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Flow step 1 & 3 are conflicting. To use transition rules you determine what "pulls leads into that stream" -- therefore you don't need to specify 'add to engagement program' because you're already changing their status in step 1. This does mean that you'll need to re-map your criteria since this won't actually put anyone in stream 3 (you'd need a transition rule there, for that too).
Now -- you can likely keep this same criteria if you run an outside SC instead of using the transition rules as it's a bit more intricate. Try that and remove the transition rule.
Thank you JD. This makes sense. I will give it a try.