Contract analysis

I. PURPOSE This memorandum analyzes the potential impact of the Independent Authority for Public Revenue ("AADE") customs classification and valuation dispute on Thalassa Shipping & Logistics SA's ("TSL") financial covenants under the €75,000,000 Revolving Credit Facility Agreement with Compass Maritime Bank SA (the "Facility Agreement"), dated September 1, 2020. The dispute arises from Additional Duty Assessment Not

II. RELEVANT COVENANT AND DISCLOSURE TERMS This Section summarizes the principal provisions of the Facility Agreement that are relevant to the customs dispute analysis. The discussion focuses on four categories of provisions: (A) the Net Debt to EBITDA ratio covenant; (B) the material litigation disclosure requirement; (C) the Material Adverse Change clause; and (D) the bank guarantee provisions. For ease of referenc

Section 7.3(a) of the Facility Agreement requires TSL to maintain a ratio of Net Debt to EBITDA of not more than 3.5 to 1.00 (the "Leverage Ratio Covenant"), tested quarterly based on the most recent trailing twelve-month period ending on each quarterly testing date. For purposes of this covenant, the Facility Agreement defines the relevant terms as follows: "Net Debt" is defined in Section 1.1 of the Facility Agreem

Section 6.2(d) of the Facility Agreement imposes a continuing obligation on TSL to notify Compass Maritime Bank "promptly, and in any event within ten (10) business days," of the commencement or threat of any litigation, arbitration, or administrative proceeding in which the amount in controversy exceeds €2,000,000, or which could otherwise reasonably be expected to have a material adverse effect on the Borrower's fi

Section 8.1(g) of the Facility Agreement provides that the occurrence of a "Material Adverse Change" constitutes an Event of Default, entitling Compass Maritime Bank to exercise its remedies under Article IX of the Facility Agreement, including acceleration of all outstanding amounts, termination of undrawn commitments, and enforcement of security interests. The term "Material Adverse Change" is defined in Section 1.

III. CURRENT FINANCIAL POSITION (AS OF DECEMBER 31, 2022 — PROJECTED) A. Key Metrics The following table presents TSL's projected key financial metrics as of December 31, 2022, based on management's updated Q4 2022 forecasts provided to this office by Ms. Papadimitriou on November 28, 2022. These projections are subject to revision upon finalization of TSL's year-end financial statements and audit by Kestrel & Pallad

IV. LIABILITY SCENARIOS AND COVENANT IMPACT ANALYSIS A. Summary of AADE Assessment Components To facilitate the scenario modeling presented in this Section, we first provide a reference table summarizing the component elements of the AADE assessment. These components are analyzed in detail in the companion Customs Classification and Valuation Analysis Memorandum; the summary below is intended for covenant impact mode

V. MATERIAL ADVERSE CHANGE (MAC) CLAUSE ANALYSIS A. Applicability Assessment The central question presented by the MAC clause analysis is whether the AADE customs liability, even at the high-end exposure of approximately €14.7 million, constitutes a "Material Adverse Change" as defined in Section 8.1(g) of the Facility Agreement. If the customs dispute does constitute a MAC, Compass Maritime Bank would be entitled to

VI. IAS 37 — PROVISION RECOGNITION AND ACCOUNTING TREATMENT A. IAS 37 Framework The accounting treatment of the customs dispute liability is governed by IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), which establishes the criteria for recognizing provisions on the balance sheet and distinguishes between provisions (which are recognized) and contingent liabilities (which are disclosed but not recog

VII. BANK GUARANTEE IMPACT ON FACILITY AVAILABILITY The proposed €5,000,000 bank guarantee to be issued by Compass Maritime Bank as CMB-BG-2023-0291 will reduce the undrawn available capacity under the €75,000,000 revolving credit facility by an equivalent amount. This reduction in available capacity occurs upon issuance of the guarantee, regardless of whether the guarantee is subsequently drawn by AADE. For purposes

VIII. INTEREST ACCRUAL MONITORING The financial impact of the customs dispute is not static. Statutory interest on underpaid customs duties continues to accrue at the rate of 0.73% per month (approximately 8.76% per annum) under Article 114 of the Union Customs Code and the corresponding Greek implementing provisions. This interest accrues on the total additional duties assessed by AADE (€1,697,080), and the rate is

IX. RECOMMENDATIONS Based on the analysis set forth in this memorandum, we make the following recommendations for TSL's management of the customs dispute in the context of the Compass Maritime Bank Facility Agreement:

1. Maintain proactive communication with Compass Maritime Bank. TSL should continue to provide periodic updates to Andreas Papathanasiou regarding the status of the customs dispute. The material litigation disclosure was provided on October 3, 2022, satisfying TSL's initial notification obligation under Section 6.2(d) of the Facility Agreement. However, ongoing transparency is advisable — both to maintain the constru

2. Coordinate provision recognition with Kestrel & Palladian LLP. TSL should discuss the appropriate IAS 37 provision amount with Spyros Makris (Partner, Kestrel & Palladian LLP, Athens office) at the earliest opportunity, and in any event before the finalization of TSL's December 31, 2022 consolidated financial statements. A provision in the range of €4,000,000 to €6,000,000 reflects the probability-weighted expecte

3. Monitor Net Debt / EBITDA ratio quarterly. TSL's finance function should monitor the leverage ratio on a quarterly basis and alert senior management and Calderwood & Harkness LLP if the ratio approaches 3.2× or higher. A ratio at or above 3.2× would indicate that TSL's headroom has been reduced to approximately €13.7 million or less, leaving limited cushion for the customs liability's ultimate resolution and for o

4. Consider whether a covenant waiver or amendment may be needed. If the customs dispute is not resolved before the next covenant compliance certification — which will cover the fiscal quarter ending December 31, 2022 and is expected to be delivered on or before March 1, 2023 — TSL should assess whether a proactive approach to Compass Maritime Bank, seeking a limited waiver or covenant holiday, is advisable. At prese