1044-00003 · Client 1044 · documents

draft-motion-employee-wages.docx DOCUMENT Finance & Banking

18 / 76 ← → ✕

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

DEBTOR'S MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION EMPLOYEE WAGES, SALARIES, AND BENEFITS AND (II) AUTHORIZING APPLICABLE FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED TRANSFERS

DRAFT — FOR DISCUSSION PURPOSES ONLY — NEVER FILED

Thalassa Americas Inc. ("TAI" or the "Debtor"), the above-captioned debtor and debtor-in-possession in this Chapter 11 case, by and through its proposed counsel, Calderwood & Harkness LLP, hereby moves this Court (the "Motion") pursuant to sections 105(a), 363(b)(1), 507(a)(4), and 507(a)(5) of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"), Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rules 9013-1 and 9014-1 of the Bankruptcy Local Rules for the Southern District of Texas (the "Local Rules"), for entry of interim and final orders, substantially in the forms attached hereto as Exhibit A and Exhibit B, respectively (the "Interim Order" and the "Final Order"), (i) authorizing, but not directing, the Debtor to pay prepetition employee wages, salaries, commissions, benefits, reimbursable business expenses, withholding obligations, and related payroll taxes (collectively, the "Employee Obligations") in the ordinary course of its business and (ii) authorizing and directing applicable financial institutions to receive, honor, process, and pay all checks, wire transfers, ACH payments, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Motion and the proposed orders. In support of this Motion, the Debtor respectfully states as follows:

I. PRELIMINARY STATEMENT

1. Thalassa Americas Inc. ("TAI" or the "Debtor") is a Delaware C-Corporation and the wholly-owned subsidiary of Thalassa Shipping & Logistics Société Anonyme ("TSL"), a Greek société anonyme headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. TAI respectfully moves this Court for entry of interim and final orders authorizing the payment of certain prepetition obligations owed to its employees.

2. TAI is a U.S. operating subsidiary conducting Houston terminal operations, Jones Act–exempt foreign-flag vessel scheduling, and domestic freight brokerage services from its principal office located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. TAI's operations serve as the critical U.S.-side nexus for TSL's transatlantic shipping and logistics enterprise, and the Debtor's continued operation is essential to the preservation and maximization of estate value for all stakeholders.

3. TAI employs approximately 680 individuals in the United States (collectively, the "Employees"), including terminal operations personnel, logistics and freight brokerage staff, vessel scheduling and operations specialists, and administrative and corporate staff. These Employees are essential to the continued operation of the Debtor's business, and their expertise, institutional knowledge, and day-to-day contributions are indispensable to the Debtor's ability to reorganize and emerge from Chapter 11 as a going concern.

4. The Debtor seeks authority, pursuant to sections 105(a), 363(b)(1), 507(a)(4), and 507(a)(5) of the Bankruptcy Code, to pay certain prepetition obligations owed to its Employees, including, without limitation, prepetition wages, salaries, commissions, employee benefits (including health, dental, vision, life, and disability insurance premiums, retirement plan contributions, paid time off, health savings account and flexible spending account contributions, and workers' compensation premiums and claims), reimbursable business expenses, withholding obligations, and related payroll taxes and employer-side FICA contributions (collectively, the "Employee Obligations").

5. Without the relief requested herein, the Debtor's Employees will suffer immediate, severe, and irreparable hardship. The vast majority of the Debtor's Employees are non-insider, non-management workers who rely on their wages and benefits to meet daily living expenses, including housing, food, childcare, and healthcare for themselves and their families. Any interruption or delay in the payment of Employee Obligations would cause disproportionate and undue harm to the individuals least able to absorb the consequences of the Debtor's financial distress.

6. Moreover, the Debtor's operations will be irreparably damaged if Employee Obligations are not timely honored. The Debtor's workforce is the engine that drives TAI's shipping and logistics operations, which generate substantially all of the Debtor's revenue. Terminal operations at the Houston facility cannot continue without experienced dockworkers, crane operators, and maintenance technicians. Vessel scheduling and freight brokerage activities require specialized, trained personnel whose expertise cannot be readily replaced.

7. The Debtor's revenue for the fiscal year ended December 31, 2022 ("FY2022") is estimated at approximately $198 million, a significant decline from approximately $312 million for the fiscal year ended December 31, 2021 ("FY2021"), reflecting the severe market downturn in the dry-bulk and container shipping industries. In light of this revenue decline, retention of the existing skilled workforce is essential to any viable reorganization strategy. The Debtor cannot afford to lose experienced Employees during this critical period.

8. The Debtor respectfully refers the Court to the Declaration of Marcus Hale, President of Thalassa Americas Inc., in Support of First-Day Motions (the "Hale Declaration"), filed contemporaneously herewith, for a comprehensive description of the Debtor's business operations, organizational and corporate structure, capital structure, and the events precipitating this Chapter 11 filing. The Hale Declaration is incorporated herein by reference.

II. JURISDICTION AND VENUE

9. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended General Order of Reference from the United States District Court for the Southern District of Texas, dated October 16, 2012. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and this Court may enter a final order consistent with Article III of the United States Constitution. The Debtor confirms its consent, pursuant to Bankruptcy Rule 7008, to the entry of a final order by this Court in connection with this Motion to the extent that it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution.

10. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. TAI's principal office is located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010, within the Southern District of Texas (Houston Division). The Debtor's principal assets and the center of its U.S. operations are located in this district. The Debtor is a corporation organized under the laws of the State of Delaware, with its registered agent, Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801.

11. The Debtor's federal employer identification number is 84-3291057.

12. The statutory predicates for the relief requested herein are sections 105(a), 363(b)(1), 507(a)(4), and 507(a)(5) of the Bankruptcy Code, Bankruptcy Rules 6003 and 6004, and the applicable Local Rules of this Court.

III. BACKGROUND

A. General Background and the Debtor's Business

13. TAI is a wholly-owned subsidiary of TSL, a Greek-headquartered private shipping and logistics conglomerate founded in 1987 by the Kostandinos family. TSL has grown from a single-vessel operation to become a significant player in the Mediterranean, Black Sea, and transatlantic trade lanes, providing integrated port-to-door logistics services to a global client base.

14. TSL owns and operates a fleet of fifty (50) vessels, consisting of thirty-eight (38) dry-bulk carriers and twelve (12) container vessels. The fleet operates primarily in the Mediterranean, Black Sea, and transatlantic trade lanes, carrying commodities including grains, coal, iron ore, steel products, and containerized general cargo.

15. TAI was incorporated in the State of Delaware in 2017 to serve as TSL's U.S.-side operating platform. TAI's U.S. operations fall into three principal categories:

(a) Houston Terminal Operations. TAI operates a multi-berth terminal facility at the Port of Houston under a long-term lease agreement. The terminal handles the loading and discharge of dry-bulk and containerized cargo arriving on or departing via TSL's vessel fleet and third-party chartered vessels. Terminal operations employ approximately 320 of TAI's 680 U.S.-based Employees, including dockworkers, crane operators, maintenance technicians, safety personnel, and terminal supervisory staff.

(b) Foreign-Flag Vessel Scheduling. TAI manages the scheduling, coordination, and logistics for TSL's Jones Act–exempt foreign-flag vessels calling at U.S. ports. This function involves coordination with port authorities, customs and border protection agencies, pilotage services, and cargo interests. Approximately 85 Employees are engaged in vessel scheduling and marine coordination activities.

(c) Domestic Freight Brokerage. TAI maintains a licensed freight brokerage operation, arranging domestic ground transportation for cargo moving between the Houston terminal and inland destinations across the United States. The brokerage operation employs approximately 130 dispatchers, logistics coordinators, account managers, and sales personnel.

16. The remaining approximately 145 Employees are engaged in administrative and corporate functions, including accounting, finance, human resources, legal, information technology, and executive management.

17. TSL employs approximately 4,200 people globally, of which approximately 680 are employed in the United States by TAI. These 680 Employees represent the entirety of the Debtor's workforce and are essential to every aspect of TAI's U.S. operations.

18. TAI's officers are Marcus Hale (President), Diana Restrepo (Vice President, Finance), and Jonathan Kurtz (Vice President, Operations). Mr. Hale has served as President of TAI since its incorporation in 2017 and is the individual most knowledgeable regarding the Debtor's day-to-day operations, workforce, and the circumstances giving rise to this Chapter 11 filing.

19. The Court is respectfully referred to the Hale Declaration for additional background regarding the Debtor's corporate and organizational structure, including a description of TSL's board of directors — comprising Chairman Dimitrios Kostandinos, Vice Chairwoman Elena Kostandinos-Pavlou, Chief Executive Officer Georgios Andreadis, Chief Financial Officer Irini Dalakoura, and General Counsel Stavros Papageorgiou — and TSL's ownership structure, in which KFO Holdings SA, a Luxembourg holding company, holds approximately 80% of TSL's equity (with Dimitrios Kostandinos holding approximately 62% and Elena Kostandinos-Pavlou holding approximately 18% of the interests in KFO Holdings SA).

B. The Debtor's Capital Structure

20. As of September 30, 2022, the most recent date for which complete financial information is available, TAI and its parent TSL carried total consolidated indebtedness of approximately $847.3 million, summarized as follows:

(a) Senior Secured Credit Facility. Approximately $540 million is outstanding under that certain Senior Secured Credit Agreement, originally dated June 15, 2019 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), by and among TSL and TAI, as co-borrowers, Nordbank International AG, as Administrative Agent and Collateral Agent, and a syndicate of nine institutional lenders. The Credit Agreement provides for a total commitment of $685 million, consisting of: (i) a $270 million Term Loan A facility, (ii) a $185 million Revolving Credit Facility (of which approximately $140 million was drawn as of September 30, 2022), and (iii) an $85 million Term Loan B / U.S. Tranche allocated specifically to TAI's U.S. operations. The facilities bear interest at SOFR plus 375 basis points per annum and mature on June 15, 2024. Obligations under the Credit Agreement are secured by first-priority liens on substantially all of TSL's and TAI's assets, including the vessel fleet, the Houston terminal lease, all accounts receivable, and the equity interests in TAI and fourteen (14) vessel-owning special purpose vehicles organized under the laws of the Republic of the marshall Islands.

(b) Mezzanine Notes. Approximately $112.3 million is outstanding (original principal of $100 million plus $12.3 million in capitalized payment-in-kind ("PIK") interest) under mezzanine notes held by Dralvecen Mezzanine Capital LLC ("Dralvecen"). The mezzanine notes bear interest at a rate of 11.5% per annum on a PIK toggle basis and mature on December 15, 2024. The mezzanine notes are secured by a second-priority lien on the same collateral package securing the Senior Secured Credit Facility, subject to the terms of an intercreditor agreement dated June 15, 2019, by and between Nordbank International AG and Dralvecen.

(c) Unsecured Notes. Approximately $50 million in aggregate principal amount is outstanding under unsecured notes bearing interest at a rate of 8.25% per annum, payable in cash semi-annually, and maturing on March 1, 2025. Garrison Trust Company serves as the indenture trustee under the indenture governing the unsecured notes.

(d) Intercompany Note. TAI owes approximately $76.4 million to its parent, TSL, under a subordinated intercompany promissory note. The intercompany note is subordinated in right of payment to all other funded indebtedness of TAI.

(e) Trade Payables. As of September 30, 2022, TAI carried approximately $38.7 million in outstanding trade payables owing to vendors, suppliers, and other trade creditors in the ordinary course of business.

21. Additional detail regarding the Debtor's capital structure, including a description of the key covenants, events of default, and intercreditor arrangements, is set forth in the Hale Declaration.

C. Events Leading to the Filing

22. The events precipitating this Chapter 11 filing are rooted in a severe and sustained downturn in the global shipping markets, which has dramatically reduced the revenues and cash flows of TSL and TAI. A summary of the key events follows:

23. Market Decline. The Baltic Dry Index ("BDI"), a widely-used benchmark for dry-bulk shipping rates, declined approximately 58% between January 2022 and September 2022, reflecting a sharp contraction in global trade volumes and freight rates. As a direct consequence, TSL's average daily time-charter equivalent ("TCE") fell from approximately $24,800 per day (FY2021 average) to approximately $11,200 per day (Q3 2022 average), a decline of approximately 54.8%.

24. Covenant Defaults. The precipitous decline in shipping rates and revenues resulted in multiple covenant defaults under the Credit Agreement:

(i) Minimum Liquidity Covenant. On September 15, 2022, the Borrowers' consolidated liquidity fell to approximately $27.3 million, breaching the minimum liquidity covenant of $40 million set forth in Section 7.11(a) of the Credit Agreement — a shortfall of approximately $12.7 million.

(ii) Maximum Net Leverage Ratio. As of September 30, 2022, the Borrowers' Maximum Net Leverage Ratio stood at 7.82x (calculated as Net Debt of approximately $770.9 million divided by trailing twelve-month ("LTM") Adjusted EBITDA of approximately $98.6 million), in breach of the maximum permitted ratio of 5.50x set forth in Section 7.11(b) of the Credit Agreement.

(iii) Minimum Interest Coverage Ratio. As of September 30, 2022, the Borrowers' Minimum Interest Coverage Ratio stood at 1.74x (calculated as LTM Adjusted EBITDA of approximately $98.6 million divided by LTM Interest Expense of approximately $56.7 million), in breach of the minimum required ratio of 2.50x set forth in Section 7.11(c) of the Credit Agreement.

25. Forbearance Agreement. Following the covenant defaults, TAI and TSL entered into a Forbearance Agreement, dated October 10, 2022 (the "Forbearance Agreement"), with Nordbank International AG, as Administrative Agent, and the requisite consenting lenders under the Credit Agreement. The Forbearance Agreement provided for a 90-day standstill through January 8, 2023, during which the lenders agreed to forbear from exercising remedies arising from the specified events of default. The Forbearance Agreement was subsequently extended on two occasions — first to March 8, 2023, and then to April 7, 2023 — to provide additional time for restructuring negotiations.

26. Fleet Devaluation. On November 1, 2022, the TSL fleet was appraised by Drakos Maritime Valuations Ltd. at an aggregate fair market value of approximately $623 million, a decline of approximately $268 million (or 30.1%) from the prior appraised value of approximately $891 million in January 2022. The fleet devaluation has significantly reduced the collateral cushion available to the senior secured lenders and exacerbated the Debtor's leverage and liquidity challenges.

27. Revenue Decline. TSL's consolidated revenue declined approximately 30.5% from approximately €1.42 billion in FY2021 to an estimated €987 million in FY2022. TAI's U.S.-side revenue similarly declined from approximately $312 million in FY2021 to an estimated $198 million in FY2022.

28. Missed Interest Payment. On December 1, 2022, the Debtor failed to make a scheduled semi-annual interest payment of $2,062,500 on the unsecured notes. The 30-day cure period provided under the indenture expired on January 1, 2023, without the payment having been made, constituting an event of default under the indenture.

29. As more fully described in the Hale Declaration, the confluence of the market downturn, covenant defaults, fleet devaluation, revenue decline, and the missed interest payment on the unsecured notes necessitated this Chapter 11 filing.

IV. THE EMPLOYEE OBLIGATIONS

A. Description of the Debtor's Workforce

30. As noted above, TAI employs approximately 680 individuals in the United States. These Employees serve in range critical roles across the Debtor's operations, and their continued service is indispensable to the Debtor's ability to maintain operations, generate revenue, and pursue a successful reorganization. The Debtor's Employees fall into the following general categories:

(a) Terminal Operations Personnel. Approximately 320 Employees are engaged in terminal operations at the Debtor's Houston terminal facility, including dockworkers, crane operators, maintenance technicians, safety coordinators, and supervisory staff. These individuals are responsible for the loading and discharge of cargo, equipment maintenance, and the safe and efficient operation of the terminal. Many of these Employees hold specialized certifications and licenses required for terminal operations.

(b) Logistics and Freight Brokerage Staff. Approximately 130 Employees work in the Debtor's domestic freight brokerage operation, including dispatchers, logistics coordinators, account managers, and sales personnel. These individuals are responsible for arranging and coordinating the ground transportation of cargo between the Houston terminal and inland destinations, maintaining customer relationships, and generating brokerage revenue.

(c) Vessel Scheduling and Operations. Approximately 85 Employees are engaged in vessel scheduling and marine coordination activities, including operations analysts, marine coordinators, and regulatory compliance personnel. These individuals manage the scheduling and coordination of vessel calls at U.S. ports, interface with port authorities and customs agencies, and ensure compliance with applicable maritime regulations.

(d) Administrative and Corporate Staff. Approximately 145 Employees serve in administrative and corporate functions, including accounting, finance, human resources, legal, information technology, and executive management. These individuals provide the essential back-office support that enables the Debtor's operations to function effectively.

31. The vast majority of TAI's Employees are non-insider, non-management employees who depend on their wages and benefits for daily living expenses, including housing, food, childcare, healthcare, and other necessities. These individuals are among the parties least able to absorb the financial consequences of the Debtor's restructuring and should not be required to bear the burden of any interruption in the payment of their compensation and benefits.

32. Certain of the Debtor's Employees may also be covered by collective bargaining agreements or individual employment contracts. The Debtor seeks authority pursuant to this Motion to honor all prepetition Employee Obligations arising under such agreements and contracts, to the extent provided herein. Nothing in this Motion or the proposed orders shall be deemed to constitute an assumption of any executory contract or collective bargaining agreement pursuant to section 365 of the Bankruptcy Code.

B. Wages and Salaries

33. TAI maintains regular payroll cycles in the ordinary course of its business. Hourly Employees are paid on a bi-weekly basis, and salaried Employees are paid on a semi-monthly basis. Payroll processing is administered through Ashgrove Solutions ("Larkspur Systems"), a third-party payroll services provider.

34. The Debtor estimates that, as of the Petition Date, aggregate prepetition wages and salaries accrued and unpaid will total up to approximately $[__] million, depending on the timing of the Petition Date relative to the applicable payroll cycles. This estimate encompasses regular wages, salaries, overtime compensation, shift differentials, and commissions earned by Employees prior to the Petition Date but not yet paid.

35. Based on the Debtor's review of its payroll records and compensation structure, the Debtor believes that no individual Employee is owed prepetition wages or salaries exceeding the statutory priority cap under section 507(a)(4) of the Bankruptcy Code, which currently provides priority status for up to $15,150 per employee for amounts earned within 180 days before the date of the filing of the petition. Accordingly, the vast majority, if not all, of the prepetition wage and salary obligations that the Debtor seeks authority to pay would be entitled to priority status under section 507(a)(4).

36. The Debtor requests authority to pay all prepetition wages and salaries to its Employees in the ordinary course of its business, in accordance with its customary payroll practices and schedules, as such amounts become due.

C. Employee Benefits

37. TAI provides or sponsors the following employee benefit programs for its Employees and, in many cases, their eligible dependents:

(a) Health Insurance. TAI sponsors medical, dental, and vision insurance plans for its Employees and their eligible dependents. The plans are funded through a combination of employer and employee premium contributions, with employee contributions deducted from payroll. The Debtor's current health insurance carrier is Sterling Reach Mutual Insurance. As of the Petition Date, prepetition employer premium contributions and employee withholdings that have been deducted but not yet remitted to the carrier are estimated at $[__].

(b) Retirement Benefits. TAI sponsors a 401(k) defined contribution retirement plan (the "401(k) Plan") for eligible Employees, with employer matching contributions of up to 4% of eligible compensation. The 401(k) Plan is administered by Brightwater Capital Management. As of the Petition Date, prepetition employer matching contributions that have been accrued but not yet deposited into Employee accounts are estimated at $[__].

(c) Life Insurance and Disability Insurance. TAI provides employer-sponsored group term life insurance and short-term and long-term disability insurance coverage to its Employees. Premiums for these coverages are paid by the Debtor. As of the Petition Date, prepetition premiums accrued and unpaid are estimated at $[__].

(d) Paid Time Off. TAI maintains a paid time off ("PTO") policy that provides Employees with accrued vacation, sick leave, and personal days. Accrued but unused PTO represents an obligation of the Debtor to its Employees. As of the Petition Date, the aggregate liability for accrued but unused PTO is estimated at $[__].

(e) Workers' Compensation Insurance. TAI maintains workers' compensation insurance coverage as required by the laws of the State of Texas and other applicable jurisdictions. The Debtor requests authority to continue paying premiums and any outstanding prepetition claims related to workers' compensation, as described more fully below.

(f) Health Savings Accounts and Flexible Spending Accounts. TAI offers Health Savings Accounts ("HSAs") and Flexible Spending Accounts ("FSAs") to eligible Employees, with employer contributions to HSAs. As of the Petition Date, prepetition employer contributions to HSAs and FSAs that have been accrued but not yet deposited are estimated at $[__].

38. The aggregate estimated prepetition employee benefit obligations accrued and unpaid as of the Petition Date total up to approximately $[__] million. These obligations are essential to Employee retention and morale. Failure to honor these obligations would result in the immediate loss of insurance coverage for Employees and their families, potential disqualification of the 401(k) Plan, and severe disruption to the Debtor's ability to retain its workforce.

39. The Debtor's Employee benefit programs are consistent with industry standards for companies of TAI's size and nature. The Debtor is not seeking to enhance or expand any benefits beyond those currently in place; rather, the Debtor simply seeks authority to continue honoring existing obligations in the ordinary course.

D. Payroll Taxes and Withholding Obligations

40. In the ordinary course of its business, TAI is required to withhold and remit to federal, state, and local taxing authorities certain amounts from Employee wages, including federal income tax withholdings, state and local income tax withholdings (to the extent applicable), the employee portion of FICA taxes (Social Security and Medicare), and unemployment insurance contributions. In addition, TAI is responsible for the employer portion of FICA taxes and federal and state unemployment insurance contributions.

41. These withholding amounts are held by the Debtor in trust for the benefit of the applicable governmental authorities and, to the extent they constitute trust fund obligations, are not property of the Debtor's estate. See 26 U.S.C. § 7501; Begier v. IRS, 496 U.S. 53, 59 (1990). Nevertheless, the Debtor seeks explicit authorization from this Court to continue remitting such amounts to the applicable taxing authorities in the ordinary course of its business and in accordance with applicable law, to avoid the imposition of penalties and interest and to avoid the potential personal liability of the Debtor's officers and directors under 26 U.S.C. § 6672 (the "trust fund recovery penalty").

42. As of the Petition Date, estimated prepetition payroll tax withholding obligations (including both employee withholdings and employer-side FICA and unemployment insurance contributions) are approximately $[__].

E. Reimbursable Business Expenses

43. In the ordinary course of their employment, TAI's Employees incur business expenses that are reimbursable under the Debtor's expense reimbursement policies. Such expenses include, without limitation, travel expenses, meals and lodging, equipment purchases, professional development and training costs, telecommunications charges, and other expenses incurred in connection with the performance of job duties. The Debtor maintains a policy requiring Employees to submit expense reports for approval and reimbursement within specified time periods.

44. As of the Petition Date, estimated aggregate prepetition reimbursable business expenses that have been incurred by Employees but not yet reimbursed are up to approximately $[__]. These amounts, while modest in comparison to the Debtor's overall obligations, are of significant importance to the individual Employees who incurred such expenses in good faith reliance on the Debtor's reimbursement policies.

F. Workers' Compensation Obligations

45. TAI is required by the laws of the State of Texas and other applicable states to maintain workers' compensation insurance coverage for its Employees. Given the nature of the Debtor's terminal operations, which involve heavy equipment, maritime cargo handling, and other inherently hazardous activities, workers' compensation coverage is not only a legal requirement but a practical necessity. The Debtor's failure to maintain workers' compensation coverage could result in regulatory sanctions, potential shutdown of terminal operations, and exposure of the estate to uninsured liability for workplace injuries.

46. The Debtor requests authority to continue paying workers' compensation insurance premiums in the ordinary course and to pay any outstanding prepetition claims or assessments related to workers' compensation coverage.

G. Summary of Requested Relief

47. The following table summarizes the categories of Employee Obligations for which the Debtor seeks authority to pay prepetition amounts, together with the estimated prepetition amounts in each category:

48. The Debtor will supplement this table with specific dollar amounts upon completion of its final prepetition payroll reconciliation and benefit accrual calculations, which will be provided in advance of the interim hearing.

V. LEGAL BASIS FOR THE REQUESTED RELIEF

A. Section 363(b)(1) — Sound Business Judgment

49. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b)(1). Courts in this District and throughout the country have consistently held that a debtor-in-possession may pay prepetition obligations under section 363(b)(1) when the debtor demonstrates a sound business justification for doing so. See In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002); see also In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989).

50. Under the sound business judgment standard, the Court need only find that the proposed transaction has a legitimate business purpose and that the debtor's decision to proceed is reasonable. See In re Continental Air Lines, Inc., 780 F.2d 1223, 1226 (5th Cir. 1986); In re Asarco, L.L.C., 650 F.3d 593, 601 (5th Cir. 2011). Courts routinely defer to the business judgment of a debtor's management when the proposed action is not the product of bad faith, self-dealing, or gross negligence.

51. The Debtor submits that its decision to pay prepetition Employee Obligations satisfies the sound business judgment standard for the following reasons:

(a) The Employees are essential to the Debtor's operations. TAI's approximately 680 U.S. Employees are the backbone of the Debtor's business. Houston terminal operations, vessel scheduling, and freight brokerage cannot function without a trained and experienced workforce. The Debtor's terminal operations alone require approximately 320 specialized workers — dockworkers, crane operators, maintenance technicians, and safety personnel — whose skills and certifications are not easily replaced. The Debtor's vessel scheduling operations require marine coordinators with deep knowledge of U.S. port procedures, customs regulations, and the operational characteristics of TSL's fleet. The freight brokerage operation depends on the relationships and institutional knowledge of experienced dispatchers and account managers.

(b) Specialized personnel cannot be readily replaced. The shipping and logistics industry requires specialized, experienced personnel with industry-specific knowledge, certifications, and relationships. The labor market for terminal operations personnel, marine coordinators, and logistics professionals is highly competitive, particularly in the Houston metropolitan area. Loss of even a modest percentage of the Debtor's workforce would severely impair the Debtor's ability to operate, generate revenue, and pursue a reorganization.

(c) Replacement costs would far exceed the amounts sought. The cost of recruiting, hiring, and training replacement workers — assuming qualified replacements could even be found in the current labor market — would vastly exceed the amounts the Debtor seeks authority to pay under this Motion. Industry studies estimate that the cost of replacing a skilled terminal operations employee ranges from 50% to 200% of the employee's annual compensation, accounting for recruitment costs, training expenses, productivity losses during onboarding, and the risk of operational disruptions.

(d) Morale and productivity will suffer. If Employees are not assured that their prepetition wages and benefits will be honored, morale and productivity will deteriorate immediately. Workers who are uncertain about whether they will be paid are likely to seek alternative employment, reduce their effort, or simply fail to report for duty. In a capital-intensive, safety-sensitive operation like a shipping terminal, even marginal declines in workforce morale and attention can have cascading consequences, including delayed vessel turnarounds, cargo damage, safety incidents, and customer defections.

(e) The Debtor's revenue depends on its workforce. The Debtor's estimated FY2022 revenue of $198 million is generated almost entirely through the efforts of its Employees. Any disruption to the Debtor's operations resulting from workforce attrition or labor unrest would directly and immediately impair the Debtor's revenue-generating capacity and, by extension, its ability to fund ongoing operations, service administrative claims, and pursue a viable reorganization plan.

52. For all of the foregoing reasons, the Debtor respectfully submits that the sound business judgment standard under section 363(b)(1) is clearly satisfied, and the Court should authorize the payment of prepetition Employee Obligations.

B. Sections 507(a)(4) and 507(a)(5) — Priority of Employee Claims

53. Section 507(a)(4) of the Bankruptcy Code provides fourth-priority status to "allowed unsecured claims, but only to the extent of $15,150 for each individual or corporation . . . earned within 180 days before the date of the filing of the petition," including claims for "wages, salaries, or commissions, including vacation, severance, and sick leave pay." 11 U.S.C. § 507(a)(4).

54. Section 507(a)(5) of the Bankruptcy Code provides fifth-priority status to "allowed unsecured claims for contributions to an employee benefit plan . . . arising from services rendered within 180 days before the date of the filing of the petition," up to a cap of $15,150 per employee (reduced by amounts paid or payable under section 507(a)(4)). 11 U.S.C. § 507(a)(5).

55. The vast majority, if not all, of the Employee Obligations that the Debtor seeks to pay under this Motion fall within these statutory priority provisions. The Debtor's prepetition wage and salary obligations were earned within 180 days of the anticipated Petition Date, and, based on the Debtor's review of its payroll records, no individual Employee is owed prepetition wages or salaries exceeding the $15,150 priority cap. Similarly, the Debtor's contributions to employee benefit plans arise from services rendered within 180 days of the anticipated Petition Date and fall within the applicable statutory limits.

56. Because the Employee Obligations would be entitled to priority treatment in any distribution under a Chapter 11 plan or in any liquidation under Chapter 7, payment of these obligations now, at the outset of the case, does not prejudice other creditors. To the contrary, early payment of priority Employee Obligations avoids the substantial administrative burden and delay that would be associated with processing hundreds of individual priority claims through the claims process, and — critically — preserves the Debtor's workforce so that the estate can continue to generate the revenue needed to fund distributions to all creditors.

57. Courts routinely authorize the payment of priority employee claims at the commencement of a Chapter 11 case. See, e.g., In re Pilgrim's Pride Corp., Case No. 08-45664 (Bankr. N.D. Tex. 2008); In re Delphi Corp., Case No. 05-44481 (Bankr. S.D.N.Y. 2005); In re Dana Corp., Case No. 06-10354 (Bankr. S.D.N.Y. 2006); In re General Motors Corp., Case No. 09-50026 (Bankr. S.D.N.Y. 2009).

C. Section 105(a) — Equitable Powers of the Court

58. Section 105(a) of the Bankruptcy Code provides that "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). The Court's broad equitable powers under section 105(a) provide independent and additional support for the relief requested herein.

59. Courts have long recognized the "doctrine of necessity" (also referred to as the "necessity of payment" rule) as a basis for authorizing the payment of prepetition claims where such payment is essential to the debtor's continued operations and the preservation of the going-concern value of the estate. See In re Lehigh & New England Ry. Co., 657 F.2d 570, 581–82 (3d Cir. 1981); In re Just for Feet, Inc., 242 B.R. 821, 826 (D. Del. 1999); In re CoServ, 273 B.R. at 497. The doctrine of necessity traces its origins to the nineteenth-century railroad receivership cases, in which courts authorized the payment of prepetition claims to vendors, suppliers, and employees whose continued cooperation was essential to the ongoing operation of the railroad. See Miltenberger v. Logansport, Crawfordsville & S.W. Ry. Co., 106 U.S. 286 (1882); Fosdick v. Schall, 99 U.S. 235 (1879).

60. Application of the doctrine of necessity is particularly appropriate in the context of employee obligations. The Debtor's Employees are not sophisticated financial creditors with diversified portfolios and the ability to absorb losses; they are ordinary working men and women who depend on regular paychecks and benefits to meet their daily living expenses and those of their families. Many of the Debtor's terminal operations personnel, dispatchers, and administrative staff earn hourly wages and live paycheck to paycheck. The equitable considerations that underlie the doctrine of necessity weigh heavily — indeed, overwhelmingly — in favor of the relief sought herein.

61. Moreover, the practical consequences of denying this Motion would be severe. Employees who are not paid will be unable to pay their rent or mortgages, buy food, maintain their vehicles, pay for childcare, or access healthcare. Many Employees will have no choice but to seek employment elsewhere, resulting in an immediate and potentially catastrophic depletion of the Debtor's workforce. The resulting operational disruptions would destroy estate value, reduce the recoveries available to all creditors, and undermine any prospect of a successful reorganization.

D. Withholding and Trust Fund Obligations

62. As noted above, certain of the Employee Obligations — specifically, the payroll tax withholdings and similar trust fund obligations — are held by the Debtor in trust for governmental authorities and are not property of the Debtor's estate. See 26 U.S.C. § 7501; Begier v. IRS, 496 U.S. 53, 59 (1990) (holding that withheld income and FICA taxes are held in trust and are not property of the debtor's estate). Because these amounts are held in trust, the Debtor has both a legal obligation and a fiduciary duty to remit them to the appropriate taxing authorities.

63. The Debtor's failure to remit payroll tax withholdings could result in the imposition of substantial penalties and interest against the estate, including the trust fund recovery penalty under 26 U.S.C. § 6672, which imposes personal liability on "responsible persons" — including officers and directors of the Debtor — who willfully fail to collect, account for, and remit trust fund taxes. The imposition of personal liability on the Debtor's officers could further destabilize the Debtor's management team at a time when stable leadership is critical to a successful reorganization.

64. Accordingly, the Court should authorize and direct the Debtor to continue to remit payroll tax withholdings, employer-side FICA contributions, and all other trust fund obligations to the applicable governmental authorities without interruption.

VI. REQUEST FOR INTERIM RELIEF

65. The Debtor respectfully requests that the Court hear this Motion on an expedited, interim basis contemporaneously with the other first-day motions filed by the Debtor in this case. Bankruptcy Rule 6003 permits the Court to grant relief within the first 21 days after the filing of the petition "to the extent that relief is necessary to avoid immediate and irreparable harm." Fed. R. Bankr. P. 6003(b). As set forth above, the Debtor's Employees will suffer immediate and irreparable harm if their prepetition wages and benefits are not timely paid.

66. The Debtor's next regularly scheduled payroll date is [date], and Employees will be directly and immediately harmed if payment is not made on a timely basis. Any delay in the payment of wages and benefits will cause severe financial hardship to the Debtor's Employees and their families and will trigger an immediate exodus of critical personnel, jeopardizing the Debtor's ability to maintain operations during the initial phase of this Chapter 11 case.

67. On an interim basis, the Debtor requests authority to pay prepetition Employee Obligations up to an aggregate cap of $[__] pending the final hearing on this Motion. The proposed interim cap is designed to cover the most immediate and pressing Employee Obligations — including wages and salaries for the current payroll cycle, health insurance premiums, and payroll tax withholdings — while reserving the balance of the Employee Obligations for authorization at the final hearing.

68. The Debtor requests that the Court schedule a final hearing on this Motion within approximately twenty-five (25) days of the Petition Date, or at such other time as the Court may direct, and that the Court enter the Final Order upon conclusion of the final hearing.

VII. AUTHORITY TO FINANCIAL INSTITUTIONS

69. In connection with the relief requested herein, the Debtor requests that the Court authorize and direct all banks, financial institutions, and other entities that maintain accounts on behalf of the Debtor, including, without limitation, Greaves Bancorp (the "Payroll Bank"), through which the Debtor processes its payroll and related payments, to receive, process, honor, and pay all checks, wire transfers, ACH payments, direct deposit transactions, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Motion and the proposed orders.

70. The Debtor further requests that the Court authorize the Payroll Bank and any other applicable financial institutions to rely upon the representations of the Debtor and the Debtor's authorized signatories as to the appropriateness of any payments made in connection with the Employee Obligations, and that such financial institutions shall not be liable to any party for honoring and processing such payment items in good faith reliance on this Motion and the orders entered in connection herewith.

VIII. WAIVER OF BANKRUPTCY RULES 6004(a) AND 6004(h)

71. To the extent applicable, the Debtor requests a waiver of the fourteen (14)-day stay imposed by Bankruptcy Rule 6004(h), which provides that "[a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise." Fed. R. Bankr. P. 6004(h). Given the urgency of the relief requested herein, and the irreparable harm that would result from any delay in the payment of Employee Obligations, the Debtor respectfully submits that cause exists to waive the 14-day stay period so that the Debtor may make payments authorized by the proposed orders immediately upon their entry.

72. The Debtor also requests that the notice requirements of Bankruptcy Rule 6004(a) be deemed satisfied by the notice provided in connection with this Motion, as more fully described in Section IX below. The Debtor submits that the notice provided is adequate and appropriate under the circumstances.

IX. NOTICE

73. Notice of this Motion has been provided to the following parties or their respective counsel:

(i) The Office of the United States Trustee for the Southern District of Texas, Region 7;

(ii) Nordbank International AG, as Administrative Agent and Collateral Agent under the Senior Secured Credit Facility (Bahnhofstrasse 78, 8001 Zürich, Switzerland, Attention: Henrik Lüdemann);

(iii) Counsel to the Ad Hoc Group of Senior Secured Lenders, Whitfield, Crane & Burgess LLP (51 West 52nd Street, 38th Floor, New York, New York 10019, Attention: Graham Whitfield III, Esq.);

(iv) Dralvecen Mezzanine Capital LLC, holder of the Mezzanine Notes (600 Lexington Avenue, 22nd Floor, New York, New York 10022, Attention: Rebecca Marsh), through its counsel, Kellner & Foss LLP (1185 Avenue of the Americas, 30th Floor, New York, New York 10036, Attention: Theodore Kellner, Esq.);

(v) Counsel to the informal group of holders of the unsecured notes, Ashford, Brightmoor Group & McKay PC (299 Park Avenue, 18th Floor, New York, New York 10171, Attention: Carolyn Brightmoor Group, Esq.);

(vi) Garrison Trust Company, as indenture trustee for the unsecured notes (100 Wall Street, 16th Floor, New York, New York 10005);

(vii) The holders of the thirty (30) largest unsecured claims against the Debtor, as identified in the Debtor's list filed pursuant to Bankruptcy Rule 1007(d);

(viii) The Internal Revenue Service; and

(ix) All parties who have requested notice pursuant to Bankruptcy Rule 2002.

74. The Debtor submits that no further or other notice of this Motion is required or necessary under the circumstances. In the event that an official committee of unsecured creditors is appointed in this case, the Debtor will provide notice to such committee and its counsel promptly upon appointment.

X. CONCLUSION AND PRAYER FOR RELIEF

WHEREFORE, the Debtor respectfully requests that this Court:

1. Enter the proposed Interim Order, substantially in the form attached hereto as Exhibit A, authorizing, but not directing, the Debtor to pay prepetition Employee Obligations on an interim basis up to the aggregate cap set forth therein;

2. Schedule a final hearing on this Motion within approximately twenty-five (25) days of the Petition Date, and enter the proposed Final Order, substantially in the form attached hereto as Exhibit B, authorizing, but not directing, the Debtor to pay all prepetition Employee Obligations in the ordinary course of its business;

3. Authorize and direct all applicable banks, financial institutions, and other entities maintaining accounts on behalf of the Debtor to receive, process, honor, and pay all checks, wire transfers, ACH payments, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Motion and the proposed orders;

4. Waive the fourteen (14)-day stay imposed by Bankruptcy Rule 6004(h) to the extent it applies to this Motion;

5. Grant such other and further relief as this Court deems just, proper, and equitable.

Dated: January 15, 2023 Houston, Texas

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Nathaniel Bower (State Bar No. __) Amy Chesterton (State Bar No. __) Nathan Ikeda (State Bar No. ____) 780 Third Avenue New York, New York 10017 Telephone: (212) 555-4000 Facsimile: (212) 555-4001

Email: nbower@calderwoodharkness.com

Email: achesterton@calderwoodharkness.com

Email: nikeda@calderwoodharkness.com

Proposed Counsel for the Debtor, Thalassa Americas Inc.

EXHIBIT A

PROPOSED INTERIM ORDER

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

INTERIM ORDER (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION EMPLOYEE WAGES, SALARIES, AND BENEFITS AND (II) AUTHORIZING APPLICABLE FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED TRANSFERS

Upon the Motion (the "Motion") of Thalassa Americas Inc. (the "Debtor"), the above-captioned debtor and debtor-in-possession, by and through its proposed counsel, Calderwood & Harkness LLP, for entry of interim and final orders authorizing the Debtor to pay prepetition employee wages, salaries, commissions, benefits, reimbursable business expenses, withholding obligations, and related payroll taxes (collectively, the "Employee Obligations") and authorizing applicable financial institutions to honor and process related transfers; and the Court having reviewed the Motion and the Declaration of Marcus Hale, President of Thalassa Americas Inc., in Support of First-Day Motions (the "Hale Declaration"), filed contemporaneously with the Motion; and the Court having considered the record in this case and the arguments of counsel at the interim hearing held on [date]; and adequate and sufficient notice of the Motion and the interim hearing having been provided under the circumstances, and no further notice being required; and no objections to the relief sought in the Motion having been filed, or all such objections having been withdrawn, waived, or overruled; and the Court having determined that the legal and factual bases set forth in the Motion and the Hale Declaration establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtor, its estate, its creditors, and all parties in interest; and after due deliberation and sufficient cause appearing therefor,

IT IS HEREBY ORDERED THAT:

1. The Motion is GRANTED on an interim basis, as set forth herein.

2. The Debtor is authorized, but not directed, to pay prepetition Employee Obligations in the ordinary course of its business, up to an aggregate amount not to exceed $[__] pending the final hearing on the Motion, including, without limitation, the following categories of Employee Obligations:

(a) Prepetition wages, salaries, overtime compensation, shift differentials, and commissions;

(b) Accrued but unused paid time off, including vacation, sick leave, and personal days;

(d) Life insurance and short-term and long-term disability insurance premiums;

(e) 401(k) employer matching contributions;

(f) Health savings account ("HSA") and flexible spending account ("FSA") employer contributions;

(g) Workers' compensation insurance premiums and prepetition workers' compensation claims;

(h) Reimbursable business expenses incurred by Employees in the ordinary course of their employment; and

(i) Payroll taxes, withholdings, FICA contributions (employee and employer portions), and federal and state unemployment insurance contributions.

3. The Debtor is authorized to issue checks, initiate wire transfers, ACH transactions, direct deposit transactions, and other forms of payment in connection with the Employee Obligations authorized by this Order.

4. All banks, financial institutions, and other entities that maintain accounts on behalf of the Debtor are authorized and directed to receive, process, honor, and pay all checks, wire transfers, ACH payments, direct deposit transactions, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Order, whether such checks, wire transfers, or other payment items were presented, issued, or drawn before or after the Petition Date, to the extent that sufficient funds are on deposit in the applicable accounts. Such financial institutions may rely upon the representations of the Debtor and the Debtor's authorized signatories as to the appropriateness of any such payments, and no such financial institution shall have any liability to any party for honoring and processing such payment items in good faith reliance on this Order.

5. Nothing in this Order shall be deemed to constitute an assumption or rejection of any executory contract or unexpired lease pursuant to section 365 of the Bankruptcy Code, and the Debtor's rights under section 365 are expressly preserved.

6. Nothing in this Order shall prejudice the rights of any party in interest to object to the allowance, priority, or secured status of any claim against the Debtor or the Debtor's estate, and the rights of all parties in interest in that regard are expressly preserved.

7. Absent further order of this Court, no individual Employee shall receive prepetition wage or salary payments pursuant to this Order in excess of the statutory priority cap under section 507(a)(4) of the Bankruptcy Code (currently $15,150 per individual).

8. The Debtor shall maintain accurate and complete records of all payments made pursuant to this Order and shall file a supplemental report with the Court, on a category-by-category basis, summarizing all such payments, no later than three (3) business days prior to the final hearing on the Motion.

9. A final hearing on the Motion shall be held on [date] at [time] before this Court. Any objections to the relief sought on a final basis shall be filed and served no later than [date] at 4:00 p.m. (prevailing Central Time), and shall be served on: (a) proposed counsel for the Debtor, Calderwood & Harkness LLP, 780 Third Avenue, New York, New York 10017, Attention: Nathaniel Bower, Esq.; and (b) the Office of the United States Trustee for the Southern District of Texas.

10. The Debtor is authorized to serve a copy of this Order on all parties in interest via first-class mail, electronic mail, or through the Court's CM/ECF system, and such service shall be deemed adequate and sufficient notice of the entry of this Order.

11. The fourteen (14)-day stay under Bankruptcy Rule 6004(h) is hereby waived, and this Order shall be effective and enforceable immediately upon its entry.

12. This Court retains exclusive jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order.

________________________________________

UNITED STATES BANKRUPTCY JUDGE

Dated: ____ Houston, Texas

EXHIBIT B

PROPOSED FINAL ORDER

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

FINAL ORDER (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION EMPLOYEE WAGES, SALARIES, AND BENEFITS AND (II) AUTHORIZING APPLICABLE FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED TRANSFERS

Upon the Motion (the "Motion") of Thalassa Americas Inc. (the "Debtor"), the above-captioned debtor and debtor-in-possession, by and through its proposed counsel, Calderwood & Harkness LLP, for entry of interim and final orders authorizing the Debtor to pay prepetition employee wages, salaries, commissions, benefits, reimbursable business expenses, withholding obligations, and related payroll taxes (collectively, the "Employee Obligations") and authorizing applicable financial institutions to honor and process related transfers; and the Court having previously entered the Interim Order (I) Authorizing the Debtor to Pay Prepetition Employee Wages, Salaries, and Benefits and (II) Authorizing Applicable Financial Institutions to Honor and Process Related Transfers [Docket No. __] on [date] (the "Interim Order"); and the Court having reviewed the Motion, the Declaration of Marcus Hale, President of Thalassa Americas Inc., in Support of First-Day Motions (the "Hale Declaration"), the Interim Order, the supplemental report filed by the Debtor, and all other submissions in connection herewith; and the Court having considered the record in this case and the arguments of counsel at the final hearing held on [date]; and adequate and sufficient notice of the Motion and the final hearing having been provided, and no further notice being required; and no objections to the relief sought on a final basis having been filed, or all such objections having been withdrawn, waived, or overruled; and the Court having determined that the legal and factual bases set forth in the Motion and the Hale Declaration establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtor, its estate, its creditors, and all parties in interest; and after due deliberation and sufficient cause appearing therefor,

IT IS HEREBY ORDERED THAT:

1. The Motion is GRANTED on a final basis, as set forth herein.

2. The Debtor is authorized, but not directed, to pay all prepetition Employee Obligations in the ordinary course of its business, without limitation as to the aggregate interim cap previously set forth in the Interim Order, including, without limitation, all categories of Employee Obligations previously enumerated in paragraph 2 of the Interim Order, specifically: (a) prepetition wages, salaries, overtime compensation, shift differentials, and commissions; (b) accrued but unused paid time off; (c) health, dental, and vision insurance premiums; (d) life insurance and disability insurance premiums; (e) 401(k) employer matching contributions; (f) HSA and FSA employer contributions; (g) workers' compensation insurance premiums and prepetition claims; (h) reimbursable business expenses; and (i) payroll taxes, withholdings, FICA contributions, and unemployment insurance contributions.

3. All banks, financial institutions, and other entities that maintain accounts on behalf of the Debtor are authorized and directed to receive, process, honor, and pay all checks, wire transfers, ACH payments, direct deposit transactions, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Order, whether such checks, wire transfers, or other payment items were presented, issued, or drawn before or after the Petition Date, to the extent that sufficient funds are on deposit in the applicable accounts. Such financial institutions may rely upon the representations of the Debtor as to the appropriateness of any such payments and shall not have any liability for honoring such payment items in good faith reliance on this Order.

4. Nothing in this Order shall be deemed to constitute an assumption or rejection of any executory contract or unexpired lease pursuant to section 365 of the Bankruptcy Code, and the Debtor's rights under section 365 are expressly preserved.

5. Nothing in this Order shall prejudice the rights of any party in interest to object to the allowance, priority, or secured status of any claim against the Debtor or the Debtor's estate, and the rights of all parties in interest in that regard are expressly preserved.

6. To the extent that individual payments to any Employee on account of prepetition wages, salaries, or benefit plan contributions exceed the priority caps set forth in sections 507(a)(4) and 507(a)(5) of the Bankruptcy Code, the excess amounts shall be subject to appropriate claim treatment and shall not receive priority status under sections 507(a)(4) or 507(a)(5) absent further order of this Court.

7. The Debtor shall maintain accurate and complete records of all payments made pursuan

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
DEBTOR'S MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION EMPLOYEE WAGES, SALARIES, AND BENEFITS AND (II) AUTHORIZING APPLICABLE FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED TRANSFERS
DRAFT — FOR DISCUSSION PURPOSES ONLY — NEVER FILED
Thalassa Americas Inc. ("TAI" or the "Debtor"), the above-captioned debtor and debtor-in-possession in this Chapter 11 case, by and through its proposed counsel, Calderwood & Harkness LLP, hereby moves this Court (the "Motion") pursuant to sections 105(a), 363(b)(1), 507(a)(4), and 507(a)(5) of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"), Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rules 9013-1 and 9014-1 of the Bankruptcy Local Rules for the Southern District of Texas (the "Local Rules"), for entry of interim and final orders, substantially in the forms attached hereto as Exhibit A and Exhibit B, respectively (the "Interim Order" and the "Final Order"), (i) authorizing, but not directing, the Debtor to pay prepetition employee wages, salaries, commissions, benefits, reimbursable business expenses, withholding obligations, and related payroll taxes (collectively, the "Employee Obligations") in the ordinary course of its business and (ii) authorizing and directing applicable financial institutions to receive, honor, process, and pay all checks, wire transfers, ACH payments, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Motion and the proposed orders. In support of this Motion, the Debtor respectfully states as follows:
I. PRELIMINARY STATEMENT
1. Thalassa Americas Inc. ("TAI" or the "Debtor") is a Delaware C-Corporation and the wholly-owned subsidiary of Thalassa Shipping & Logistics Société Anonyme ("TSL"), a Greek société anonyme headquartered at 42 Akti Miaouli, Piraeus 18538, Greece. TAI respectfully moves this Court for entry of interim and final orders authorizing the payment of certain prepetition obligations owed to its employees.
2. TAI is a U.S. operating subsidiary conducting Houston terminal operations, Jones Act–exempt foreign-flag vessel scheduling, and domestic freight brokerage services from its principal office located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. TAI's operations serve as the critical U.S.-side nexus for TSL's transatlantic shipping and logistics enterprise, and the Debtor's continued operation is essential to the preservation and maximization of estate value for all stakeholders.
3. TAI employs approximately 680 individuals in the United States (collectively, the "Employees"), including terminal operations personnel, logistics and freight brokerage staff, vessel scheduling and operations specialists, and administrative and corporate staff. These Employees are essential to the continued operation of the Debtor's business, and their expertise, institutional knowledge, and day-to-day contributions are indispensable to the Debtor's ability to reorganize and emerge from Chapter 11 as a going concern.
4. The Debtor seeks authority, pursuant to sections 105(a), 363(b)(1), 507(a)(4), and 507(a)(5) of the Bankruptcy Code, to pay certain prepetition obligations owed to its Employees, including, without limitation, prepetition wages, salaries, commissions, employee benefits (including health, dental, vision, life, and disability insurance premiums, retirement plan contributions, paid time off, health savings account and flexible spending account contributions, and workers' compensation premiums and claims), reimbursable business expenses, withholding obligations, and related payroll taxes and employer-side FICA contributions (collectively, the "Employee Obligations").
5. Without the relief requested herein, the Debtor's Employees will suffer immediate, severe, and irreparable hardship. The vast majority of the Debtor's Employees are non-insider, non-management workers who rely on their wages and benefits to meet daily living expenses, including housing, food, childcare, and healthcare for themselves and their families. Any interruption or delay in the payment of Employee Obligations would cause disproportionate and undue harm to the individuals least able to absorb the consequences of the Debtor's financial distress.
6. Moreover, the Debtor's operations will be irreparably damaged if Employee Obligations are not timely honored. The Debtor's workforce is the engine that drives TAI's shipping and logistics operations, which generate substantially all of the Debtor's revenue. Terminal operations at the Houston facility cannot continue without experienced dockworkers, crane operators, and maintenance technicians. Vessel scheduling and freight brokerage activities require specialized, trained personnel whose expertise cannot be readily replaced.
7. The Debtor's revenue for the fiscal year ended December 31, 2022 ("FY2022") is estimated at approximately $198 million, a significant decline from approximately $312 million for the fiscal year ended December 31, 2021 ("FY2021"), reflecting the severe market downturn in the dry-bulk and container shipping industries. In light of this revenue decline, retention of the existing skilled workforce is essential to any viable reorganization strategy. The Debtor cannot afford to lose experienced Employees during this critical period.
8. The Debtor respectfully refers the Court to the Declaration of Marcus Hale, President of Thalassa Americas Inc., in Support of First-Day Motions (the "Hale Declaration"), filed contemporaneously herewith, for a comprehensive description of the Debtor's business operations, organizational and corporate structure, capital structure, and the events precipitating this Chapter 11 filing. The Hale Declaration is incorporated herein by reference.
II. JURISDICTION AND VENUE
9. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended General Order of Reference from the United States District Court for the Southern District of Texas, dated October 16, 2012. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and this Court may enter a final order consistent with Article III of the United States Constitution. The Debtor confirms its consent, pursuant to Bankruptcy Rule 7008, to the entry of a final order by this Court in connection with this Motion to the extent that it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution.
10. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. TAI's principal office is located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010, within the Southern District of Texas (Houston Division). The Debtor's principal assets and the center of its U.S. operations are located in this district. The Debtor is a corporation organized under the laws of the State of Delaware, with its registered agent, Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801.
11. The Debtor's federal employer identification number is 84-3291057.
12. The statutory predicates for the relief requested herein are sections 105(a), 363(b)(1), 507(a)(4), and 507(a)(5) of the Bankruptcy Code, Bankruptcy Rules 6003 and 6004, and the applicable Local Rules of this Court.
III. BACKGROUND
A. General Background and the Debtor's Business
13. TAI is a wholly-owned subsidiary of TSL, a Greek-headquartered private shipping and logistics conglomerate founded in 1987 by the Kostandinos family. TSL has grown from a single-vessel operation to become a significant player in the Mediterranean, Black Sea, and transatlantic trade lanes, providing integrated port-to-door logistics services to a global client base.
14. TSL owns and operates a fleet of fifty (50) vessels, consisting of thirty-eight (38) dry-bulk carriers and twelve (12) container vessels. The fleet operates primarily in the Mediterranean, Black Sea, and transatlantic trade lanes, carrying commodities including grains, coal, iron ore, steel products, and containerized general cargo.
15. TAI was incorporated in the State of Delaware in 2017 to serve as TSL's U.S.-side operating platform. TAI's U.S. operations fall into three principal categories:
(a) Houston Terminal Operations. TAI operates a multi-berth terminal facility at the Port of Houston under a long-term lease agreement. The terminal handles the loading and discharge of dry-bulk and containerized cargo arriving on or departing via TSL's vessel fleet and third-party chartered vessels. Terminal operations employ approximately 320 of TAI's 680 U.S.-based Employees, including dockworkers, crane operators, maintenance technicians, safety personnel, and terminal supervisory staff.
(b) Foreign-Flag Vessel Scheduling. TAI manages the scheduling, coordination, and logistics for TSL's Jones Act–exempt foreign-flag vessels calling at U.S. ports. This function involves coordination with port authorities, customs and border protection agencies, pilotage services, and cargo interests. Approximately 85 Employees are engaged in vessel scheduling and marine coordination activities.
(c) Domestic Freight Brokerage. TAI maintains a licensed freight brokerage operation, arranging domestic ground transportation for cargo moving between the Houston terminal and inland destinations across the United States. The brokerage operation employs approximately 130 dispatchers, logistics coordinators, account managers, and sales personnel.
16. The remaining approximately 145 Employees are engaged in administrative and corporate functions, including accounting, finance, human resources, legal, information technology, and executive management.
17. TSL employs approximately 4,200 people globally, of which approximately 680 are employed in the United States by TAI. These 680 Employees represent the entirety of the Debtor's workforce and are essential to every aspect of TAI's U.S. operations.
18. TAI's officers are Marcus Hale (President), Diana Restrepo (Vice President, Finance), and Jonathan Kurtz (Vice President, Operations). Mr. Hale has served as President of TAI since its incorporation in 2017 and is the individual most knowledgeable regarding the Debtor's day-to-day operations, workforce, and the circumstances giving rise to this Chapter 11 filing.
19. The Court is respectfully referred to the Hale Declaration for additional background regarding the Debtor's corporate and organizational structure, including a description of TSL's board of directors — comprising Chairman Dimitrios Kostandinos, Vice Chairwoman Elena Kostandinos-Pavlou, Chief Executive Officer Georgios Andreadis, Chief Financial Officer Irini Dalakoura, and General Counsel Stavros Papageorgiou — and TSL's ownership structure, in which KFO Holdings SA, a Luxembourg holding company, holds approximately 80% of TSL's equity (with Dimitrios Kostandinos holding approximately 62% and Elena Kostandinos-Pavlou holding approximately 18% of the interests in KFO Holdings SA).
B. The Debtor's Capital Structure
20. As of September 30, 2022, the most recent date for which complete financial information is available, TAI and its parent TSL carried total consolidated indebtedness of approximately $847.3 million, summarized as follows:
(a) Senior Secured Credit Facility. Approximately $540 million is outstanding under that certain Senior Secured Credit Agreement, originally dated June 15, 2019 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), by and among TSL and TAI, as co-borrowers, Nordbank International AG, as Administrative Agent and Collateral Agent, and a syndicate of nine institutional lenders. The Credit Agreement provides for a total commitment of $685 million, consisting of: (i) a $270 million Term Loan A facility, (ii) a $185 million Revolving Credit Facility (of which approximately $140 million was drawn as of September 30, 2022), and (iii) an $85 million Term Loan B / U.S. Tranche allocated specifically to TAI's U.S. operations. The facilities bear interest at SOFR plus 375 basis points per annum and mature on June 15, 2024. Obligations under the Credit Agreement are secured by first-priority liens on substantially all of TSL's and TAI's assets, including the vessel fleet, the Houston terminal lease, all accounts receivable, and the equity interests in TAI and fourteen (14) vessel-owning special purpose vehicles organized under the laws of the Republic of the marshall Islands.
(b) Mezzanine Notes. Approximately $112.3 million is outstanding (original principal of $100 million plus $12.3 million in capitalized payment-in-kind ("PIK") interest) under mezzanine notes held by Dralvecen Mezzanine Capital LLC ("Dralvecen"). The mezzanine notes bear interest at a rate of 11.5% per annum on a PIK toggle basis and mature on December 15, 2024. The mezzanine notes are secured by a second-priority lien on the same collateral package securing the Senior Secured Credit Facility, subject to the terms of an intercreditor agreement dated June 15, 2019, by and between Nordbank International AG and Dralvecen.
(c) Unsecured Notes. Approximately $50 million in aggregate principal amount is outstanding under unsecured notes bearing interest at a rate of 8.25% per annum, payable in cash semi-annually, and maturing on March 1, 2025. Garrison Trust Company serves as the indenture trustee under the indenture governing the unsecured notes.
(d) Intercompany Note. TAI owes approximately $76.4 million to its parent, TSL, under a subordinated intercompany promissory note. The intercompany note is subordinated in right of payment to all other funded indebtedness of TAI.
(e) Trade Payables. As of September 30, 2022, TAI carried approximately $38.7 million in outstanding trade payables owing to vendors, suppliers, and other trade creditors in the ordinary course of business.
21. Additional detail regarding the Debtor's capital structure, including a description of the key covenants, events of default, and intercreditor arrangements, is set forth in the Hale Declaration.
C. Events Leading to the Filing
22. The events precipitating this Chapter 11 filing are rooted in a severe and sustained downturn in the global shipping markets, which has dramatically reduced the revenues and cash flows of TSL and TAI. A summary of the key events follows:
23. Market Decline. The Baltic Dry Index ("BDI"), a widely-used benchmark for dry-bulk shipping rates, declined approximately 58% between January 2022 and September 2022, reflecting a sharp contraction in global trade volumes and freight rates. As a direct consequence, TSL's average daily time-charter equivalent ("TCE") fell from approximately $24,800 per day (FY2021 average) to approximately $11,200 per day (Q3 2022 average), a decline of approximately 54.8%.
24. Covenant Defaults. The precipitous decline in shipping rates and revenues resulted in multiple covenant defaults under the Credit Agreement:
(i) Minimum Liquidity Covenant. On September 15, 2022, the Borrowers' consolidated liquidity fell to approximately $27.3 million, breaching the minimum liquidity covenant of $40 million set forth in Section 7.11(a) of the Credit Agreement — a shortfall of approximately $12.7 million.
(ii) Maximum Net Leverage Ratio. As of September 30, 2022, the Borrowers' Maximum Net Leverage Ratio stood at 7.82x (calculated as Net Debt of approximately $770.9 million divided by trailing twelve-month ("LTM") Adjusted EBITDA of approximately $98.6 million), in breach of the maximum permitted ratio of 5.50x set forth in Section 7.11(b) of the Credit Agreement.
(iii) Minimum Interest Coverage Ratio. As of September 30, 2022, the Borrowers' Minimum Interest Coverage Ratio stood at 1.74x (calculated as LTM Adjusted EBITDA of approximately $98.6 million divided by LTM Interest Expense of approximately $56.7 million), in breach of the minimum required ratio of 2.50x set forth in Section 7.11(c) of the Credit Agreement.
25. Forbearance Agreement. Following the covenant defaults, TAI and TSL entered into a Forbearance Agreement, dated October 10, 2022 (the "Forbearance Agreement"), with Nordbank International AG, as Administrative Agent, and the requisite consenting lenders under the Credit Agreement. The Forbearance Agreement provided for a 90-day standstill through January 8, 2023, during which the lenders agreed to forbear from exercising remedies arising from the specified events of default. The Forbearance Agreement was subsequently extended on two occasions — first to March 8, 2023, and then to April 7, 2023 — to provide additional time for restructuring negotiations.
26. Fleet Devaluation. On November 1, 2022, the TSL fleet was appraised by Drakos Maritime Valuations Ltd. at an aggregate fair market value of approximately $623 million, a decline of approximately $268 million (or 30.1%) from the prior appraised value of approximately $891 million in January 2022. The fleet devaluation has significantly reduced the collateral cushion available to the senior secured lenders and exacerbated the Debtor's leverage and liquidity challenges.
27. Revenue Decline. TSL's consolidated revenue declined approximately 30.5% from approximately €1.42 billion in FY2021 to an estimated €987 million in FY2022. TAI's U.S.-side revenue similarly declined from approximately $312 million in FY2021 to an estimated $198 million in FY2022.
28. Missed Interest Payment. On December 1, 2022, the Debtor failed to make a scheduled semi-annual interest payment of $2,062,500 on the unsecured notes. The 30-day cure period provided under the indenture expired on January 1, 2023, without the payment having been made, constituting an event of default under the indenture.
29. As more fully described in the Hale Declaration, the confluence of the market downturn, covenant defaults, fleet devaluation, revenue decline, and the missed interest payment on the unsecured notes necessitated this Chapter 11 filing.
IV. THE EMPLOYEE OBLIGATIONS
A. Description of the Debtor's Workforce
30. As noted above, TAI employs approximately 680 individuals in the United States. These Employees serve in range critical roles across the Debtor's operations, and their continued service is indispensable to the Debtor's ability to maintain operations, generate revenue, and pursue a successful reorganization. The Debtor's Employees fall into the following general categories:
(a) Terminal Operations Personnel. Approximately 320 Employees are engaged in terminal operations at the Debtor's Houston terminal facility, including dockworkers, crane operators, maintenance technicians, safety coordinators, and supervisory staff. These individuals are responsible for the loading and discharge of cargo, equipment maintenance, and the safe and efficient operation of the terminal. Many of these Employees hold specialized certifications and licenses required for terminal operations.
(b) Logistics and Freight Brokerage Staff. Approximately 130 Employees work in the Debtor's domestic freight brokerage operation, including dispatchers, logistics coordinators, account managers, and sales personnel. These individuals are responsible for arranging and coordinating the ground transportation of cargo between the Houston terminal and inland destinations, maintaining customer relationships, and generating brokerage revenue.
(c) Vessel Scheduling and Operations. Approximately 85 Employees are engaged in vessel scheduling and marine coordination activities, including operations analysts, marine coordinators, and regulatory compliance personnel. These individuals manage the scheduling and coordination of vessel calls at U.S. ports, interface with port authorities and customs agencies, and ensure compliance with applicable maritime regulations.
(d) Administrative and Corporate Staff. Approximately 145 Employees serve in administrative and corporate functions, including accounting, finance, human resources, legal, information technology, and executive management. These individuals provide the essential back-office support that enables the Debtor's operations to function effectively.
31. The vast majority of TAI's Employees are non-insider, non-management employees who depend on their wages and benefits for daily living expenses, including housing, food, childcare, healthcare, and other necessities. These individuals are among the parties least able to absorb the financial consequences of the Debtor's restructuring and should not be required to bear the burden of any interruption in the payment of their compensation and benefits.
32. Certain of the Debtor's Employees may also be covered by collective bargaining agreements or individual employment contracts. The Debtor seeks authority pursuant to this Motion to honor all prepetition Employee Obligations arising under such agreements and contracts, to the extent provided herein. Nothing in this Motion or the proposed orders shall be deemed to constitute an assumption of any executory contract or collective bargaining agreement pursuant to section 365 of the Bankruptcy Code.
B. Wages and Salaries
33. TAI maintains regular payroll cycles in the ordinary course of its business. Hourly Employees are paid on a bi-weekly basis, and salaried Employees are paid on a semi-monthly basis. Payroll processing is administered through Ashgrove Solutions ("Larkspur Systems"), a third-party payroll services provider.
34. The Debtor estimates that, as of the Petition Date, aggregate prepetition wages and salaries accrued and unpaid will total up to approximately $[__] million, depending on the timing of the Petition Date relative to the applicable payroll cycles. This estimate encompasses regular wages, salaries, overtime compensation, shift differentials, and commissions earned by Employees prior to the Petition Date but not yet paid.
35. Based on the Debtor's review of its payroll records and compensation structure, the Debtor believes that no individual Employee is owed prepetition wages or salaries exceeding the statutory priority cap under section 507(a)(4) of the Bankruptcy Code, which currently provides priority status for up to $15,150 per employee for amounts earned within 180 days before the date of the filing of the petition. Accordingly, the vast majority, if not all, of the prepetition wage and salary obligations that the Debtor seeks authority to pay would be entitled to priority status under section 507(a)(4).
36. The Debtor requests authority to pay all prepetition wages and salaries to its Employees in the ordinary course of its business, in accordance with its customary payroll practices and schedules, as such amounts become due.
C. Employee Benefits
37. TAI provides or sponsors the following employee benefit programs for its Employees and, in many cases, their eligible dependents:
(a) Health Insurance. TAI sponsors medical, dental, and vision insurance plans for its Employees and their eligible dependents. The plans are funded through a combination of employer and employee premium contributions, with employee contributions deducted from payroll. The Debtor's current health insurance carrier is Sterling Reach Mutual Insurance. As of the Petition Date, prepetition employer premium contributions and employee withholdings that have been deducted but not yet remitted to the carrier are estimated at $[__].
(b) Retirement Benefits. TAI sponsors a 401(k) defined contribution retirement plan (the "401(k) Plan") for eligible Employees, with employer matching contributions of up to 4% of eligible compensation. The 401(k) Plan is administered by Brightwater Capital Management. As of the Petition Date, prepetition employer matching contributions that have been accrued but not yet deposited into Employee accounts are estimated at $[__].
(c) Life Insurance and Disability Insurance. TAI provides employer-sponsored group term life insurance and short-term and long-term disability insurance coverage to its Employees. Premiums for these coverages are paid by the Debtor. As of the Petition Date, prepetition premiums accrued and unpaid are estimated at $[__].
(d) Paid Time Off. TAI maintains a paid time off ("PTO") policy that provides Employees with accrued vacation, sick leave, and personal days. Accrued but unused PTO represents an obligation of the Debtor to its Employees. As of the Petition Date, the aggregate liability for accrued but unused PTO is estimated at $[__].
(e) Workers' Compensation Insurance. TAI maintains workers' compensation insurance coverage as required by the laws of the State of Texas and other applicable jurisdictions. The Debtor requests authority to continue paying premiums and any outstanding prepetition claims related to workers' compensation, as described more fully below.
(f) Health Savings Accounts and Flexible Spending Accounts. TAI offers Health Savings Accounts ("HSAs") and Flexible Spending Accounts ("FSAs") to eligible Employees, with employer contributions to HSAs. As of the Petition Date, prepetition employer contributions to HSAs and FSAs that have been accrued but not yet deposited are estimated at $[__].
38. The aggregate estimated prepetition employee benefit obligations accrued and unpaid as of the Petition Date total up to approximately $[__] million. These obligations are essential to Employee retention and morale. Failure to honor these obligations would result in the immediate loss of insurance coverage for Employees and their families, potential disqualification of the 401(k) Plan, and severe disruption to the Debtor's ability to retain its workforce.
39. The Debtor's Employee benefit programs are consistent with industry standards for companies of TAI's size and nature. The Debtor is not seeking to enhance or expand any benefits beyond those currently in place; rather, the Debtor simply seeks authority to continue honoring existing obligations in the ordinary course.
D. Payroll Taxes and Withholding Obligations
40. In the ordinary course of its business, TAI is required to withhold and remit to federal, state, and local taxing authorities certain amounts from Employee wages, including federal income tax withholdings, state and local income tax withholdings (to the extent applicable), the employee portion of FICA taxes (Social Security and Medicare), and unemployment insurance contributions. In addition, TAI is responsible for the employer portion of FICA taxes and federal and state unemployment insurance contributions.
41. These withholding amounts are held by the Debtor in trust for the benefit of the applicable governmental authorities and, to the extent they constitute trust fund obligations, are not property of the Debtor's estate. See 26 U.S.C. § 7501; Begier v. IRS, 496 U.S. 53, 59 (1990). Nevertheless, the Debtor seeks explicit authorization from this Court to continue remitting such amounts to the applicable taxing authorities in the ordinary course of its business and in accordance with applicable law, to avoid the imposition of penalties and interest and to avoid the potential personal liability of the Debtor's officers and directors under 26 U.S.C. § 6672 (the "trust fund recovery penalty").
42. As of the Petition Date, estimated prepetition payroll tax withholding obligations (including both employee withholdings and employer-side FICA and unemployment insurance contributions) are approximately $[__].
E. Reimbursable Business Expenses
43. In the ordinary course of their employment, TAI's Employees incur business expenses that are reimbursable under the Debtor's expense reimbursement policies. Such expenses include, without limitation, travel expenses, meals and lodging, equipment purchases, professional development and training costs, telecommunications charges, and other expenses incurred in connection with the performance of job duties. The Debtor maintains a policy requiring Employees to submit expense reports for approval and reimbursement within specified time periods.
44. As of the Petition Date, estimated aggregate prepetition reimbursable business expenses that have been incurred by Employees but not yet reimbursed are up to approximately $[__]. These amounts, while modest in comparison to the Debtor's overall obligations, are of significant importance to the individual Employees who incurred such expenses in good faith reliance on the Debtor's reimbursement policies.
F. Workers' Compensation Obligations
45. TAI is required by the laws of the State of Texas and other applicable states to maintain workers' compensation insurance coverage for its Employees. Given the nature of the Debtor's terminal operations, which involve heavy equipment, maritime cargo handling, and other inherently hazardous activities, workers' compensation coverage is not only a legal requirement but a practical necessity. The Debtor's failure to maintain workers' compensation coverage could result in regulatory sanctions, potential shutdown of terminal operations, and exposure of the estate to uninsured liability for workplace injuries.
46. The Debtor requests authority to continue paying workers' compensation insurance premiums in the ordinary course and to pay any outstanding prepetition claims or assessments related to workers' compensation coverage.
G. Summary of Requested Relief
47. The following table summarizes the categories of Employee Obligations for which the Debtor seeks authority to pay prepetition amounts, together with the estimated prepetition amounts in each category:
48. The Debtor will supplement this table with specific dollar amounts upon completion of its final prepetition payroll reconciliation and benefit accrual calculations, which will be provided in advance of the interim hearing.
V. LEGAL BASIS FOR THE REQUESTED RELIEF
A. Section 363(b)(1) — Sound Business Judgment
49. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b)(1). Courts in this District and throughout the country have consistently held that a debtor-in-possession may pay prepetition obligations under section 363(b)(1) when the debtor demonstrates a sound business justification for doing so. See In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002); see also In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989).
50. Under the sound business judgment standard, the Court need only find that the proposed transaction has a legitimate business purpose and that the debtor's decision to proceed is reasonable. See In re Continental Air Lines, Inc., 780 F.2d 1223, 1226 (5th Cir. 1986); In re Asarco, L.L.C., 650 F.3d 593, 601 (5th Cir. 2011). Courts routinely defer to the business judgment of a debtor's management when the proposed action is not the product of bad faith, self-dealing, or gross negligence.
51. The Debtor submits that its decision to pay prepetition Employee Obligations satisfies the sound business judgment standard for the following reasons:
(a) The Employees are essential to the Debtor's operations. TAI's approximately 680 U.S. Employees are the backbone of the Debtor's business. Houston terminal operations, vessel scheduling, and freight brokerage cannot function without a trained and experienced workforce. The Debtor's terminal operations alone require approximately 320 specialized workers — dockworkers, crane operators, maintenance technicians, and safety personnel — whose skills and certifications are not easily replaced. The Debtor's vessel scheduling operations require marine coordinators with deep knowledge of U.S. port procedures, customs regulations, and the operational characteristics of TSL's fleet. The freight brokerage operation depends on the relationships and institutional knowledge of experienced dispatchers and account managers.
(b) Specialized personnel cannot be readily replaced. The shipping and logistics industry requires specialized, experienced personnel with industry-specific knowledge, certifications, and relationships. The labor market for terminal operations personnel, marine coordinators, and logistics professionals is highly competitive, particularly in the Houston metropolitan area. Loss of even a modest percentage of the Debtor's workforce would severely impair the Debtor's ability to operate, generate revenue, and pursue a reorganization.
(c) Replacement costs would far exceed the amounts sought. The cost of recruiting, hiring, and training replacement workers — assuming qualified replacements could even be found in the current labor market — would vastly exceed the amounts the Debtor seeks authority to pay under this Motion. Industry studies estimate that the cost of replacing a skilled terminal operations employee ranges from 50% to 200% of the employee's annual compensation, accounting for recruitment costs, training expenses, productivity losses during onboarding, and the risk of operational disruptions.
(d) Morale and productivity will suffer. If Employees are not assured that their prepetition wages and benefits will be honored, morale and productivity will deteriorate immediately. Workers who are uncertain about whether they will be paid are likely to seek alternative employment, reduce their effort, or simply fail to report for duty. In a capital-intensive, safety-sensitive operation like a shipping terminal, even marginal declines in workforce morale and attention can have cascading consequences, including delayed vessel turnarounds, cargo damage, safety incidents, and customer defections.
(e) The Debtor's revenue depends on its workforce. The Debtor's estimated FY2022 revenue of $198 million is generated almost entirely through the efforts of its Employees. Any disruption to the Debtor's operations resulting from workforce attrition or labor unrest would directly and immediately impair the Debtor's revenue-generating capacity and, by extension, its ability to fund ongoing operations, service administrative claims, and pursue a viable reorganization plan.
52. For all of the foregoing reasons, the Debtor respectfully submits that the sound business judgment standard under section 363(b)(1) is clearly satisfied, and the Court should authorize the payment of prepetition Employee Obligations.
B. Sections 507(a)(4) and 507(a)(5) — Priority of Employee Claims
53. Section 507(a)(4) of the Bankruptcy Code provides fourth-priority status to "allowed unsecured claims, but only to the extent of $15,150 for each individual or corporation . . . earned within 180 days before the date of the filing of the petition," including claims for "wages, salaries, or commissions, including vacation, severance, and sick leave pay." 11 U.S.C. § 507(a)(4).
54. Section 507(a)(5) of the Bankruptcy Code provides fifth-priority status to "allowed unsecured claims for contributions to an employee benefit plan . . . arising from services rendered within 180 days before the date of the filing of the petition," up to a cap of $15,150 per employee (reduced by amounts paid or payable under section 507(a)(4)). 11 U.S.C. § 507(a)(5).
55. The vast majority, if not all, of the Employee Obligations that the Debtor seeks to pay under this Motion fall within these statutory priority provisions. The Debtor's prepetition wage and salary obligations were earned within 180 days of the anticipated Petition Date, and, based on the Debtor's review of its payroll records, no individual Employee is owed prepetition wages or salaries exceeding the $15,150 priority cap. Similarly, the Debtor's contributions to employee benefit plans arise from services rendered within 180 days of the anticipated Petition Date and fall within the applicable statutory limits.
56. Because the Employee Obligations would be entitled to priority treatment in any distribution under a Chapter 11 plan or in any liquidation under Chapter 7, payment of these obligations now, at the outset of the case, does not prejudice other creditors. To the contrary, early payment of priority Employee Obligations avoids the substantial administrative burden and delay that would be associated with processing hundreds of individual priority claims through the claims process, and — critically — preserves the Debtor's workforce so that the estate can continue to generate the revenue needed to fund distributions to all creditors.
57. Courts routinely authorize the payment of priority employee claims at the commencement of a Chapter 11 case. See, e.g., In re Pilgrim's Pride Corp., Case No. 08-45664 (Bankr. N.D. Tex. 2008); In re Delphi Corp., Case No. 05-44481 (Bankr. S.D.N.Y. 2005); In re Dana Corp., Case No. 06-10354 (Bankr. S.D.N.Y. 2006); In re General Motors Corp., Case No. 09-50026 (Bankr. S.D.N.Y. 2009).
C. Section 105(a) — Equitable Powers of the Court
58. Section 105(a) of the Bankruptcy Code provides that "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). The Court's broad equitable powers under section 105(a) provide independent and additional support for the relief requested herein.
59. Courts have long recognized the "doctrine of necessity" (also referred to as the "necessity of payment" rule) as a basis for authorizing the payment of prepetition claims where such payment is essential to the debtor's continued operations and the preservation of the going-concern value of the estate. See In re Lehigh & New England Ry. Co., 657 F.2d 570, 581–82 (3d Cir. 1981); In re Just for Feet, Inc., 242 B.R. 821, 826 (D. Del. 1999); In re CoServ, 273 B.R. at 497. The doctrine of necessity traces its origins to the nineteenth-century railroad receivership cases, in which courts authorized the payment of prepetition claims to vendors, suppliers, and employees whose continued cooperation was essential to the ongoing operation of the railroad. See Miltenberger v. Logansport, Crawfordsville & S.W. Ry. Co., 106 U.S. 286 (1882); Fosdick v. Schall, 99 U.S. 235 (1879).
60. Application of the doctrine of necessity is particularly appropriate in the context of employee obligations. The Debtor's Employees are not sophisticated financial creditors with diversified portfolios and the ability to absorb losses; they are ordinary working men and women who depend on regular paychecks and benefits to meet their daily living expenses and those of their families. Many of the Debtor's terminal operations personnel, dispatchers, and administrative staff earn hourly wages and live paycheck to paycheck. The equitable considerations that underlie the doctrine of necessity weigh heavily — indeed, overwhelmingly — in favor of the relief sought herein.
61. Moreover, the practical consequences of denying this Motion would be severe. Employees who are not paid will be unable to pay their rent or mortgages, buy food, maintain their vehicles, pay for childcare, or access healthcare. Many Employees will have no choice but to seek employment elsewhere, resulting in an immediate and potentially catastrophic depletion of the Debtor's workforce. The resulting operational disruptions would destroy estate value, reduce the recoveries available to all creditors, and undermine any prospect of a successful reorganization.
D. Withholding and Trust Fund Obligations
62. As noted above, certain of the Employee Obligations — specifically, the payroll tax withholdings and similar trust fund obligations — are held by the Debtor in trust for governmental authorities and are not property of the Debtor's estate. See 26 U.S.C. § 7501; Begier v. IRS, 496 U.S. 53, 59 (1990) (holding that withheld income and FICA taxes are held in trust and are not property of the debtor's estate). Because these amounts are held in trust, the Debtor has both a legal obligation and a fiduciary duty to remit them to the appropriate taxing authorities.
63. The Debtor's failure to remit payroll tax withholdings could result in the imposition of substantial penalties and interest against the estate, including the trust fund recovery penalty under 26 U.S.C. § 6672, which imposes personal liability on "responsible persons" — including officers and directors of the Debtor — who willfully fail to collect, account for, and remit trust fund taxes. The imposition of personal liability on the Debtor's officers could further destabilize the Debtor's management team at a time when stable leadership is critical to a successful reorganization.
64. Accordingly, the Court should authorize and direct the Debtor to continue to remit payroll tax withholdings, employer-side FICA contributions, and all other trust fund obligations to the applicable governmental authorities without interruption.
VI. REQUEST FOR INTERIM RELIEF
65. The Debtor respectfully requests that the Court hear this Motion on an expedited, interim basis contemporaneously with the other first-day motions filed by the Debtor in this case. Bankruptcy Rule 6003 permits the Court to grant relief within the first 21 days after the filing of the petition "to the extent that relief is necessary to avoid immediate and irreparable harm." Fed. R. Bankr. P. 6003(b). As set forth above, the Debtor's Employees will suffer immediate and irreparable harm if their prepetition wages and benefits are not timely paid.
66. The Debtor's next regularly scheduled payroll date is [date], and Employees will be directly and immediately harmed if payment is not made on a timely basis. Any delay in the payment of wages and benefits will cause severe financial hardship to the Debtor's Employees and their families and will trigger an immediate exodus of critical personnel, jeopardizing the Debtor's ability to maintain operations during the initial phase of this Chapter 11 case.
67. On an interim basis, the Debtor requests authority to pay prepetition Employee Obligations up to an aggregate cap of $[__] pending the final hearing on this Motion. The proposed interim cap is designed to cover the most immediate and pressing Employee Obligations — including wages and salaries for the current payroll cycle, health insurance premiums, and payroll tax withholdings — while reserving the balance of the Employee Obligations for authorization at the final hearing.
68. The Debtor requests that the Court schedule a final hearing on this Motion within approximately twenty-five (25) days of the Petition Date, or at such other time as the Court may direct, and that the Court enter the Final Order upon conclusion of the final hearing.
VII. AUTHORITY TO FINANCIAL INSTITUTIONS
69. In connection with the relief requested herein, the Debtor requests that the Court authorize and direct all banks, financial institutions, and other entities that maintain accounts on behalf of the Debtor, including, without limitation, Greaves Bancorp (the "Payroll Bank"), through which the Debtor processes its payroll and related payments, to receive, process, honor, and pay all checks, wire transfers, ACH payments, direct deposit transactions, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Motion and the proposed orders.
70. The Debtor further requests that the Court authorize the Payroll Bank and any other applicable financial institutions to rely upon the representations of the Debtor and the Debtor's authorized signatories as to the appropriateness of any payments made in connection with the Employee Obligations, and that such financial institutions shall not be liable to any party for honoring and processing such payment items in good faith reliance on this Motion and the orders entered in connection herewith.
VIII. WAIVER OF BANKRUPTCY RULES 6004(a) AND 6004(h)
71. To the extent applicable, the Debtor requests a waiver of the fourteen (14)-day stay imposed by Bankruptcy Rule 6004(h), which provides that "[a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise." Fed. R. Bankr. P. 6004(h). Given the urgency of the relief requested herein, and the irreparable harm that would result from any delay in the payment of Employee Obligations, the Debtor respectfully submits that cause exists to waive the 14-day stay period so that the Debtor may make payments authorized by the proposed orders immediately upon their entry.
72. The Debtor also requests that the notice requirements of Bankruptcy Rule 6004(a) be deemed satisfied by the notice provided in connection with this Motion, as more fully described in Section IX below. The Debtor submits that the notice provided is adequate and appropriate under the circumstances.
IX. NOTICE
73. Notice of this Motion has been provided to the following parties or their respective counsel:
(i) The Office of the United States Trustee for the Southern District of Texas, Region 7;
(ii) Nordbank International AG, as Administrative Agent and Collateral Agent under the Senior Secured Credit Facility (Bahnhofstrasse 78, 8001 Zürich, Switzerland, Attention: Henrik Lüdemann);
(iii) Counsel to the Ad Hoc Group of Senior Secured Lenders, Whitfield, Crane & Burgess LLP (51 West 52nd Street, 38th Floor, New York, New York 10019, Attention: Graham Whitfield III, Esq.);
(iv) Dralvecen Mezzanine Capital LLC, holder of the Mezzanine Notes (600 Lexington Avenue, 22nd Floor, New York, New York 10022, Attention: Rebecca Marsh), through its counsel, Kellner & Foss LLP (1185 Avenue of the Americas, 30th Floor, New York, New York 10036, Attention: Theodore Kellner, Esq.);
(v) Counsel to the informal group of holders of the unsecured notes, Ashford, Brightmoor Group & McKay PC (299 Park Avenue, 18th Floor, New York, New York 10171, Attention: Carolyn Brightmoor Group, Esq.);
(vi) Garrison Trust Company, as indenture trustee for the unsecured notes (100 Wall Street, 16th Floor, New York, New York 10005);
(vii) The holders of the thirty (30) largest unsecured claims against the Debtor, as identified in the Debtor's list filed pursuant to Bankruptcy Rule 1007(d);
(viii) The Internal Revenue Service; and
(ix) All parties who have requested notice pursuant to Bankruptcy Rule 2002.
74. The Debtor submits that no further or other notice of this Motion is required or necessary under the circumstances. In the event that an official committee of unsecured creditors is appointed in this case, the Debtor will provide notice to such committee and its counsel promptly upon appointment.
X. CONCLUSION AND PRAYER FOR RELIEF
WHEREFORE, the Debtor respectfully requests that this Court:
1. Enter the proposed Interim Order, substantially in the form attached hereto as Exhibit A, authorizing, but not directing, the Debtor to pay prepetition Employee Obligations on an interim basis up to the aggregate cap set forth therein;
2. Schedule a final hearing on this Motion within approximately twenty-five (25) days of the Petition Date, and enter the proposed Final Order, substantially in the form attached hereto as Exhibit B, authorizing, but not directing, the Debtor to pay all prepetition Employee Obligations in the ordinary course of its business;
3. Authorize and direct all applicable banks, financial institutions, and other entities maintaining accounts on behalf of the Debtor to receive, process, honor, and pay all checks, wire transfers, ACH payments, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Motion and the proposed orders;
4. Waive the fourteen (14)-day stay imposed by Bankruptcy Rule 6004(h) to the extent it applies to this Motion;
5. Grant such other and further relief as this Court deems just, proper, and equitable.
Dated: January 15, 2023 Houston, Texas
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Nathaniel Bower (State Bar No. __) Amy Chesterton (State Bar No. __) Nathan Ikeda (State Bar No. ____) 780 Third Avenue New York, New York 10017 Telephone: (212) 555-4000 Facsimile: (212) 555-4001
Email: nbower@calderwoodharkness.com
Email: achesterton@calderwoodharkness.com
Email: nikeda@calderwoodharkness.com
Proposed Counsel for the Debtor, Thalassa Americas Inc.
EXHIBIT A
PROPOSED INTERIM ORDER
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
INTERIM ORDER (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION EMPLOYEE WAGES, SALARIES, AND BENEFITS AND (II) AUTHORIZING APPLICABLE FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED TRANSFERS
Upon the Motion (the "Motion") of Thalassa Americas Inc. (the "Debtor"), the above-captioned debtor and debtor-in-possession, by and through its proposed counsel, Calderwood & Harkness LLP, for entry of interim and final orders authorizing the Debtor to pay prepetition employee wages, salaries, commissions, benefits, reimbursable business expenses, withholding obligations, and related payroll taxes (collectively, the "Employee Obligations") and authorizing applicable financial institutions to honor and process related transfers; and the Court having reviewed the Motion and the Declaration of Marcus Hale, President of Thalassa Americas Inc., in Support of First-Day Motions (the "Hale Declaration"), filed contemporaneously with the Motion; and the Court having considered the record in this case and the arguments of counsel at the interim hearing held on [date]; and adequate and sufficient notice of the Motion and the interim hearing having been provided under the circumstances, and no further notice being required; and no objections to the relief sought in the Motion having been filed, or all such objections having been withdrawn, waived, or overruled; and the Court having determined that the legal and factual bases set forth in the Motion and the Hale Declaration establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtor, its estate, its creditors, and all parties in interest; and after due deliberation and sufficient cause appearing therefor,
IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED on an interim basis, as set forth herein.
2. The Debtor is authorized, but not directed, to pay prepetition Employee Obligations in the ordinary course of its business, up to an aggregate amount not to exceed $[__] pending the final hearing on the Motion, including, without limitation, the following categories of Employee Obligations:
(a) Prepetition wages, salaries, overtime compensation, shift differentials, and commissions;
(b) Accrued but unused paid time off, including vacation, sick leave, and personal days;
(c) Health, dental, and vision insurance premiums, including both employer and employee contribution portions;
(d) Life insurance and short-term and long-term disability insurance premiums;
(e) 401(k) employer matching contributions;
(f) Health savings account ("HSA") and flexible spending account ("FSA") employer contributions;
(g) Workers' compensation insurance premiums and prepetition workers' compensation claims;
(h) Reimbursable business expenses incurred by Employees in the ordinary course of their employment; and
(i) Payroll taxes, withholdings, FICA contributions (employee and employer portions), and federal and state unemployment insurance contributions.
3. The Debtor is authorized to issue checks, initiate wire transfers, ACH transactions, direct deposit transactions, and other forms of payment in connection with the Employee Obligations authorized by this Order.
4. All banks, financial institutions, and other entities that maintain accounts on behalf of the Debtor are authorized and directed to receive, process, honor, and pay all checks, wire transfers, ACH payments, direct deposit transactions, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Order, whether such checks, wire transfers, or other payment items were presented, issued, or drawn before or after the Petition Date, to the extent that sufficient funds are on deposit in the applicable accounts. Such financial institutions may rely upon the representations of the Debtor and the Debtor's authorized signatories as to the appropriateness of any such payments, and no such financial institution shall have any liability to any party for honoring and processing such payment items in good faith reliance on this Order.
5. Nothing in this Order shall be deemed to constitute an assumption or rejection of any executory contract or unexpired lease pursuant to section 365 of the Bankruptcy Code, and the Debtor's rights under section 365 are expressly preserved.
6. Nothing in this Order shall prejudice the rights of any party in interest to object to the allowance, priority, or secured status of any claim against the Debtor or the Debtor's estate, and the rights of all parties in interest in that regard are expressly preserved.
7. Absent further order of this Court, no individual Employee shall receive prepetition wage or salary payments pursuant to this Order in excess of the statutory priority cap under section 507(a)(4) of the Bankruptcy Code (currently $15,150 per individual).
8. The Debtor shall maintain accurate and complete records of all payments made pursuant to this Order and shall file a supplemental report with the Court, on a category-by-category basis, summarizing all such payments, no later than three (3) business days prior to the final hearing on the Motion.
9. A final hearing on the Motion shall be held on [date] at [time] before this Court. Any objections to the relief sought on a final basis shall be filed and served no later than [date] at 4:00 p.m. (prevailing Central Time), and shall be served on: (a) proposed counsel for the Debtor, Calderwood & Harkness LLP, 780 Third Avenue, New York, New York 10017, Attention: Nathaniel Bower, Esq.; and (b) the Office of the United States Trustee for the Southern District of Texas.
10. The Debtor is authorized to serve a copy of this Order on all parties in interest via first-class mail, electronic mail, or through the Court's CM/ECF system, and such service shall be deemed adequate and sufficient notice of the entry of this Order.
11. The fourteen (14)-day stay under Bankruptcy Rule 6004(h) is hereby waived, and this Order shall be effective and enforceable immediately upon its entry.
12. This Court retains exclusive jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order.
________________________________________
UNITED STATES BANKRUPTCY JUDGE
Dated: ____ Houston, Texas
EXHIBIT B
PROPOSED FINAL ORDER
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
FINAL ORDER (I) AUTHORIZING THE DEBTOR TO PAY PREPETITION EMPLOYEE WAGES, SALARIES, AND BENEFITS AND (II) AUTHORIZING APPLICABLE FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED TRANSFERS
Upon the Motion (the "Motion") of Thalassa Americas Inc. (the "Debtor"), the above-captioned debtor and debtor-in-possession, by and through its proposed counsel, Calderwood & Harkness LLP, for entry of interim and final orders authorizing the Debtor to pay prepetition employee wages, salaries, commissions, benefits, reimbursable business expenses, withholding obligations, and related payroll taxes (collectively, the "Employee Obligations") and authorizing applicable financial institutions to honor and process related transfers; and the Court having previously entered the Interim Order (I) Authorizing the Debtor to Pay Prepetition Employee Wages, Salaries, and Benefits and (II) Authorizing Applicable Financial Institutions to Honor and Process Related Transfers [Docket No. __] on [date] (the "Interim Order"); and the Court having reviewed the Motion, the Declaration of Marcus Hale, President of Thalassa Americas Inc., in Support of First-Day Motions (the "Hale Declaration"), the Interim Order, the supplemental report filed by the Debtor, and all other submissions in connection herewith; and the Court having considered the record in this case and the arguments of counsel at the final hearing held on [date]; and adequate and sufficient notice of the Motion and the final hearing having been provided, and no further notice being required; and no objections to the relief sought on a final basis having been filed, or all such objections having been withdrawn, waived, or overruled; and the Court having determined that the legal and factual bases set forth in the Motion and the Hale Declaration establish just cause for the relief granted herein; and it appearing that the relief requested in the Motion is in the best interests of the Debtor, its estate, its creditors, and all parties in interest; and after due deliberation and sufficient cause appearing therefor,
IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED on a final basis, as set forth herein.
2. The Debtor is authorized, but not directed, to pay all prepetition Employee Obligations in the ordinary course of its business, without limitation as to the aggregate interim cap previously set forth in the Interim Order, including, without limitation, all categories of Employee Obligations previously enumerated in paragraph 2 of the Interim Order, specifically: (a) prepetition wages, salaries, overtime compensation, shift differentials, and commissions; (b) accrued but unused paid time off; (c) health, dental, and vision insurance premiums; (d) life insurance and disability insurance premiums; (e) 401(k) employer matching contributions; (f) HSA and FSA employer contributions; (g) workers' compensation insurance premiums and prepetition claims; (h) reimbursable business expenses; and (i) payroll taxes, withholdings, FICA contributions, and unemployment insurance contributions.
3. All banks, financial institutions, and other entities that maintain accounts on behalf of the Debtor are authorized and directed to receive, process, honor, and pay all checks, wire transfers, ACH payments, direct deposit transactions, and other payment items drawn on the Debtor's accounts in connection with the Employee Obligations authorized by this Order, whether such checks, wire transfers, or other payment items were presented, issued, or drawn before or after the Petition Date, to the extent that sufficient funds are on deposit in the applicable accounts. Such financial institutions may rely upon the representations of the Debtor as to the appropriateness of any such payments and shall not have any liability for honoring such payment items in good faith reliance on this Order.
4. Nothing in this Order shall be deemed to constitute an assumption or rejection of any executory contract or unexpired lease pursuant to section 365 of the Bankruptcy Code, and the Debtor's rights under section 365 are expressly preserved.
5. Nothing in this Order shall prejudice the rights of any party in interest to object to the allowance, priority, or secured status of any claim against the Debtor or the Debtor's estate, and the rights of all parties in interest in that regard are expressly preserved.
6. To the extent that individual payments to any Employee on account of prepetition wages, salaries, or benefit plan contributions exceed the priority caps set forth in sections 507(a)(4) and 507(a)(5) of the Bankruptcy Code, the excess amounts shall be subject to appropriate claim treatment and shall not receive priority status under sections 507(a)(4) or 507(a)(5) absent further order of this Court.
7. The Debtor shall maintain accurate and complete records of all payments made pursuan

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

I. PRELIMINARY STATEMENT

II. JURISDICTION AND VENUE

III. BACKGROUND

IV. THE EMPLOYEE OBLIGATIONS

V. LEGAL BASIS FOR THE REQUESTED RELIEF

VI. REQUEST FOR INTERIM RELIEF

VII. AUTHORITY TO FINANCIAL INSTITUTIONS

IX. NOTICE

X. CONCLUSION AND PRAYER FOR RELIEF

CALDERWOOD & HARKNESS LLP

EXHIBIT A

PROPOSED INTERIM ORDER

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

IT IS HEREBY ORDERED THAT:

UNITED STATES BANKRUPTCY JUDGE

EXHIBIT B

PROPOSED FINAL ORDER

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

IT IS HEREBY ORDERED THAT:

Record

Parties

Dates

Amounts