorney of record, or the presiding justice, the Honorable Althea Marchetti, that would affect your independence or create a conflict of interest or the appearance thereof.
•  You are not aware of any circumstance that could reasonably be perceived as impairing your objectivity or creating a bias in favor of or against any party.
You agree to promptly notify Calderwood & Harkness LLP if, at any time during the course of this engagement, you become aware of any circumstance — whether arising from a new engagement, a personal relationship, a financial interest, or otherwise — that could affect your independence or give rise to an appearance of bias.
10. Term and Termination
This engagement shall commence upon your execution and return of this letter and shall continue until the conclusion of the litigation (including all appeals, if any) or earlier termination by either party. Either party may terminate this engagement upon thirty (30) days' prior written notice to the other party.
Upon termination of this engagement for any reason, you agree to return promptly to Calderwood & Harkness LLP all materials provided to you in connection with the engagement, and to destroy any copies, reproductions, extracts, or summaries thereof, whether in physical or electronic form, subject to any applicable document retention obligations imposed by law, court order, or the Protective Order. Upon request, you will certify in writing that all such materials have been returned or destroyed.
Termination of the engagement shall not affect your obligation to maintain the confidentiality of all materials and information provided to you, which obligation shall survive termination and continue in perpetuity. Similarly, compensation for all work performed and expenses incurred prior to the effective date of termination shall remain due and payable in accordance with the terms set forth in Section 7 above.
11. Governing Law
This engagement letter and the relationship between the parties shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law. Any dispute arising out of or relating to this engagement shall be resolved in the courts of the State of New York, New York County.
12. Acceptance
If the foregoing terms are acceptable to you, please countersign and return a copy of this letter to the undersigned. Upon receipt of your executed copy, we will arrange for the transmission of the initial batch of materials described in Section 4 and will schedule an introductory conference call with the engagement team to discuss the scope of work and preliminary timeline.
We look forward to working with you on this important matter and are confident that your expertise and experience will be of great value to BRB's defense.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Linda Osei
Title: Partner
Date: ________
ACCEPTED AND AGREED:
The undersigned hereby accepts and agrees to the terms and conditions set forth in this engagement letter, confirms the representations set forth in Section 9 (Independence and Conflicts), and acknowledges the confidentiality obligations set forth in Section 8.
WENTWORTH RISK ADVISORS LLC
By: ________
Name: Dr. Gerald Stokes
Title: Managing Principal
Date: ________
13. Enclosures / Attachments
Please note that the initial batch of materials referenced in Section 4 will be transmitted to you separately under cover of a transmittal letter, which will include an index of the enclosed documents. Materials designated under the Protective Order will be clearly marked with the appropriate confidentiality designation.
You may also be required to sign or otherwise formally acknowledge the Stipulated Confidentiality and Protective Order entered on December 20, 2024 by Justice Marchetti as a condition of receiving materials designated "Confidential" or "Highly Confidential — Attorneys' Eyes Only." We will provide you with a copy of the Protective Order and any necessary acknowledgment forms under separate cover.
cc: Margaret Linden, SVP & General Counsel, Belmont Ridge Bank NA Thomas Hargreaves, VP & Associate General Counsel, Belmont Ridge Bank NA Priya Anand, Partner, Calderwood & Harkness LLP Carlos Espinoza, Associate, Calderwood & Harkness LLP Hannah Brinkley, Associate, Calderwood & Harkness LLP
Component | Amount
Term Loan A | $10,625,000
Revolving Credit Facility | $6,200,000
Accrued Interest | $487,322
Late Fees and Default Interest | $143,890
Total | $17,456,212
Service | Hourly Rate
Expert review and analysis | $750 per hour
Report preparation | $750 per hour
Deposition testimony | $850 per hour
Trial testimony | $850 per hour
Travel time | $375 per hour (50% of standard hourly rate)

CALDERWOOD & HARKNESS LLP 600 Lexington Avenue, 30th Floor New York, New York 10022 Tel: (212) 841-7000

VIA ELECTRONIC MAIL AND HAND DELIVERY

CALDERWOOD & HARKNESS LLP

ACCEPTED AND AGREED:

WENTWORTH RISK ADVISORS LLC

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