Contract analysis

I. Material Adverse Change ("MAC") Definition A. Overview of Lender's Draft Position

Section 1.01 of the Draft Credit Agreement defines "Material Adverse Change" (which term is used interchangeably with "Material Adverse Effect" throughout the Draft) in language that is, in our view, considerably broader than current market practice would warrant for a credit facility of this type, size, and credit quality. Specifically, the Draft defines a "Material Adverse Change" to include any event, condition, d

1. Deletion of "Prospects." The Borrower requests that the word "prospects" be deleted from clause (i) of the MAC definition. The MAC clause should be tied to actual or reasonably expected impacts on the Borrower's current business, operations, assets, liabilities, or financial condition — not to speculative, forward-looking assessments of the Borrower's future business environment. The deletion of "prospects" is sta

2. Addition of Standard Carve-Outs. The Borrower proposes the addition of the following exclusions from the MAC definition, each of which is well-established in market practice and reflects the reality that certain categories of events should not, standing alone, give rise to a MAC determination: (a) General Economic and Market Conditions. Changes in general economic conditions, financial market conditions, or politi

3. Materiality Qualifier Refinement. The Borrower proposes that the temporal standard embedded in the MAC definition be limited to events that "ha[ve] had" a material adverse effect, rather than the Draft's formulation of "has had or could reasonably be expected to have" a material adverse effect. The "reasonably expected" standard introduces an additional layer of uncertainty and subjectivity that is, in our view, u

II. Mandatory Prepayment Triggers A. Overview of Lender's Draft Position

Section 2.11 of the Draft Credit Agreement sets forth a series of mandatory prepayment provisions requiring the Borrower to apply certain categories of cash receipts to the prepayment of outstanding revolving loans and, to the extent applicable, the permanent reduction of revolving commitments. While the Borrower acknowledges that mandatory prepayment provisions serve an important protective function for the Lenders,

1. Vessel Sale Proceeds (Clause (i)). The Borrower raises three specific concerns with the mandatory prepayment trigger applicable to vessel sale proceeds. De Minimis Threshold. The de minimis threshold of $1,000,000 per transaction is inadequate in the context of a $150 million revolving credit facility secured by a fleet of vessels with an aggregate appraised value of approximately $1.2 billion. The Borrower propos

2. Insurance and Condemnation Proceeds (Clause (ii)). The Borrower proposes two revisions to the mandatory prepayment trigger applicable to insurance proceeds and condemnation awards. Reinvestment Period. The Draft provides for a reinvestment period of one hundred eighty (180) days from the date of receipt of insurance or condemnation proceeds. This period is insufficient given the practical realities of vessel repai

3. Excess Cash Flow Sweep (Clause (iv)). The Borrower objects to the inclusion of an excess cash flow sweep in the Credit Agreement on fundamental structural grounds. Excess cash flow sweeps are a characteristic feature of term loan B facilities — particularly in the leveraged finance context — where the borrower's cash flows are the primary source of repayment for a fully funded, amortizing term loan. In a revolving

4. Collateral Coverage Deficiency (Clause (vi)). The Borrower accepts the Minimum Collateral Coverage Ratio of 140% and the thirty (30) day cure period in principle. These provisions are consistent with market practice in ship finance facilities and appropriately protect the Lenders against a decline in the value of the Mortgaged Vessels. However, the Borrower proposes that the cure right available to the Borrower up

III. Restricted Payments Basket A. Overview of Lender's Draft Position

Section 7.06 of the Draft Credit Agreement imposes a broad restriction on the ability of the Borrower and its subsidiaries to declare, make, or pay any dividend, distribution, or other restricted payment (including share repurchases and redemptions), subject to only two narrow exceptions: (a) distributions among wholly-owned subsidiaries of the Borrower; and (b) tax distributions in an amount not to exceed the actual

1. General Restricted Payments Basket. The Borrower proposes a general basket permitting restricted payments in an aggregate amount not to exceed $15,000,000 per fiscal year, subject to satisfaction of the following conditions at the time of, and after giving pro forma effect to, each such payment: (i) no Event of Default shall exist or would result from the making of such payment; and (ii) after giving pro forma eff

2. Leverage-Based Exception. In addition to the general basket, the Borrower proposes an unlimited restricted payments capacity available at any time when the Borrower's pro forma consolidated net leverage ratio is at or below 3.00 to 1.00. This threshold represents a full turn of leverage below the maximum covenant level of 4.00 to 1.00 (as in effect in Year 3 and thereafter) and signals a credit profile at which th

3. Builder Basket. The Borrower proposes a cumulative "builder basket" permitting restricted payments funded from retained excess cash flow, commencing with the fiscal year ending December 31, 2023 (the first full fiscal year following the expected Closing Date). The builder basket would have an initial "starter amount" of $10,000,000, which is available from and after the Closing Date without regard to actual excess

4. Share Repurchase Basket. The Borrower proposes a specific basket for share repurchases, redemptions, or other equity repurchase transactions in an aggregate amount not to exceed $5,000,000 per fiscal year. This basket is particularly relevant to TSL's equity management needs, including potential repurchases from members of the Karadimitriou family and other existing equity holders. This basket would be subject to

5. Intercompany Dividends. The Borrower requests express confirmation in the Credit Agreement that dividends and distributions from the Borrower's wholly-owned subsidiary Guarantors — specifically, Thalassa Dry Bulk Holdings Ltd. (organized under the laws of the Republic of Cyprus), Thalassa Tanker Operations Ltd. (organized under the laws of the Republic of the marshall Islands), and Thalassa Logistics International

IV. Process and Next Steps We respectfully request that Whitmore, Jennings & Alcott LLP, Meridian Atlantic, and the Lenders consider the foregoing positions in preparing the next draft of the Credit Agreement. The Borrower believes that each of the proposed revisions set forth in this letter is reasonable, well-supported by market practice, and consistent with the overall credit profile and risk characteristics of th