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MEMORANDUM

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

TO: Nathaniel Bower, Partner, Bankruptcy & Restructuring, Calderwood & Harkness LLP

FROM: Amy Chesterton, Lead Associate, Bankruptcy & Restructuring, Calderwood & Harkness LLP

DATE: December 10, 2022

RE: D&O Liability and Fiduciary Duty Issues in the Zone of Insolvency — Thalassa Americas Inc. and Thalassa Shipping & Logistics SA

Matter No.: 1044-00003

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I. Executive Summary

The purpose of this memorandum is to analyze the fiduciary duty obligations of the officers and directors of Thalassa Americas Inc. ("TAI") and its parent company, Thalassa Shipping & Logistics SA ("TSL"), as both entities operate in or near the zone of insolvency, and to assess the scope of directors' and officers' ("D&O") insurance coverage available to protect individual directors and officers from personal liability exposure. This memorandum has been prepared at the request of Nathaniel Bower in connection with the ongoing restructuring advisory engagement and is intended to inform the restructuring team's strategic planning as well as to provide guidance directly to the officers and directors of TAI and TSL regarding their obligations during this critical period.

Key Conclusions. TAI, a C-Corporation organized under the laws of the State of Delaware, is governed by Delaware fiduciary duty law. As of September 30, 2022, TAI and TSL exhibit numerous indicators of financial distress, including covenant defaults under the senior secured credit facility, a liquidity shortfall of $12.7 million below the minimum covenant threshold, a net leverage ratio of 7.82x (against a 5.50x maximum), a missed unsecured note interest payment, and an enterprise value estimated at $580 million to $640 million against total indebtedness of approximately $847.3 million. Based on these metrics, TAI and TSL are, at minimum, in the "zone of insolvency" and are likely already actually insolvent on a balance-sheet basis. This determination triggers heightened scrutiny of director and officer conduct under applicable law.

Under Delaware law, officers and directors must act with informed judgment, in good faith, and in the honest belief that their actions are in the best interests of the corporation. Upon actual insolvency, the fiduciary duties owed to the corporate enterprise encompass creditor interests, as creditors become the residual beneficiaries of the corporation's value. While the business judgment rule continues to protect directors who make informed and good-faith decisions, the heightened scrutiny environment demands rigorous documentation and process.

The D&O insurance policy with Promontory Indemnity Insurance Co. (Policy No. PII-DO-2022-08847) provides a $25 million aggregate limit of liability. This coverage must be carefully managed given the complexity of the restructuring, the number of potential claimant constituencies, and the risk that entity-level coverage demands could erode the aggregate limit to the detriment of individual director and officer coverage. Side A coverage — which protects individual insureds when the company is unable to indemnify — is of paramount importance in the current circumstances.

Scope. This memorandum covers: (a) identification of the relevant officers and directors of TAI and TSL; (b) applicable fiduciary duty standards under Delaware law and, for contextual purposes, under Greek law; (c) the zone-of-insolvency doctrine and its practical implications; (d) specific risk areas arising from the current liquidity crisis and restructuring activities; (e) a D&O insurance coverage analysis; and (f) practical recommendations for the officers and directors and for preservation of insurance coverage. This memorandum should be read in conjunction with the companion memoranda referenced herein, including the Preference and Fraudulent Transfer Exposure Analysis (dated December 1, 2022), the Intercompany Claims and Substantive Consolidation Risk memorandum (dated December 5, 2022), and the Chapter 11 Contingency Playbook (currently in preparation).

II. Background: Relevant Officers and Directors

A. Thalassa Americas Inc. (TAI) — Delaware Corporation

TAI is a C-Corporation organized under the laws of the State of Delaware. Its registered agent is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. TAI's principal office is located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. TAI's Employer Identification Number is 84-3291057.

TAI is a wholly-owned subsidiary of TSL. TAI was incorporated in Delaware in 2017 to serve as the U.S. operational platform for TSL's Western Hemisphere shipping and logistics operations, including chartering, freight forwarding, vessel management, and port-side logistics throughout North and South America. TAI's revenues are predominantly denominated in U.S. dollars, and its primary creditor relationships are governed by New York law or, in the case of the senior secured credit facility, English law.

The officers of TAI are as follows:

• Marcus Hale — President, age 48. Mr. Hale has served as President of TAI since its incorporation and is responsible for the overall management and strategic direction of TAI's U.S. and Latin American operations. He reports to Georgios Andreadis at the TSL parent level.

• Diana Restrepo — Vice President, Finance, age 41. Ms. Restrepo oversees TAI's financial operations, including treasury management, financial reporting, and coordination with TSL's consolidated reporting functions. She coordinates closely with Irini Dalakoura, CFO of TSL, on intercompany accounting matters.

• Jonathan Kurtz — Vice President, Operations, age 45. Mr. Kurtz is responsible for TAI's day-to-day operational activities, including vessel scheduling, port operations, and logistics coordination throughout the Americas.

TAI's board of directors consists of the three officers listed above, plus designees from the TSL parent board. The specific composition of the TAI board is currently being confirmed through a review of TAI's corporate records, including its certificate of incorporation, bylaws, and board resolutions. For purposes of this memorandum, we assume that, at minimum, Georgios Andreadis (CEO of TSL) and Elena Kostandinos-Pavlou (Vice Chairwoman of TSL) sit on the TAI board as parent-company designees, consistent with customary practice in wholly-owned subsidiary governance structures and with the information provided to us by TAI's management. We will update this analysis once the complete board composition is confirmed.

B. Thalassa Shipping & Logistics SA (TSL) — Greek Société Anonyme

TSL is a Société Anonyme (Anonimi Etairia) organized under the laws of the Hellenic Republic. Its registered office is located at 42 Akti Miaouli, Piraeus 18538, Greece. TSL's Greek Tax Identification Number (AFM) is 998214763. TSL is the ultimate operating parent company of the Thalassa group, which, in addition to TAI, includes various operating subsidiaries and special-purpose vessel-owning entities organized in Greece, Cyprus, the marshall Islands, Malta, and Liberia.

The board members of TSL relevant to this analysis are as follows:

• Dimitrios Kostandinos — Chairman of the Board, age 71. Mr. Kostandinos is a second-generation shipping magnate who inherited the Thalassa business from his father, Nikos Kostandinos, in 1989. He holds approximately 62% of TSL's equity through KFO Holdings SA, a Greek holding company. Mr. Kostandinos has served as Chairman of the TSL board since 1989 and exercises dominant influence over the strategic direction of the Thalassa group.

• Elena Kostandinos-Pavlou — Vice Chairwoman, age 44. Ms. Kostandinos-Pavlou is the daughter of Dimitrios Kostandinos and holds approximately 18% of TSL's equity through KFO Holdings SA. She has been Vice Chairwoman since 2018 and is actively involved in TSL's operational and financial decision-making. As noted above, she is also believed to serve on the TAI board as a parent-company designee.

• Georgios Andreadis — Chief Executive Officer, age 56. Mr. Andreadis is a non-family professional manager who was appointed CEO of TSL in 2015 after a career in senior management positions at several major Greek and Scandinavian shipping companies. He is responsible for the executive management of TSL and its subsidiaries, including oversight of TAI. As noted above, he is also believed to serve on the TAI board as a parent-company designee.

Other key TSL officers relevant to this analysis include:

• Irini Dalakoura — Chief Financial Officer, age 49. Ms. Dalakoura is responsible for TSL's consolidated financial operations, treasury management, capital markets relationships, and financial reporting. She has been CFO since 2019.

• Stavros Papageorgiou — General Counsel (Greece), age 52. Mr. Papageorgiou has served as TSL's in-house General Counsel since 2016 and oversees all legal matters relating to TSL's Greek operations, vessel registrations, and regulatory compliance. Mr. Papageorgiou does not hold a fiduciary position at TAI but coordinates with Calderwood & Harkness and Vassiliou & Demetriou Law Offices on cross-border legal matters.

The combined Kostandinos family equity in TSL is approximately 80% (Dimitrios Kostandinos at 62% and Elena Kostandinos-Pavlou at 18%), all held through KFO Holdings SA, a Greek Société Anonyme registered at the same 42 Akti Miaouli, Piraeus 18538 address as TSL. The concentration of equity ownership in the Kostandinos family, through a single holding company, is a significant factor in evaluating conflicts of interest and the independence of corporate governance at both the TSL and TAI levels.

C. Dual-Hat Concerns

Certain individuals serve in fiduciary capacities at both the TSL parent level and the TAI subsidiary level, creating the potential for conflicts of interest. This concern is particularly acute with respect to two individuals:

Georgios Andreadis serves as CEO of TSL and, based on our current understanding, sits on the TAI board as a parent-company designee. In this dual capacity, Mr. Andreadis owes fiduciary duties to both TSL and TAI. In situations where the interests of the parent and the subsidiary diverge — a scenario that is increasingly likely as the restructuring progresses — Mr. Andreadis must be mindful of his separate and independent obligations to each entity. He cannot favor TSL's interests to the detriment of TAI, or vice versa, without exposing himself to liability for breach of fiduciary duty at the entity whose interests he subordinated.

Elena Kostandinos-Pavlou similarly serves as Vice Chairwoman of TSL and, based on our current understanding, sits on the TAI board as a parent-company designee. Her dual-hat role is further complicated by her status as an 18% equity holder in TSL (through KFO Holdings), which gives her a direct personal financial interest in the outcome of the restructuring that may not be aligned with the interests of TAI's creditors.

The most significant intercompany transaction presenting dual-hat risk is the $76.4 million subordinated intercompany note from TAI to TSL. Decisions regarding the repayment, modification, subordination, or forgiveness of this note will directly affect the recoveries available to TAI's creditors and the financial position of TSL. Directors who sit on both boards must exercise extraordinary care to ensure that their decisions regarding this note are made independently and in the best interests of each respective entity. The risk of conflicted decision-making on this issue is discussed further in Part V.A below.

Additionally, the allocation of restructuring costs between TSL and TAI, the allocation of revenues from jointly managed vessel operations, and the terms of any intercompany services agreements present further areas of potential conflict for dual-hat fiduciaries. These individuals should be advised of the specific risks associated with their dual roles and should consider recusal from conflicted decisions at the TAI board level, as discussed in Part VIII below.

III. Financial Context: The Zone of Insolvency

A. Indicators of Insolvency

As of September 30, 2022, TAI and TSL exhibit multiple, reinforcing indicators of financial distress that, taken together, place both entities at minimum in the "zone of insolvency" and likely render them actually insolvent under both balance-sheet and cash-flow tests. The following metrics are drawn from the financial data provided by TAI management, the Kensington Veltrian Partners ("KHP") enterprise valuation analysis, and the Drakos Maritime Valuations Ltd. fleet appraisal.

Liquidity Breach. On September 15, 2022, TSL breached the Minimum Liquidity Covenant under the Senior Secured Credit Agreement (which requires maintenance of $40 million in unrestricted cash and cash equivalents) when unrestricted cash fell to $27.3 million — a shortfall of $12.7 million, representing a 31.75% deficiency. This breach has not been cured and is one of the events of default that gave rise to the Forbearance Agreement discussed in Part III.B below. The liquidity position has continued to deteriorate since September 15, 2022, with unrestricted cash estimated at approximately $21.8 million as of December 1, 2022, based on the most recent cash flow projections provided by Ms. Restrepo.

Leverage Ratio Breach. The Maximum Net Leverage Ratio covenant of 5.50x was breached at 7.82x. This ratio was calculated as Net Debt of $770.9 million divided by last-twelve-months ("LTM") EBITDA of $98.6 million. The net debt figure reflects total funded indebtedness of approximately $847.3 million less unrestricted cash of $27.3 million (as of September 30, 2022, and prior to the application of the mezzanine facility's cash-netting restrictions). The magnitude of the breach — a leverage ratio 42.2% above the covenant threshold — is significant and reflects both the decline in EBITDA driven by the revenue downturn and the persistent burden of the group's capital structure.

Interest Coverage Breach. The Minimum Interest Coverage Ratio covenant of 2.50x was breached at 1.74x. This ratio was calculated as LTM EBITDA of $98.6 million divided by LTM Interest Expense of $56.7 million. The breach indicates that the group's cash earnings are insufficient to cover its interest obligations at a level consistent with the lenders' underwritten expectations, and the trend line suggests further deterioration as EBITDA continues to contract.

Revenue Decline. TSL's consolidated revenue declined 30.5% from €1.42 billion in FY2021 to an estimated €987 million for FY2022 (based on the nine-month run rate through September 30, 2022, annualized). This decline reflects a combination of factors, including the downturn in global dry bulk and containerized freight rates, the loss of two major chartering contracts with Aegean Commodity Traders AG and Trans-Pacific Logistics Inc. in Q2 2022, and operational disruptions associated with the aging fleet. At the TAI subsidiary level, revenue declined from $312 million in FY2021 to an estimated $198 million for FY2022, a decline of approximately 36.5%.

Fleet Value Decline. The appraised fair market value of TSL's owned fleet, as assessed by Drakos Maritime Valuations Ltd. (an independent marine surveying and valuation firm), dropped from $891 million as of January 2022 to $623 million as of November 1, 2022 — a decline of $268 million, or approximately 30.1%. This decline reflects both the deterioration in global secondhand vessel values and the aging profile of the TSL fleet (average age 14.3 years as of the appraisal date). The fleet is the primary collateral securing the senior secured credit facility, and the decline in collateral value has materially reduced the lenders' recovery cushion.

Total Debt Outstanding. As of September 30, 2022, total consolidated indebtedness across all facilities and categories was approximately $847.3 million, consisting of the following:

Enterprise Value. KHP's enterprise valuation analysis, completed in November 2022, estimated an enterprise value range of $580 million to $640 million (midpoint $610 million) for the consolidated Thalassa group. This valuation reflects a blended approach incorporating a discounted cash flow analysis, a comparable company trading analysis, and a precedent transaction analysis, adjusted for the current market environment and the group's operational profile. At the midpoint enterprise value of $610 million, total indebtedness of $847.3 million exceeds enterprise value by approximately $237.3 million, indicating that the equity is deeply out of the money and that even the senior secured lenders face a potential shortfall of approximately $70 million to $160 million (depending on the value attributed to senior secured collateral versus the unsecured claims waterfall).

Missed Unsecured Note Interest Payment. The December 1, 2022 semi-annual interest payment on the 8.25% Senior Unsecured Notes due 2026 — in the amount of $2,062,500 (calculated as $50 million principal × 8.25% annual coupon ÷ 2) — was not made. The indenture governing the unsecured notes provides a 30-day cure period for missed interest payments, which expires on January 1, 2023. If the coupon is not paid within the cure period, an event of default will occur under the indenture, triggering acceleration rights for the unsecured noteholders and potential cross-default provisions under other debt instruments.

B. Forbearance Agreement

In response to the covenant defaults described above, a Forbearance Agreement was executed on October 10, 2022, between TSL (as borrower), TAI (as guarantor), and the Senior Secured Lender syndicate, with Nordbank International AG acting as administrative agent. The Forbearance Agreement provides a 90-day standstill period through January 8, 2023, during which the senior secured lenders have agreed to forbear from exercising their acceleration and enforcement rights arising from the identified events of default.

The forbearance is subject to a number of conditions, including: (i) compliance with a 13-week cash flow forecast updated and delivered weekly; (ii) maintenance of minimum unrestricted cash of $15 million (a lower threshold than the original $40 million covenant, reflecting the parties' negotiated agreement); (iii) restrictions on capital expenditures, asset dispositions, and intercompany transfers outside the ordinary course; (iv) engagement of professional advisors (Calderwood & Harkness for legal, KHP for financial advisory) acceptable to the agent; and (v) good-faith participation in restructuring negotiations.

Critically, the Forbearance Agreement suspends but does not cure the underlying covenant defaults. The lenders retain the full panoply of rights and remedies under the credit agreement and applicable law, and those rights will revive immediately upon the earlier of (x) the expiration of the 90-day standstill period on January 8, 2023, and (y) the occurrence of any additional event of default or breach of the forbearance conditions. Accordingly, the forbearance provides a limited and conditional breathing space, but does not resolve the fundamental financial distress confronting the Thalassa group.

C. Conclusion on Insolvency Status

Based on the financial data summarized above, we conclude that TAI and TSL are, at minimum, in the "zone of insolvency" and are likely actually insolvent under both the balance-sheet test and the cash-flow test.

Under the balance-sheet test (sometimes referred to as the "asset-deficiency" test), a corporation is insolvent when its total liabilities exceed the fair value of its total assets. Here, total consolidated indebtedness of approximately $847.3 million significantly exceeds the KHP enterprise value estimate of $580 million to $640 million (midpoint $610 million). Even at the high end of the enterprise value range ($640 million), total liabilities exceed enterprise value by more than $207 million.

Under the cash-flow test (sometimes referred to as the "equitable insolvency" test), a corporation is insolvent when it is unable to pay its debts as they become due in the ordinary course of business. The liquidity shortfall (unrestricted cash of $27.3 million as of September 30, 2022, declining to an estimated $21.8 million as of December 1, 2022, against a $40 million minimum liquidity covenant), the missed December 1, 2022 unsecured note coupon of $2,062,500, and the ongoing inability to service debt without further capital infusion or restructuring all indicate that cash-flow insolvency is either present or imminent.

This determination is significant for the fiduciary duty analysis that follows. Under Delaware law, the actual insolvency of a corporation causes fiduciary duties to encompass the interests of creditors as residual beneficiaries of the corporate enterprise. The directors and officers of TAI — and, under the parallel Greek law framework, the directors and officers of TSL — must conduct themselves accordingly.

IV. Delaware Law: Fiduciary Duties of Directors and Officers

A. Core Fiduciary Duties

Under Delaware law, which governs TAI as a Delaware corporation, directors and officers owe two primary fiduciary duties to the corporation and, derivatively, to its stakeholders. These duties are rooted in fundamental principles of equity and are the cornerstones of Delaware corporate governance.

Duty of Care. The duty of care requires that directors and officers act on an informed basis, in good faith, and with the honest belief that the action taken is in the best interest of the company. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984). This duty requires directors to inform themselves, prior to making a business decision, of all material information reasonably available to them. Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985). The duty of care does not require directors to achieve any particular business outcome; rather, it requires that the process by which decisions are made be reasonably informed and deliberate. Directors must devote adequate time and attention to board matters, review material documents and financial analyses, ask probing questions of management and advisors, and ensure that they understand the risks and alternatives associated with any significant corporate action.

In the current context, the duty of care demands that TAI's directors and officers make restructuring-related decisions only after thorough deliberation, with the benefit of advice from qualified legal counsel (Calderwood & Harkness) and financial advisors (KHP), and with full knowledge of the financial condition of the company, the terms and implications of the forbearance agreement, the alternatives available (including Chapter 11), and the interests of the various stakeholder constituencies.

Duty of Loyalty. The duty of loyalty requires that directors and officers act in the best interests of the corporation and its stakeholders, and not for personal benefit or the benefit of a conflicted party. Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939). The duty of loyalty prohibits self-dealing transactions (transactions in which the fiduciary has a personal financial interest on both sides), usurpation of corporate opportunities (taking for oneself a business opportunity that properly belongs to the corporation), and conflicts of interest that compromise the fiduciary's ability to exercise independent judgment.

Transactions involving conflicts of interest are subject to the "entire fairness" standard of review — the most exacting standard under Delaware law — which places the burden on the conflicted fiduciary to demonstrate both fair dealing (a fair process) and fair price (a fair economic result). Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983). However, the burden can be shifted back to the plaintiff if the transaction was approved by a well-functioning committee of independent, disinterested directors or by a fully informed vote of disinterested stockholders. Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014).

The duty of loyalty is of particular relevance in the Thalassa restructuring given the controlling shareholder dynamic (the Kostandinos family's 80% ownership of TSL through KFO Holdings), the intercompany note between TAI and TSL, and the dual-hat roles of certain directors.

The Business Judgment Rule. The business judgment rule is a presumption that, in making a business decision, the directors of a corporation acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interest of the company. Aronson, 473 A.2d at 812. When the business judgment rule applies, courts will not second-guess substantive business decisions, even if those decisions ultimately prove to be unwise or unprofitable. The rule reflects a judicial recognition that directors, not courts, are best positioned to make business judgments, and that the risk-taking inherent in business decision-making should not be chilled by the threat of personal liability.

The business judgment rule applies unless the plaintiff can show that the directors breached their duty of care (by acting uninformed) or their duty of loyalty (by acting with a conflict of interest or in bad faith). If the presumption is rebutted, the standard of review shifts to entire fairness, and the directors bear the burden of proving that the challenged transaction was entirely fair to the corporation.

For TAI's directors and officers, the business judgment rule remains the primary shield against personal liability. To preserve the protection of the rule, every significant decision — particularly decisions related to the restructuring, the forbearance agreement, intercompany transactions, the potential Chapter 11 filing, and the engagement and retention of professionals — must be made through a well-documented, deliberative process.

B. The "Zone of Insolvency" Doctrine — Post-*Gheewalla* Framework

The relationship between fiduciary duties and the financial condition of a corporation has been the subject of significant judicial and scholarly attention. The seminal Delaware Supreme Court decision in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007), established the governing framework.

Prior to Gheewalla, there was considerable uncertainty in Delaware law regarding whether fiduciary duties shifted to creditors when a corporation entered the "zone of insolvency" — a term used to describe the period when a corporation is approaching, but has not yet reached, actual insolvency. Some earlier Chancery Court decisions, notably Credit Lyonnais Bank Nederland, N.V. v. Pathe Communications Corp., No. 12150, 1991 WL 277613 (Del. Ch. Dec. 30, 1991), suggested that directors of a corporation operating in the "vicinity of insolvency" should consider the interests of the "entire corporate enterprise," including creditors, and that a board could properly consider creditor interests alongside stockholder interests in making business decisions.

In Gheewalla, the Delaware Supreme Court clarified the doctrine in several important respects:

First, the Court held that creditors of a Delaware corporation that is insolvent or in the zone of insolvency cannot bring direct fiduciary duty claims against directors. 930 A.2d at 101-03. Fiduciary duties are owed to the corporation, not to individual creditors, and claims for breach of fiduciary duty belong to the corporation and may only be asserted derivatively — that is, on behalf of the corporation by a party with standing to bring a derivative action. Id. at 101 ("[T]he creditors of a Delaware corporation that is either insolvent or in the zone of insolvency have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against the corporation's directors.").

Second, when a corporation is solvent, directors owe fiduciary duties to the corporation and, derivatively, to its stockholders as the residual claimants of the corporation's value. The interests of creditors are protected by contractual rights (loan agreements, indentures, etc.) and applicable law (fraudulent transfer statutes, etc.), but not by fiduciary duties.

Third, when a corporation becomes actually insolvent — whether on a balance-sheet basis (liabilities exceed assets) or a cash-flow basis (inability to pay debts as they come due) — creditors replace stockholders as the residual beneficiaries of the corporation's value. In this circumstance, fiduciary duties continue to run to the corporation, but the interests of the corporation are understood to encompass creditor interests, because creditors are now the parties with the economic stake in the corporation's remaining value. Id. at 101-02. However, this does not create a separate or independent fiduciary duty owed directly to creditors. Id. at 99 ("When a solvent corporation is navigating in the zone of insolvency, the focus for Delaware directors does not change: directors must continue to discharge their fiduciary duties to the corporation and its shareholders by exercising their business judgment in the best interests of the corporation for the benefit of its shareholder owners.").

Fourth, the "zone of insolvency" concept — standing alone — does not shift fiduciary duties to creditors. The shift occurs only upon actual insolvency. The zone of insolvency is better understood as a period of heightened risk during which directors should be particularly attentive to the potential for fiduciary duty claims, but the formal legal standard does not change until actual insolvency is established.

Practical Impact for TAI. Given the financial metrics discussed in Part III — total indebtedness of $847.3 million against an enterprise value range of $580 million to $640 million, unrestricted cash of $27.3 million (declining), a missed unsecured note coupon, and multiple covenant breaches — TAI is likely actually insolvent under both the balance-sheet and cash-flow tests. Accordingly, the fiduciary duties of TAI's directors and officers must account for creditor interests in all decision-making. This does not mean that directors must prioritize creditor interests above all others in every circumstance, nor does it transform directors into agents of the creditors. Rather, it means that the overall welfare of the corporate enterprise — including the interests of creditors as residual claimants — must be the guiding principle in exercising business judgment. Decisions that benefit stockholders (here, TSL and ultimately the Kostandinos family through KFO Holdings) at the expense of creditors will face heightened scrutiny and may not be protected by the business judgment rule.

It should also be noted that in a subsequent Chapter 11 case, a trustee or creditors' committee could assert derivative claims against TAI's directors and officers for breaches of fiduciary duty occurring in the prepetition period. The applicable standard of review would be the Delaware fiduciary duty framework described in this memorandum, and the zone-of-insolvency analysis would be central to any such claims.

C. Exculpation and Indemnification Under DGCL §102(b)(7) and §145

Delaware law provides two important mechanisms for protecting directors and officers from personal liability: exculpation and indemnification.

Exculpation (DGCL §102(b)(7)). Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") authorizes a Delaware corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of directors to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Such a provision, commonly referred to as an "exculpation clause," is a powerful protective mechanism and is included in the certificates of incorporation of the vast majority of Delaware corporations. However, §102(b)(7) contains important carve-outs: an exculpation clause cannot eliminate or limit liability for (i) breaches of the duty of loyalty, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) unlawful payment of dividends or stock purchases or redemptions under DGCL §174, or (iv) any transaction from which the director derived an improper personal benefit.

TAI's certificate of incorporation should be reviewed to confirm the existence and precise scope of a §102(b)(7) exculpation clause. If such a clause is in place, it would protect TAI's directors (but not officers, unless TAI has adopted the recent amendment under Delaware's 2022 amendments to DGCL §102(b)(7) permitting officer exculpation for duty-of-care claims) from monetary damages for duty-of-care claims — i.e., claims alleging that directors failed to act on a sufficiently informed basis — but would not protect against duty-of-loyalty claims, bad-faith claims, or claims involving intentional misconduct. Given the restructuring context, the most likely claims against TAI directors would involve duty-of-loyalty challenges to intercompany transactions and self-dealing, which fall outside the scope of exculpation.

Indemnification (DGCL §145). Section 145 of the DGCL authorizes a Delaware corporation to indemnify its directors and officers against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, to which the director or officer was a party by reason of his or her corporate role, provided that the director or officer acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation. DGCL §145(a) (third-party actions); §145(b) (actions by or in the right of the corporation). In the case of actions by or in the right of the corporation (derivative actions), indemnification is limited to expenses and does not cover judgments or settlements.

TAI's bylaws should be reviewed for mandatory indemnification and advancement provisions. Advancement of expenses — the obligation of the corporation to pay defense costs as they are incurred, subject to an undertaking by the director or officer to repay if it is ultimately determined that he or she is not entitled to indemnification — is a critical protection for individual fiduciaries, particularly in the restructuring context where litigation may commence before the restructuring is resolved. Homestore, Inc. v. Tafeen, 888 A.2d 204 (Del. 2005) (recognizing the importance of advancement rights).

Intersection with Insolvency. In an insolvency scenario, indemnification and advancement rights may be of limited practical value because the corporation may be unable to fund these obligations. If TAI's assets are insufficient to pay defense costs for its directors and officers, the D&O insurance policy becomes the primary — and potentially only — source of protection. This underscores the critical importance of the D&O insurance coverage analysis in Part VII below.

D. Enhanced Scrutiny: *Revlon* Duties

Under certain circumstances, Delaware law imposes enhanced duties on directors that go beyond the ordinary business judgment rule. Most relevant here is the Revlon framework, which arises from the Delaware Supreme Court's decision in Revlon, Inc. v. MacAndrews & Forbaci Holdings, Inc., 506 A.2d 173 (Del. 1986).

Under Revlon, when a board of directors determines that a sale or breakup of the company is inevitable — that is, when the board abandons the long-term strategic plan and enters a "sale mode" — the board's duty shifts from the preservation of the corporate enterprise to the maximization of the company's value at sale for the benefit of stockholders (and, in insolvency, creditors). In practical terms, Revlon requires the board to seek the highest price reasonably available through a fair and open process.

Current Posture. TSL and TAI are currently pursuing a dual-track approach: an out-of-court restructuring negotiation with the senior secured lenders, the mezzanine lender, and the unsecured noteholders, with Chapter 11 contingency planning occurring in parallel. The restructuring contemplates the continuation of the Thalassa business as a going concern, with a recapitalization of the balance sheet through some combination of debt-for-equity conversion, new money investment, the KFO equity contribution of €35 million, and potential asset sales of non-core vessels. The restructuring does not contemplate a sale or liquidation of TAI or the Thalassa group as a whole.

Accordingly, Revlon duties are not currently triggered. The board's obligation remains to exercise informed business judgment in the best interests of the corporate enterprise, taking into account the interests of creditors as residual claimants given the state of insolvency.

However, this assessment could change. If the out-of-court restructuring negotiations fail and a Chapter 11 filing becomes necessary, and if the Chapter 11 case evolves into a liquidation under Chapter 7 or a §363 sale of substantially all assets, Revlon duties may arise. The board should be prepared for this contingency and should ensure that, if a sale becomes the chosen path, it is conducted through a process designed to maximize value — including, potentially, a marketing process or auction supervised by KHP.

V. Specific Risk Areas for TAI Officers and TSL Directors

A. Intercompany Transactions

The $76.4 million subordinated intercompany note from TAI to TSL is the most significant area of fiduciary duty risk in the current restructuring. This note represents a claim by TSL (the parent) against TAI (the wholly-owned subsidiary) and is subordinated to all of TAI's external debt obligations. In the event of a Chapter 11 filing by TAI, the intercompany note would be treated as a claim against the TAI estate, and its priority, validity, and enforceability would be subject to challenge by other creditors.

Decisions regarding the repayment, subordination, modification, or forgiveness of the intercompany note must be evaluated with scrupulous attention to fairness to TAI and its creditors. This is precisely the type of transaction that implicates the duty of loyalty, because the parties on both sides of the note are controlled by the same ultimate beneficial owners — the Kostandinos family through KFO Holdings. Any decision by TAI's board to repay the intercompany note, in whole or in part, would transfer value from TAI (and, derivatively, from TAI's creditors) to TSL (and, derivatively, to the Kostandinos family). Such a transfer, if made while TAI is insolvent or in the zone of insolvency, would be subject to challenge as a fraudulent transfer under both state law (Delaware Uniform Voidable Transactions Act, 6 Del. C. §§1301-1311) and federal law (11 U.S.C. §548).

Moreover, any repayment of the intercompany note in the 90-day period preceding a Chapter 11 filing (or, because TSL is an insider of TAI, in the one-year period preceding a filing) could be scrutinized as a preferential transfer under 11 U.S.C. §547. The Preference and Fraudulent Transfer Exposure Analysis dated December 1, 2022 provides a detailed analysis of these risks and should be consulted for the specifics of the avoidance action exposure.

Beyond the intercompany note, other intercompany transactions — including management fees, shared services charges, vessel charter payments, and cash sweeps — must be reviewed to ensure that they reflect arm's-length terms and provide fair consideration to TAI. The risk of equitable subordination (11 U.S.C. §510(c)) or recharacterization of TSL's intercompany claim is heightened if the intercompany dealings reflect overreaching by the parent to the detriment of the subsidiary's creditors.

Recommendation. TAI's board should independently evaluate any intercompany transactions and should consider appointing an independent director or forming an independent committee to evaluate and approve such transactions. The independent director or committee should be empowered to retain independent legal and financial advisors and should document its analysis and conclusions in detailed board minutes or committee reports. Any modification of the intercompany note — whether a deferral, reduction, or restructuring of terms — should be negotiated and documented as if it were an arm's-length transaction between unrelated parties.

B. Continuation of Business Operations During Insolvency

The decision to continue operating the business during the forbearance period and while the restructuring is being negotiated is itself a fiduciary duty decision. Directors must ensure that the company does not incur obligations it cannot reasonably expect to repay, as the incurrence of such obligations could harm creditors and expose directors to claims that they acted in bad faith or without due care.

The theory of "deepening insolvency" — which posits that directors who cause a corporation to continue operating and incurring debt when the corporation is already insolvent can be held liable for the additional losses caused by the prolonged operation — has been the subject of considerable judicial skepticism in Delaware. In Trenwick America Litigation Trust v. Rowan Whitfield CPAs LLP, L.L.P., 906 A.2d 168 (Del. Ch. 2006), then-Vice Chancellor Strine (now retired Chief Justice Strine) rejected deepening insolvency as an independent cause of action under Delaware law, reasoning that the decision to continue operating a business is a business judgment and that holding directors liable simply for failing to liquidate would be inconsistent with the business judgment rule. The court emphasized that "deepening insolvency is no more of a cause of action when a firm is insolvent than a cause of action for 'shallowing profitability' would be when a firm is solvent." 906 A.2d at 204.

Notwithstanding the rejection of deepening insolvency as a standalone cause of action, the underlying concern remains relevant. If directors cause the company to incur new obligations — for example, by drawing on the revolving credit facility, ordering new supplies, or entering into new charters — while knowing that the company has no reasonable prospect of satisfying those obligations, such conduct could support a breach-of-fiduciary-duty claim (for failure to act in good faith) or a fraudulent transfer claim (if the new obligations are incurred without reasonably equivalent value in exchange).

In the current context, the revolving credit facility under the Senior Secured Credit Agreement has a total commitment of $200 million, of which $185 million is currently drawn, leaving $15 million in undrawn capacity. Any further draws on the revolving facility during the forbearance period require careful consideration, as such draws increase the senior secured claims against TAI's assets (potentially to the detriment of subordinated creditors) and may be subject to challenge if TAI ultimately files for Chapter 11. The TAI board should ensure that any draws are made only to fund essential operating expenses and are consistent with the 13-week cash flow forecast being provided to the senior secured lenders under the Forbearance Agreement.

Similarly, new trade payables incurred during the forbearance period — while necessary to maintain business operations — should be managed carefully. Vendors and counterparties that extend credit to TAI during this period may assert administrative expense priority or other priority claims if TAI files for Chapter 11, and the accumulation of significant new trade payables could complicate the restructuring process.

Key Principle. The decision to continue operating is defensible — and, indeed, may be the best course of action for maximizing value for the enterprise and all stakeholders — so long as it is made on an informed basis, with the benefit of professional advice, and with a reasonable basis for believing that the continued operation will preserve or enhance value rather than destroy it.

C. Preferential Payments and Fraudulent Transfers

Officers who authorize payments to insiders or affiliated parties during the 90-day preference period (or the one-year insider preference period applicable to payments to entities such as TSL, KFO Holdings, and other affiliates) face potential clawback exposure in a subsequent Chapter 11 case under 11 U.S.C. §547 (preferences) and §548 (fraudulent transfers). While the primary exposure in a preference or fraudulent transfer action falls on the recipient of the payment (who must disgorge the payment to the estate), directors and officers who authorize such payments may face fiduciary duty claims for failing to protect the estate's assets.

Particular Concerns. The following payments and obligations are of particular concern from a preference and fraudulent transfer perspective:

(a) Any payments on the $76.4 million subordinated intercompany note to TSL, for the reasons discussed in Part V.A above.

(b) Payments to Olympian Fuel & Supply SA, which has $9.2 million in outstanding trade payables. Olympian is a Greek entity that has historically been a significant supplier of fuel and marine supplies to TSL's fleet. The relationship between Olympian and the Kostandinos family should be investigated to determine whether Olympian is an insider or affiliate of the Thalassa group, which would extend the preference look-back period from 90 days to one year.

(c) Any distributions, dividends, management fees, or other payments to KFO Holdings SA or to Dimitrios Kostandinos or Elena Kostandinos-Pavlou in their personal capacities. Such payments, if made while TAI is insolvent, would face scrutiny as both preferential transfers (to the extent they are on account of an antecedent debt) and constructive fraudulent transfers (to the extent they are made without reasonably equivalent value in exchange).

(d) Payments to other large trade creditors that are disproportionate to the ordinary course of business. The "ordinary course of business" defense under §547(c)(2) may protect some trade payments, but payments that are significantly larger, earlier, or otherwise outside the normal pattern of dealings may be vulnerable.

TAI's officers should be advised to consult with Calderwood & Harkness before authorizing any payment to an insider or affiliated party, and before making any payment that is materially outside the ordinary course of TAI's business operations. The Preference and Fraudulent Transfer Exposure Analysis dated December 1, 2022 provides a detailed framework for evaluating specific payment decisions.

D. Dual-Hat Fiduciary Obligations

As discussed in Part II.C above, Georgios Andreadis (CEO of TSL and potential TAI board member) and Elena Kostandinos-Pavlou (Vice Chairwoman of TSL and potential TAI board member) hold fiduciary positions at both the parent and subsidiary levels. This dual-hat arrangement creates inherent conflicts of interest that are amplified in a restructuring context where the interests of the parent and the subsidiary diverge.

The areas of potential divergence include, but are not limited to:

(a) Treatment of the intercompany note. TSL, as creditor, has an interest in maximizing recovery on the $76.4 million note. TAI's creditors have an interest in minimizing or eliminating the note, or in subordinating it to their own claims.

(b) Allocation of restructuring costs. The costs of the restructuring — including legal fees, financial advisory fees, and operational restructuring expenses — must be allocated between TSL and TAI. The allocation methodology should be fair and well-documented, as any disproportionate allocation of costs to TAI would effectively transfer value from TAI's creditors to TSL.

(c) Allocation of vessel revenues. Certain Thalassa vessels are owned by TSL or its non-TAI subsidiaries but generate revenue that flows through TAI's operations. The intercompany pricing of charter agreements, revenue-sharing arrangements, and management fees must be at arm's length.

(d) Equity contribution terms. The proposed €35 million equity contribution from KFO Holdings is intended to support the restructuring, but the terms of the contribution — including the valuation, the dilution effect, and any conditions or preferential terms — must be fair to all stakeholders.

Directors who serve on both boards must be mindful of their separate and independent obligations to each entity. When a conflict arises, the conflicted director should disclose the conflict to both boards, recuse himself or herself from deliberations and votes on the conflicted matter at the entity whose interests he or she cannot independently represent, and ensure that the decision is made by disinterested directors (or, if no disinterested directors are available, by an independent committee with the authority to retain independent advisors).

Dimitrios Kostandinos, as 62% equity holder (through KFO Holdings) and Chairman of TSL, presents a unique set of dual-hat and controlling-shareholder concerns. While Mr. Kostandinos does not serve on the TAI board (based on our current understanding), his dominant influence over TSL — and, through TSL, over TAI — means that his decisions regarding the restructuring have a direct impact on both entities. His personal financial interests (preservation of equity value, terms of the KFO equity contribution, treatment of the intercompany note) may not be aligned with the interests of TAI's creditors. Any transaction in which Mr. Kostandinos has a personal interest should be subject to the most rigorous scrutiny and should be approved by disinterested directors or an independent committee.

E. Decision to File or Not File Chapter 11

The decision of whether and when to file a Chapter 11 petition for TAI is among the most significant fiduciary duty decisions confronting the TAI board. The filing decision must be made in good faith, on an informed basis, and with a reasonable belief that the filing is in the best interests of the corporation and its stakeholders.

Filing Too Early. A premature Chapter 11 filing carries risks, including: destruction of going-concern value through the stigma of bankruptcy; loss of customer and vendor relationships; disruption to operations; the imposition of significant administrative costs (professional fees, U.S. Trustee fees, court costs); and the transfer of significant decision-making authority from the board to the bankruptcy court and creditor constituencies. If the out-of-court restructuring is achievable and would produce a better outcome for the enterprise than a Chapter 11 reorganization, a premature filing could expose directors to claims that they failed to pursue the more value-maximizing alternative.

Filing Too Late. Conversely, delay in filing can also expose directors to liability. If the company continues to operate and incur obligations while insolvent, and the delay results in a deterioration of the company's financial position (dissipation of assets, accumulation of additional claims, loss of going-concern value), directors may face claims that they breached their fiduciary duties by failing to seek the protection of the bankruptcy court at the appropriate time. In extreme cases, delay may result in a conversion from Chapter 11 to Chapter 7 (liquidation), with the loss of any possibility of reorganization.

Current Approach. The dual-track approach — simultaneous pursuit of an out-of-court restructuring and Chapter 11 contingency planning — is itself a fiduciary duty best practice, as it ensures that the board has alternatives and is not forced into a suboptimal outcome by the passage of time. The Chapter 11 contingency plan (being prepared separately by Calderwood & Harkness) will provide the board with a detailed roadmap for a Chapter 11 filing, including first-day motions, DIP financing proposals, key employee retention plans, and a proposed plan of reorganization framework, so that the board can make a well-informed filing decision if and when the time comes.

The proposed filing venue is the United States Bankruptcy Court for the Southern District of Texas (Houston Division), based on TAI's principal office location at 1400 McKinney Street, Suite 2200, Houston, TX 77010. Venue in the Southern District of Texas is appropriate under 28 U.S.C. §1408 because TAI has its principal place of business in Houston.

F. Professional Fee Obligations

If a Chapter 11 petition is filed, prepetition professional fees — including fees owed to Calderwood & Harkness and KHP — become prepetition claims against the estate. Professional fees incurred post-petition are administrative expenses under 11 U.S.C. §503(b) and are subject to reasonableness review by the bankruptcy court.

Calderwood & Harkness's current engagement with TAI is at the following billing rates: $1,650 per hour for partners, $1,050 per hour for senior associates, $850 per hour for associates, and $425 per hour for paralegals. A $500,000 retainer was received at the commencement of the engagement. KHP's engagement provides for a monthly advisory fee of $250,000, plus a success fee (the terms of which are detailed in the engagement letter).

The aggregate professional fees for the first 12 months of a Chapter 11 case — encompassing debtor's counsel, financial advisor, claims agent, creditors' committee counsel and financial advisor, and other court-appointed professionals — are estimated at approximately $18.5 million. This estimate is based on comparable cases of similar size and complexity and assumes a 12-month path to confirmation of a plan of reorganization.

The TAI board should ensure that all professional engagements are properly authorized by board resolution, that the terms of engagement are market-standard and defensible, and that the estate is not burdened with excessive or duplicative administrative costs. In a Chapter 11 case, all professionals retained by the debtor or a committee must be approved by the bankruptcy court, and their fees are subject to periodic review and approval under 11 U.S.C. §330. The board should be prepared for fee objections from creditor constituencies and should work with counsel to ensure that fee applications are well-documented and supportable.

VI. Greek Law Considerations for TSL Board Members

A. Overview

TSL is a Greek Société Anonyme (Anonimi Etairia), and its directors and officers are subject to Greek corporate law and Greek insolvency law. Greek law considerations are relevant to this analysis because (i) TSL's directors — particularly Dimitrios Kostandinos, Elena Kostandinos-Pavlou, and Georgios Andreadis — face potential personal liability under Greek law in addition to any exposure they may have under Delaware law in their capacity as TAI board members, and (ii) the interplay between Greek and Delaware fiduciary duty standards is relevant to the dual-hat directors and to the coordination of the cross-border restructuring.

This memorandum provides only a summary of key Greek law concepts for contextual purposes. Definitive analysis of Greek law obligations is being provided by Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, Athens), which has been retained to advise on all matters of Greek law arising in connection with the TSL restructuring. The summary below is based on preliminary consultations with Greek counsel and should be read subject to their more detailed analysis.

B. Greek Corporate Law Duties

Under Greek Law 4548/2018 (the Greek Companies Act, which replaced the former Codified Law 2190/1920), directors of a Greek Société Anonyme owe duties of care and loyalty to the company. Article 96 of Law 4548/2018 provides that board members must manage the company's affairs with the diligence of a prudent businessperson, acting in the interest of the company and its shareholders. Board members who breach their duties may be held personally liable to the company for damages, and such liability may be asserted by the company, by shareholders holding at least 10% of the share capital (through a derivative action mechanism), or, in insolvency, by the insolvency administrator.

In the context of insolvency, Greek Law 4738/2020 (the Greek Debt Settlement & Insolvency Code, commonly referred to as the "New Greek Insolvency Code," which entered into force on March 1, 2021) imposes additional obligations on directors. Key provisions include:

(a) Obligation to file for insolvency. Under Article 77 of Law 4738/2020, a debtor is obligated to file for insolvency within 30 days of cessation of payments (pausi pliromón), defined as the general and permanent inability to pay debts as they become due. Failure to file within the prescribed period may result in personal liability of the directors for damages caused to creditors by the delay.

(b) Liability for acts worsening the company's position. Directors who engage in transactions or take actions after insolvency is apparent that worsen the company's financial position or that transfer value to insiders at the expense of creditors may face personal liability under both the corporate law duties framework and the insolvency law avoidance provisions.

(c) Criminal liability. In certain circumstances, including fraudulent bankruptcy or mismanagement leading to insolvency, Greek law imposes criminal liability on directors. Articles 338-340 of the Greek Penal Code and the specific provisions of Law 4738/2020 provide for criminal sanctions, including imprisonment, for directors who deliberately or negligently cause or contribute to the insolvency of the company.

TSL board members — Dimitrios Kostandinos, Elena Kostandinos-Pavlou, and Georgios Andreadis — may face personal liability under Greek law for failure to file for insolvency in a timely manner, for actions taken after insolvency that worsen the company's financial position, or for preferential or fraudulent transactions with insiders. The 30-day filing obligation under Article 77 is of particular concern: if TSL's "cessation of payments" can be dated to September 15, 2022 (the date of the liquidity covenant breach) or earlier, the 30-day period may have already expired without a filing. Greek counsel should provide definitive advice on this point.

C. Cross-Border Coordination

If TSL were to file for insolvency under Greek Law 4738/2020, a parallel proceeding under Chapter 15 of the U.S. Bankruptcy Code could be commenced in the United States to obtain recognition of the Greek proceeding as either a "foreign main proceeding" (if TSL's center of main interests, or "COMI," is in Greece) or a "foreign nonmain proceeding" (if TSL has an "establishment" in the United States). Recognition under Chapter 15 would provide TSL with certain protections in the United States, including the automatic stay and the ability to coordinate with any Chapter 11 case filed by TAI.

The COMI analysis for TSL — which is addressed in the separate COMI/Chapter 15 memorandum dated November 8, 2022 — indicates that TSL's COMI is in Piraeus, Greece, based on the location of its registered office, the location of its principal operations and management, and the expectations of its creditors and contractual counterparties. Accordingly, a Greek insolvency proceeding would likely be recognized in the United States as a foreign main proceeding.

The interplay between Greek and Delaware fiduciary duty standards is a relevant consideration for dual-hat directors serving on both the TSL and TAI boards. While the substantive standards are broadly similar in their emphasis on duties of care and loyalty, the specific requirements (including filing deadlines, personal liability provisions, and the availability of exculpation defenses) differ between the two jurisdictions. Directors with dual fiduciary obligations must comply

MEMORANDUM
PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: Nathaniel Bower, Partner, Bankruptcy & Restructuring, Calderwood & Harkness LLP
FROM: Amy Chesterton, Lead Associate, Bankruptcy & Restructuring, Calderwood & Harkness LLP
DATE: December 10, 2022
RE: D&O Liability and Fiduciary Duty Issues in the Zone of Insolvency — Thalassa Americas Inc. and Thalassa Shipping & Logistics SA
Matter No.: 1044-00003
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I. Executive Summary
The purpose of this memorandum is to analyze the fiduciary duty obligations of the officers and directors of Thalassa Americas Inc. ("TAI") and its parent company, Thalassa Shipping & Logistics SA ("TSL"), as both entities operate in or near the zone of insolvency, and to assess the scope of directors' and officers' ("D&O") insurance coverage available to protect individual directors and officers from personal liability exposure. This memorandum has been prepared at the request of Nathaniel Bower in connection with the ongoing restructuring advisory engagement and is intended to inform the restructuring team's strategic planning as well as to provide guidance directly to the officers and directors of TAI and TSL regarding their obligations during this critical period.
Key Conclusions. TAI, a C-Corporation organized under the laws of the State of Delaware, is governed by Delaware fiduciary duty law. As of September 30, 2022, TAI and TSL exhibit numerous indicators of financial distress, including covenant defaults under the senior secured credit facility, a liquidity shortfall of $12.7 million below the minimum covenant threshold, a net leverage ratio of 7.82x (against a 5.50x maximum), a missed unsecured note interest payment, and an enterprise value estimated at $580 million to $640 million against total indebtedness of approximately $847.3 million. Based on these metrics, TAI and TSL are, at minimum, in the "zone of insolvency" and are likely already actually insolvent on a balance-sheet basis. This determination triggers heightened scrutiny of director and officer conduct under applicable law.
Under Delaware law, officers and directors must act with informed judgment, in good faith, and in the honest belief that their actions are in the best interests of the corporation. Upon actual insolvency, the fiduciary duties owed to the corporate enterprise encompass creditor interests, as creditors become the residual beneficiaries of the corporation's value. While the business judgment rule continues to protect directors who make informed and good-faith decisions, the heightened scrutiny environment demands rigorous documentation and process.
The D&O insurance policy with Promontory Indemnity Insurance Co. (Policy No. PII-DO-2022-08847) provides a $25 million aggregate limit of liability. This coverage must be carefully managed given the complexity of the restructuring, the number of potential claimant constituencies, and the risk that entity-level coverage demands could erode the aggregate limit to the detriment of individual director and officer coverage. Side A coverage — which protects individual insureds when the company is unable to indemnify — is of paramount importance in the current circumstances.
Scope. This memorandum covers: (a) identification of the relevant officers and directors of TAI and TSL; (b) applicable fiduciary duty standards under Delaware law and, for contextual purposes, under Greek law; (c) the zone-of-insolvency doctrine and its practical implications; (d) specific risk areas arising from the current liquidity crisis and restructuring activities; (e) a D&O insurance coverage analysis; and (f) practical recommendations for the officers and directors and for preservation of insurance coverage. This memorandum should be read in conjunction with the companion memoranda referenced herein, including the Preference and Fraudulent Transfer Exposure Analysis (dated December 1, 2022), the Intercompany Claims and Substantive Consolidation Risk memorandum (dated December 5, 2022), and the Chapter 11 Contingency Playbook (currently in preparation).
II. Background: Relevant Officers and Directors
A. Thalassa Americas Inc. (TAI) — Delaware Corporation
TAI is a C-Corporation organized under the laws of the State of Delaware. Its registered agent is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. TAI's principal office is located at 1400 McKinney Street, Suite 2200, Houston, Texas 77010. TAI's Employer Identification Number is 84-3291057.
TAI is a wholly-owned subsidiary of TSL. TAI was incorporated in Delaware in 2017 to serve as the U.S. operational platform for TSL's Western Hemisphere shipping and logistics operations, including chartering, freight forwarding, vessel management, and port-side logistics throughout North and South America. TAI's revenues are predominantly denominated in U.S. dollars, and its primary creditor relationships are governed by New York law or, in the case of the senior secured credit facility, English law.
The officers of TAI are as follows:
• Marcus Hale — President, age 48. Mr. Hale has served as President of TAI since its incorporation and is responsible for the overall management and strategic direction of TAI's U.S. and Latin American operations. He reports to Georgios Andreadis at the TSL parent level.
• Diana Restrepo — Vice President, Finance, age 41. Ms. Restrepo oversees TAI's financial operations, including treasury management, financial reporting, and coordination with TSL's consolidated reporting functions. She coordinates closely with Irini Dalakoura, CFO of TSL, on intercompany accounting matters.
• Jonathan Kurtz — Vice President, Operations, age 45. Mr. Kurtz is responsible for TAI's day-to-day operational activities, including vessel scheduling, port operations, and logistics coordination throughout the Americas.
TAI's board of directors consists of the three officers listed above, plus designees from the TSL parent board. The specific composition of the TAI board is currently being confirmed through a review of TAI's corporate records, including its certificate of incorporation, bylaws, and board resolutions. For purposes of this memorandum, we assume that, at minimum, Georgios Andreadis (CEO of TSL) and Elena Kostandinos-Pavlou (Vice Chairwoman of TSL) sit on the TAI board as parent-company designees, consistent with customary practice in wholly-owned subsidiary governance structures and with the information provided to us by TAI's management. We will update this analysis once the complete board composition is confirmed.
B. Thalassa Shipping & Logistics SA (TSL) — Greek Société Anonyme
TSL is a Société Anonyme (Anonimi Etairia) organized under the laws of the Hellenic Republic. Its registered office is located at 42 Akti Miaouli, Piraeus 18538, Greece. TSL's Greek Tax Identification Number (AFM) is 998214763. TSL is the ultimate operating parent company of the Thalassa group, which, in addition to TAI, includes various operating subsidiaries and special-purpose vessel-owning entities organized in Greece, Cyprus, the marshall Islands, Malta, and Liberia.
The board members of TSL relevant to this analysis are as follows:
• Dimitrios Kostandinos — Chairman of the Board, age 71. Mr. Kostandinos is a second-generation shipping magnate who inherited the Thalassa business from his father, Nikos Kostandinos, in 1989. He holds approximately 62% of TSL's equity through KFO Holdings SA, a Greek holding company. Mr. Kostandinos has served as Chairman of the TSL board since 1989 and exercises dominant influence over the strategic direction of the Thalassa group.
• Elena Kostandinos-Pavlou — Vice Chairwoman, age 44. Ms. Kostandinos-Pavlou is the daughter of Dimitrios Kostandinos and holds approximately 18% of TSL's equity through KFO Holdings SA. She has been Vice Chairwoman since 2018 and is actively involved in TSL's operational and financial decision-making. As noted above, she is also believed to serve on the TAI board as a parent-company designee.
• Georgios Andreadis — Chief Executive Officer, age 56. Mr. Andreadis is a non-family professional manager who was appointed CEO of TSL in 2015 after a career in senior management positions at several major Greek and Scandinavian shipping companies. He is responsible for the executive management of TSL and its subsidiaries, including oversight of TAI. As noted above, he is also believed to serve on the TAI board as a parent-company designee.
Other key TSL officers relevant to this analysis include:
• Irini Dalakoura — Chief Financial Officer, age 49. Ms. Dalakoura is responsible for TSL's consolidated financial operations, treasury management, capital markets relationships, and financial reporting. She has been CFO since 2019.
• Stavros Papageorgiou — General Counsel (Greece), age 52. Mr. Papageorgiou has served as TSL's in-house General Counsel since 2016 and oversees all legal matters relating to TSL's Greek operations, vessel registrations, and regulatory compliance. Mr. Papageorgiou does not hold a fiduciary position at TAI but coordinates with Calderwood & Harkness and Vassiliou & Demetriou Law Offices on cross-border legal matters.
The combined Kostandinos family equity in TSL is approximately 80% (Dimitrios Kostandinos at 62% and Elena Kostandinos-Pavlou at 18%), all held through KFO Holdings SA, a Greek Société Anonyme registered at the same 42 Akti Miaouli, Piraeus 18538 address as TSL. The concentration of equity ownership in the Kostandinos family, through a single holding company, is a significant factor in evaluating conflicts of interest and the independence of corporate governance at both the TSL and TAI levels.
C. Dual-Hat Concerns
Certain individuals serve in fiduciary capacities at both the TSL parent level and the TAI subsidiary level, creating the potential for conflicts of interest. This concern is particularly acute with respect to two individuals:
Georgios Andreadis serves as CEO of TSL and, based on our current understanding, sits on the TAI board as a parent-company designee. In this dual capacity, Mr. Andreadis owes fiduciary duties to both TSL and TAI. In situations where the interests of the parent and the subsidiary diverge — a scenario that is increasingly likely as the restructuring progresses — Mr. Andreadis must be mindful of his separate and independent obligations to each entity. He cannot favor TSL's interests to the detriment of TAI, or vice versa, without exposing himself to liability for breach of fiduciary duty at the entity whose interests he subordinated.
Elena Kostandinos-Pavlou similarly serves as Vice Chairwoman of TSL and, based on our current understanding, sits on the TAI board as a parent-company designee. Her dual-hat role is further complicated by her status as an 18% equity holder in TSL (through KFO Holdings), which gives her a direct personal financial interest in the outcome of the restructuring that may not be aligned with the interests of TAI's creditors.
The most significant intercompany transaction presenting dual-hat risk is the $76.4 million subordinated intercompany note from TAI to TSL. Decisions regarding the repayment, modification, subordination, or forgiveness of this note will directly affect the recoveries available to TAI's creditors and the financial position of TSL. Directors who sit on both boards must exercise extraordinary care to ensure that their decisions regarding this note are made independently and in the best interests of each respective entity. The risk of conflicted decision-making on this issue is discussed further in Part V.A below.
Additionally, the allocation of restructuring costs between TSL and TAI, the allocation of revenues from jointly managed vessel operations, and the terms of any intercompany services agreements present further areas of potential conflict for dual-hat fiduciaries. These individuals should be advised of the specific risks associated with their dual roles and should consider recusal from conflicted decisions at the TAI board level, as discussed in Part VIII below.
III. Financial Context: The Zone of Insolvency
A. Indicators of Insolvency
As of September 30, 2022, TAI and TSL exhibit multiple, reinforcing indicators of financial distress that, taken together, place both entities at minimum in the "zone of insolvency" and likely render them actually insolvent under both balance-sheet and cash-flow tests. The following metrics are drawn from the financial data provided by TAI management, the Kensington Veltrian Partners ("KHP") enterprise valuation analysis, and the Drakos Maritime Valuations Ltd. fleet appraisal.
Liquidity Breach. On September 15, 2022, TSL breached the Minimum Liquidity Covenant under the Senior Secured Credit Agreement (which requires maintenance of $40 million in unrestricted cash and cash equivalents) when unrestricted cash fell to $27.3 million — a shortfall of $12.7 million, representing a 31.75% deficiency. This breach has not been cured and is one of the events of default that gave rise to the Forbearance Agreement discussed in Part III.B below. The liquidity position has continued to deteriorate since September 15, 2022, with unrestricted cash estimated at approximately $21.8 million as of December 1, 2022, based on the most recent cash flow projections provided by Ms. Restrepo.
Leverage Ratio Breach. The Maximum Net Leverage Ratio covenant of 5.50x was breached at 7.82x. This ratio was calculated as Net Debt of $770.9 million divided by last-twelve-months ("LTM") EBITDA of $98.6 million. The net debt figure reflects total funded indebtedness of approximately $847.3 million less unrestricted cash of $27.3 million (as of September 30, 2022, and prior to the application of the mezzanine facility's cash-netting restrictions). The magnitude of the breach — a leverage ratio 42.2% above the covenant threshold — is significant and reflects both the decline in EBITDA driven by the revenue downturn and the persistent burden of the group's capital structure.
Interest Coverage Breach. The Minimum Interest Coverage Ratio covenant of 2.50x was breached at 1.74x. This ratio was calculated as LTM EBITDA of $98.6 million divided by LTM Interest Expense of $56.7 million. The breach indicates that the group's cash earnings are insufficient to cover its interest obligations at a level consistent with the lenders' underwritten expectations, and the trend line suggests further deterioration as EBITDA continues to contract.
Revenue Decline. TSL's consolidated revenue declined 30.5% from €1.42 billion in FY2021 to an estimated €987 million for FY2022 (based on the nine-month run rate through September 30, 2022, annualized). This decline reflects a combination of factors, including the downturn in global dry bulk and containerized freight rates, the loss of two major chartering contracts with Aegean Commodity Traders AG and Trans-Pacific Logistics Inc. in Q2 2022, and operational disruptions associated with the aging fleet. At the TAI subsidiary level, revenue declined from $312 million in FY2021 to an estimated $198 million for FY2022, a decline of approximately 36.5%.
Fleet Value Decline. The appraised fair market value of TSL's owned fleet, as assessed by Drakos Maritime Valuations Ltd. (an independent marine surveying and valuation firm), dropped from $891 million as of January 2022 to $623 million as of November 1, 2022 — a decline of $268 million, or approximately 30.1%. This decline reflects both the deterioration in global secondhand vessel values and the aging profile of the TSL fleet (average age 14.3 years as of the appraisal date). The fleet is the primary collateral securing the senior secured credit facility, and the decline in collateral value has materially reduced the lenders' recovery cushion.
Total Debt Outstanding. As of September 30, 2022, total consolidated indebtedness across all facilities and categories was approximately $847.3 million, consisting of the following:
Enterprise Value. KHP's enterprise valuation analysis, completed in November 2022, estimated an enterprise value range of $580 million to $640 million (midpoint $610 million) for the consolidated Thalassa group. This valuation reflects a blended approach incorporating a discounted cash flow analysis, a comparable company trading analysis, and a precedent transaction analysis, adjusted for the current market environment and the group's operational profile. At the midpoint enterprise value of $610 million, total indebtedness of $847.3 million exceeds enterprise value by approximately $237.3 million, indicating that the equity is deeply out of the money and that even the senior secured lenders face a potential shortfall of approximately $70 million to $160 million (depending on the value attributed to senior secured collateral versus the unsecured claims waterfall).
Missed Unsecured Note Interest Payment. The December 1, 2022 semi-annual interest payment on the 8.25% Senior Unsecured Notes due 2026 — in the amount of $2,062,500 (calculated as $50 million principal × 8.25% annual coupon ÷ 2) — was not made. The indenture governing the unsecured notes provides a 30-day cure period for missed interest payments, which expires on January 1, 2023. If the coupon is not paid within the cure period, an event of default will occur under the indenture, triggering acceleration rights for the unsecured noteholders and potential cross-default provisions under other debt instruments.
B. Forbearance Agreement
In response to the covenant defaults described above, a Forbearance Agreement was executed on October 10, 2022, between TSL (as borrower), TAI (as guarantor), and the Senior Secured Lender syndicate, with Nordbank International AG acting as administrative agent. The Forbearance Agreement provides a 90-day standstill period through January 8, 2023, during which the senior secured lenders have agreed to forbear from exercising their acceleration and enforcement rights arising from the identified events of default.
The forbearance is subject to a number of conditions, including: (i) compliance with a 13-week cash flow forecast updated and delivered weekly; (ii) maintenance of minimum unrestricted cash of $15 million (a lower threshold than the original $40 million covenant, reflecting the parties' negotiated agreement); (iii) restrictions on capital expenditures, asset dispositions, and intercompany transfers outside the ordinary course; (iv) engagement of professional advisors (Calderwood & Harkness for legal, KHP for financial advisory) acceptable to the agent; and (v) good-faith participation in restructuring negotiations.
Critically, the Forbearance Agreement suspends but does not cure the underlying covenant defaults. The lenders retain the full panoply of rights and remedies under the credit agreement and applicable law, and those rights will revive immediately upon the earlier of (x) the expiration of the 90-day standstill period on January 8, 2023, and (y) the occurrence of any additional event of default or breach of the forbearance conditions. Accordingly, the forbearance provides a limited and conditional breathing space, but does not resolve the fundamental financial distress confronting the Thalassa group.
C. Conclusion on Insolvency Status
Based on the financial data summarized above, we conclude that TAI and TSL are, at minimum, in the "zone of insolvency" and are likely actually insolvent under both the balance-sheet test and the cash-flow test.
Under the balance-sheet test (sometimes referred to as the "asset-deficiency" test), a corporation is insolvent when its total liabilities exceed the fair value of its total assets. Here, total consolidated indebtedness of approximately $847.3 million significantly exceeds the KHP enterprise value estimate of $580 million to $640 million (midpoint $610 million). Even at the high end of the enterprise value range ($640 million), total liabilities exceed enterprise value by more than $207 million.
Under the cash-flow test (sometimes referred to as the "equitable insolvency" test), a corporation is insolvent when it is unable to pay its debts as they become due in the ordinary course of business. The liquidity shortfall (unrestricted cash of $27.3 million as of September 30, 2022, declining to an estimated $21.8 million as of December 1, 2022, against a $40 million minimum liquidity covenant), the missed December 1, 2022 unsecured note coupon of $2,062,500, and the ongoing inability to service debt without further capital infusion or restructuring all indicate that cash-flow insolvency is either present or imminent.
This determination is significant for the fiduciary duty analysis that follows. Under Delaware law, the actual insolvency of a corporation causes fiduciary duties to encompass the interests of creditors as residual beneficiaries of the corporate enterprise. The directors and officers of TAI — and, under the parallel Greek law framework, the directors and officers of TSL — must conduct themselves accordingly.
IV. Delaware Law: Fiduciary Duties of Directors and Officers
A. Core Fiduciary Duties
Under Delaware law, which governs TAI as a Delaware corporation, directors and officers owe two primary fiduciary duties to the corporation and, derivatively, to its stakeholders. These duties are rooted in fundamental principles of equity and are the cornerstones of Delaware corporate governance.
Duty of Care. The duty of care requires that directors and officers act on an informed basis, in good faith, and with the honest belief that the action taken is in the best interest of the company. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984). This duty requires directors to inform themselves, prior to making a business decision, of all material information reasonably available to them. Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985). The duty of care does not require directors to achieve any particular business outcome; rather, it requires that the process by which decisions are made be reasonably informed and deliberate. Directors must devote adequate time and attention to board matters, review material documents and financial analyses, ask probing questions of management and advisors, and ensure that they understand the risks and alternatives associated with any significant corporate action.
In the current context, the duty of care demands that TAI's directors and officers make restructuring-related decisions only after thorough deliberation, with the benefit of advice from qualified legal counsel (Calderwood & Harkness) and financial advisors (KHP), and with full knowledge of the financial condition of the company, the terms and implications of the forbearance agreement, the alternatives available (including Chapter 11), and the interests of the various stakeholder constituencies.
Duty of Loyalty. The duty of loyalty requires that directors and officers act in the best interests of the corporation and its stakeholders, and not for personal benefit or the benefit of a conflicted party. Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939). The duty of loyalty prohibits self-dealing transactions (transactions in which the fiduciary has a personal financial interest on both sides), usurpation of corporate opportunities (taking for oneself a business opportunity that properly belongs to the corporation), and conflicts of interest that compromise the fiduciary's ability to exercise independent judgment.
Transactions involving conflicts of interest are subject to the "entire fairness" standard of review — the most exacting standard under Delaware law — which places the burden on the conflicted fiduciary to demonstrate both fair dealing (a fair process) and fair price (a fair economic result). Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983). However, the burden can be shifted back to the plaintiff if the transaction was approved by a well-functioning committee of independent, disinterested directors or by a fully informed vote of disinterested stockholders. Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014).
The duty of loyalty is of particular relevance in the Thalassa restructuring given the controlling shareholder dynamic (the Kostandinos family's 80% ownership of TSL through KFO Holdings), the intercompany note between TAI and TSL, and the dual-hat roles of certain directors.
The Business Judgment Rule. The business judgment rule is a presumption that, in making a business decision, the directors of a corporation acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interest of the company. Aronson, 473 A.2d at 812. When the business judgment rule applies, courts will not second-guess substantive business decisions, even if those decisions ultimately prove to be unwise or unprofitable. The rule reflects a judicial recognition that directors, not courts, are best positioned to make business judgments, and that the risk-taking inherent in business decision-making should not be chilled by the threat of personal liability.
The business judgment rule applies unless the plaintiff can show that the directors breached their duty of care (by acting uninformed) or their duty of loyalty (by acting with a conflict of interest or in bad faith). If the presumption is rebutted, the standard of review shifts to entire fairness, and the directors bear the burden of proving that the challenged transaction was entirely fair to the corporation.
For TAI's directors and officers, the business judgment rule remains the primary shield against personal liability. To preserve the protection of the rule, every significant decision — particularly decisions related to the restructuring, the forbearance agreement, intercompany transactions, the potential Chapter 11 filing, and the engagement and retention of professionals — must be made through a well-documented, deliberative process.
B. The "Zone of Insolvency" Doctrine — Post-*Gheewalla* Framework
The relationship between fiduciary duties and the financial condition of a corporation has been the subject of significant judicial and scholarly attention. The seminal Delaware Supreme Court decision in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007), established the governing framework.
Prior to Gheewalla, there was considerable uncertainty in Delaware law regarding whether fiduciary duties shifted to creditors when a corporation entered the "zone of insolvency" — a term used to describe the period when a corporation is approaching, but has not yet reached, actual insolvency. Some earlier Chancery Court decisions, notably Credit Lyonnais Bank Nederland, N.V. v. Pathe Communications Corp., No. 12150, 1991 WL 277613 (Del. Ch. Dec. 30, 1991), suggested that directors of a corporation operating in the "vicinity of insolvency" should consider the interests of the "entire corporate enterprise," including creditors, and that a board could properly consider creditor interests alongside stockholder interests in making business decisions.
In Gheewalla, the Delaware Supreme Court clarified the doctrine in several important respects:
First, the Court held that creditors of a Delaware corporation that is insolvent or in the zone of insolvency cannot bring direct fiduciary duty claims against directors. 930 A.2d at 101-03. Fiduciary duties are owed to the corporation, not to individual creditors, and claims for breach of fiduciary duty belong to the corporation and may only be asserted derivatively — that is, on behalf of the corporation by a party with standing to bring a derivative action. Id. at 101 ("[T]he creditors of a Delaware corporation that is either insolvent or in the zone of insolvency have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against the corporation's directors.").
Second, when a corporation is solvent, directors owe fiduciary duties to the corporation and, derivatively, to its stockholders as the residual claimants of the corporation's value. The interests of creditors are protected by contractual rights (loan agreements, indentures, etc.) and applicable law (fraudulent transfer statutes, etc.), but not by fiduciary duties.
Third, when a corporation becomes actually insolvent — whether on a balance-sheet basis (liabilities exceed assets) or a cash-flow basis (inability to pay debts as they come due) — creditors replace stockholders as the residual beneficiaries of the corporation's value. In this circumstance, fiduciary duties continue to run to the corporation, but the interests of the corporation are understood to encompass creditor interests, because creditors are now the parties with the economic stake in the corporation's remaining value. Id. at 101-02. However, this does not create a separate or independent fiduciary duty owed directly to creditors. Id. at 99 ("When a solvent corporation is navigating in the zone of insolvency, the focus for Delaware directors does not change: directors must continue to discharge their fiduciary duties to the corporation and its shareholders by exercising their business judgment in the best interests of the corporation for the benefit of its shareholder owners.").
Fourth, the "zone of insolvency" concept — standing alone — does not shift fiduciary duties to creditors. The shift occurs only upon actual insolvency. The zone of insolvency is better understood as a period of heightened risk during which directors should be particularly attentive to the potential for fiduciary duty claims, but the formal legal standard does not change until actual insolvency is established.
Practical Impact for TAI. Given the financial metrics discussed in Part III — total indebtedness of $847.3 million against an enterprise value range of $580 million to $640 million, unrestricted cash of $27.3 million (declining), a missed unsecured note coupon, and multiple covenant breaches — TAI is likely actually insolvent under both the balance-sheet and cash-flow tests. Accordingly, the fiduciary duties of TAI's directors and officers must account for creditor interests in all decision-making. This does not mean that directors must prioritize creditor interests above all others in every circumstance, nor does it transform directors into agents of the creditors. Rather, it means that the overall welfare of the corporate enterprise — including the interests of creditors as residual claimants — must be the guiding principle in exercising business judgment. Decisions that benefit stockholders (here, TSL and ultimately the Kostandinos family through KFO Holdings) at the expense of creditors will face heightened scrutiny and may not be protected by the business judgment rule.
It should also be noted that in a subsequent Chapter 11 case, a trustee or creditors' committee could assert derivative claims against TAI's directors and officers for breaches of fiduciary duty occurring in the prepetition period. The applicable standard of review would be the Delaware fiduciary duty framework described in this memorandum, and the zone-of-insolvency analysis would be central to any such claims.
C. Exculpation and Indemnification Under DGCL §102(b)(7) and §145
Delaware law provides two important mechanisms for protecting directors and officers from personal liability: exculpation and indemnification.
Exculpation (DGCL §102(b)(7)). Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") authorizes a Delaware corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of directors to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Such a provision, commonly referred to as an "exculpation clause," is a powerful protective mechanism and is included in the certificates of incorporation of the vast majority of Delaware corporations. However, §102(b)(7) contains important carve-outs: an exculpation clause cannot eliminate or limit liability for (i) breaches of the duty of loyalty, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) unlawful payment of dividends or stock purchases or redemptions under DGCL §174, or (iv) any transaction from which the director derived an improper personal benefit.
TAI's certificate of incorporation should be reviewed to confirm the existence and precise scope of a §102(b)(7) exculpation clause. If such a clause is in place, it would protect TAI's directors (but not officers, unless TAI has adopted the recent amendment under Delaware's 2022 amendments to DGCL §102(b)(7) permitting officer exculpation for duty-of-care claims) from monetary damages for duty-of-care claims — i.e., claims alleging that directors failed to act on a sufficiently informed basis — but would not protect against duty-of-loyalty claims, bad-faith claims, or claims involving intentional misconduct. Given the restructuring context, the most likely claims against TAI directors would involve duty-of-loyalty challenges to intercompany transactions and self-dealing, which fall outside the scope of exculpation.
Indemnification (DGCL §145). Section 145 of the DGCL authorizes a Delaware corporation to indemnify its directors and officers against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, to which the director or officer was a party by reason of his or her corporate role, provided that the director or officer acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation. DGCL §145(a) (third-party actions); §145(b) (actions by or in the right of the corporation). In the case of actions by or in the right of the corporation (derivative actions), indemnification is limited to expenses and does not cover judgments or settlements.
TAI's bylaws should be reviewed for mandatory indemnification and advancement provisions. Advancement of expenses — the obligation of the corporation to pay defense costs as they are incurred, subject to an undertaking by the director or officer to repay if it is ultimately determined that he or she is not entitled to indemnification — is a critical protection for individual fiduciaries, particularly in the restructuring context where litigation may commence before the restructuring is resolved. Homestore, Inc. v. Tafeen, 888 A.2d 204 (Del. 2005) (recognizing the importance of advancement rights).
Intersection with Insolvency. In an insolvency scenario, indemnification and advancement rights may be of limited practical value because the corporation may be unable to fund these obligations. If TAI's assets are insufficient to pay defense costs for its directors and officers, the D&O insurance policy becomes the primary — and potentially only — source of protection. This underscores the critical importance of the D&O insurance coverage analysis in Part VII below.
D. Enhanced Scrutiny: *Revlon* Duties
Under certain circumstances, Delaware law imposes enhanced duties on directors that go beyond the ordinary business judgment rule. Most relevant here is the Revlon framework, which arises from the Delaware Supreme Court's decision in Revlon, Inc. v. MacAndrews & Forbaci Holdings, Inc., 506 A.2d 173 (Del. 1986).
Under Revlon, when a board of directors determines that a sale or breakup of the company is inevitable — that is, when the board abandons the long-term strategic plan and enters a "sale mode" — the board's duty shifts from the preservation of the corporate enterprise to the maximization of the company's value at sale for the benefit of stockholders (and, in insolvency, creditors). In practical terms, Revlon requires the board to seek the highest price reasonably available through a fair and open process.
Current Posture. TSL and TAI are currently pursuing a dual-track approach: an out-of-court restructuring negotiation with the senior secured lenders, the mezzanine lender, and the unsecured noteholders, with Chapter 11 contingency planning occurring in parallel. The restructuring contemplates the continuation of the Thalassa business as a going concern, with a recapitalization of the balance sheet through some combination of debt-for-equity conversion, new money investment, the KFO equity contribution of €35 million, and potential asset sales of non-core vessels. The restructuring does not contemplate a sale or liquidation of TAI or the Thalassa group as a whole.
Accordingly, Revlon duties are not currently triggered. The board's obligation remains to exercise informed business judgment in the best interests of the corporate enterprise, taking into account the interests of creditors as residual claimants given the state of insolvency.
However, this assessment could change. If the out-of-court restructuring negotiations fail and a Chapter 11 filing becomes necessary, and if the Chapter 11 case evolves into a liquidation under Chapter 7 or a §363 sale of substantially all assets, Revlon duties may arise. The board should be prepared for this contingency and should ensure that, if a sale becomes the chosen path, it is conducted through a process designed to maximize value — including, potentially, a marketing process or auction supervised by KHP.
V. Specific Risk Areas for TAI Officers and TSL Directors
A. Intercompany Transactions
The $76.4 million subordinated intercompany note from TAI to TSL is the most significant area of fiduciary duty risk in the current restructuring. This note represents a claim by TSL (the parent) against TAI (the wholly-owned subsidiary) and is subordinated to all of TAI's external debt obligations. In the event of a Chapter 11 filing by TAI, the intercompany note would be treated as a claim against the TAI estate, and its priority, validity, and enforceability would be subject to challenge by other creditors.
Decisions regarding the repayment, subordination, modification, or forgiveness of the intercompany note must be evaluated with scrupulous attention to fairness to TAI and its creditors. This is precisely the type of transaction that implicates the duty of loyalty, because the parties on both sides of the note are controlled by the same ultimate beneficial owners — the Kostandinos family through KFO Holdings. Any decision by TAI's board to repay the intercompany note, in whole or in part, would transfer value from TAI (and, derivatively, from TAI's creditors) to TSL (and, derivatively, to the Kostandinos family). Such a transfer, if made while TAI is insolvent or in the zone of insolvency, would be subject to challenge as a fraudulent transfer under both state law (Delaware Uniform Voidable Transactions Act, 6 Del. C. §§1301-1311) and federal law (11 U.S.C. §548).
Moreover, any repayment of the intercompany note in the 90-day period preceding a Chapter 11 filing (or, because TSL is an insider of TAI, in the one-year period preceding a filing) could be scrutinized as a preferential transfer under 11 U.S.C. §547. The Preference and Fraudulent Transfer Exposure Analysis dated December 1, 2022 provides a detailed analysis of these risks and should be consulted for the specifics of the avoidance action exposure.
Beyond the intercompany note, other intercompany transactions — including management fees, shared services charges, vessel charter payments, and cash sweeps — must be reviewed to ensure that they reflect arm's-length terms and provide fair consideration to TAI. The risk of equitable subordination (11 U.S.C. §510(c)) or recharacterization of TSL's intercompany claim is heightened if the intercompany dealings reflect overreaching by the parent to the detriment of the subsidiary's creditors.
Recommendation. TAI's board should independently evaluate any intercompany transactions and should consider appointing an independent director or forming an independent committee to evaluate and approve such transactions. The independent director or committee should be empowered to retain independent legal and financial advisors and should document its analysis and conclusions in detailed board minutes or committee reports. Any modification of the intercompany note — whether a deferral, reduction, or restructuring of terms — should be negotiated and documented as if it were an arm's-length transaction between unrelated parties.
B. Continuation of Business Operations During Insolvency
The decision to continue operating the business during the forbearance period and while the restructuring is being negotiated is itself a fiduciary duty decision. Directors must ensure that the company does not incur obligations it cannot reasonably expect to repay, as the incurrence of such obligations could harm creditors and expose directors to claims that they acted in bad faith or without due care.
The theory of "deepening insolvency" — which posits that directors who cause a corporation to continue operating and incurring debt when the corporation is already insolvent can be held liable for the additional losses caused by the prolonged operation — has been the subject of considerable judicial skepticism in Delaware. In Trenwick America Litigation Trust v. Rowan Whitfield CPAs LLP, L.L.P., 906 A.2d 168 (Del. Ch. 2006), then-Vice Chancellor Strine (now retired Chief Justice Strine) rejected deepening insolvency as an independent cause of action under Delaware law, reasoning that the decision to continue operating a business is a business judgment and that holding directors liable simply for failing to liquidate would be inconsistent with the business judgment rule. The court emphasized that "deepening insolvency is no more of a cause of action when a firm is insolvent than a cause of action for 'shallowing profitability' would be when a firm is solvent." 906 A.2d at 204.
Notwithstanding the rejection of deepening insolvency as a standalone cause of action, the underlying concern remains relevant. If directors cause the company to incur new obligations — for example, by drawing on the revolving credit facility, ordering new supplies, or entering into new charters — while knowing that the company has no reasonable prospect of satisfying those obligations, such conduct could support a breach-of-fiduciary-duty claim (for failure to act in good faith) or a fraudulent transfer claim (if the new obligations are incurred without reasonably equivalent value in exchange).
In the current context, the revolving credit facility under the Senior Secured Credit Agreement has a total commitment of $200 million, of which $185 million is currently drawn, leaving $15 million in undrawn capacity. Any further draws on the revolving facility during the forbearance period require careful consideration, as such draws increase the senior secured claims against TAI's assets (potentially to the detriment of subordinated creditors) and may be subject to challenge if TAI ultimately files for Chapter 11. The TAI board should ensure that any draws are made only to fund essential operating expenses and are consistent with the 13-week cash flow forecast being provided to the senior secured lenders under the Forbearance Agreement.
Similarly, new trade payables incurred during the forbearance period — while necessary to maintain business operations — should be managed carefully. Vendors and counterparties that extend credit to TAI during this period may assert administrative expense priority or other priority claims if TAI files for Chapter 11, and the accumulation of significant new trade payables could complicate the restructuring process.
Key Principle. The decision to continue operating is defensible — and, indeed, may be the best course of action for maximizing value for the enterprise and all stakeholders — so long as it is made on an informed basis, with the benefit of professional advice, and with a reasonable basis for believing that the continued operation will preserve or enhance value rather than destroy it.
C. Preferential Payments and Fraudulent Transfers
Officers who authorize payments to insiders or affiliated parties during the 90-day preference period (or the one-year insider preference period applicable to payments to entities such as TSL, KFO Holdings, and other affiliates) face potential clawback exposure in a subsequent Chapter 11 case under 11 U.S.C. §547 (preferences) and §548 (fraudulent transfers). While the primary exposure in a preference or fraudulent transfer action falls on the recipient of the payment (who must disgorge the payment to the estate), directors and officers who authorize such payments may face fiduciary duty claims for failing to protect the estate's assets.
Particular Concerns. The following payments and obligations are of particular concern from a preference and fraudulent transfer perspective:
(a) Any payments on the $76.4 million subordinated intercompany note to TSL, for the reasons discussed in Part V.A above.
(b) Payments to Olympian Fuel & Supply SA, which has $9.2 million in outstanding trade payables. Olympian is a Greek entity that has historically been a significant supplier of fuel and marine supplies to TSL's fleet. The relationship between Olympian and the Kostandinos family should be investigated to determine whether Olympian is an insider or affiliate of the Thalassa group, which would extend the preference look-back period from 90 days to one year.
(c) Any distributions, dividends, management fees, or other payments to KFO Holdings SA or to Dimitrios Kostandinos or Elena Kostandinos-Pavlou in their personal capacities. Such payments, if made while TAI is insolvent, would face scrutiny as both preferential transfers (to the extent they are on account of an antecedent debt) and constructive fraudulent transfers (to the extent they are made without reasonably equivalent value in exchange).
(d) Payments to other large trade creditors that are disproportionate to the ordinary course of business. The "ordinary course of business" defense under §547(c)(2) may protect some trade payments, but payments that are significantly larger, earlier, or otherwise outside the normal pattern of dealings may be vulnerable.
TAI's officers should be advised to consult with Calderwood & Harkness before authorizing any payment to an insider or affiliated party, and before making any payment that is materially outside the ordinary course of TAI's business operations. The Preference and Fraudulent Transfer Exposure Analysis dated December 1, 2022 provides a detailed framework for evaluating specific payment decisions.
D. Dual-Hat Fiduciary Obligations
As discussed in Part II.C above, Georgios Andreadis (CEO of TSL and potential TAI board member) and Elena Kostandinos-Pavlou (Vice Chairwoman of TSL and potential TAI board member) hold fiduciary positions at both the parent and subsidiary levels. This dual-hat arrangement creates inherent conflicts of interest that are amplified in a restructuring context where the interests of the parent and the subsidiary diverge.
The areas of potential divergence include, but are not limited to:
(a) Treatment of the intercompany note. TSL, as creditor, has an interest in maximizing recovery on the $76.4 million note. TAI's creditors have an interest in minimizing or eliminating the note, or in subordinating it to their own claims.
(b) Allocation of restructuring costs. The costs of the restructuring — including legal fees, financial advisory fees, and operational restructuring expenses — must be allocated between TSL and TAI. The allocation methodology should be fair and well-documented, as any disproportionate allocation of costs to TAI would effectively transfer value from TAI's creditors to TSL.
(c) Allocation of vessel revenues. Certain Thalassa vessels are owned by TSL or its non-TAI subsidiaries but generate revenue that flows through TAI's operations. The intercompany pricing of charter agreements, revenue-sharing arrangements, and management fees must be at arm's length.
(d) Equity contribution terms. The proposed €35 million equity contribution from KFO Holdings is intended to support the restructuring, but the terms of the contribution — including the valuation, the dilution effect, and any conditions or preferential terms — must be fair to all stakeholders.
Directors who serve on both boards must be mindful of their separate and independent obligations to each entity. When a conflict arises, the conflicted director should disclose the conflict to both boards, recuse himself or herself from deliberations and votes on the conflicted matter at the entity whose interests he or she cannot independently represent, and ensure that the decision is made by disinterested directors (or, if no disinterested directors are available, by an independent committee with the authority to retain independent advisors).
Dimitrios Kostandinos, as 62% equity holder (through KFO Holdings) and Chairman of TSL, presents a unique set of dual-hat and controlling-shareholder concerns. While Mr. Kostandinos does not serve on the TAI board (based on our current understanding), his dominant influence over TSL — and, through TSL, over TAI — means that his decisions regarding the restructuring have a direct impact on both entities. His personal financial interests (preservation of equity value, terms of the KFO equity contribution, treatment of the intercompany note) may not be aligned with the interests of TAI's creditors. Any transaction in which Mr. Kostandinos has a personal interest should be subject to the most rigorous scrutiny and should be approved by disinterested directors or an independent committee.
E. Decision to File or Not File Chapter 11
The decision of whether and when to file a Chapter 11 petition for TAI is among the most significant fiduciary duty decisions confronting the TAI board. The filing decision must be made in good faith, on an informed basis, and with a reasonable belief that the filing is in the best interests of the corporation and its stakeholders.
Filing Too Early. A premature Chapter 11 filing carries risks, including: destruction of going-concern value through the stigma of bankruptcy; loss of customer and vendor relationships; disruption to operations; the imposition of significant administrative costs (professional fees, U.S. Trustee fees, court costs); and the transfer of significant decision-making authority from the board to the bankruptcy court and creditor constituencies. If the out-of-court restructuring is achievable and would produce a better outcome for the enterprise than a Chapter 11 reorganization, a premature filing could expose directors to claims that they failed to pursue the more value-maximizing alternative.
Filing Too Late. Conversely, delay in filing can also expose directors to liability. If the company continues to operate and incur obligations while insolvent, and the delay results in a deterioration of the company's financial position (dissipation of assets, accumulation of additional claims, loss of going-concern value), directors may face claims that they breached their fiduciary duties by failing to seek the protection of the bankruptcy court at the appropriate time. In extreme cases, delay may result in a conversion from Chapter 11 to Chapter 7 (liquidation), with the loss of any possibility of reorganization.
Current Approach. The dual-track approach — simultaneous pursuit of an out-of-court restructuring and Chapter 11 contingency planning — is itself a fiduciary duty best practice, as it ensures that the board has alternatives and is not forced into a suboptimal outcome by the passage of time. The Chapter 11 contingency plan (being prepared separately by Calderwood & Harkness) will provide the board with a detailed roadmap for a Chapter 11 filing, including first-day motions, DIP financing proposals, key employee retention plans, and a proposed plan of reorganization framework, so that the board can make a well-informed filing decision if and when the time comes.
The proposed filing venue is the United States Bankruptcy Court for the Southern District of Texas (Houston Division), based on TAI's principal office location at 1400 McKinney Street, Suite 2200, Houston, TX 77010. Venue in the Southern District of Texas is appropriate under 28 U.S.C. §1408 because TAI has its principal place of business in Houston.
F. Professional Fee Obligations
If a Chapter 11 petition is filed, prepetition professional fees — including fees owed to Calderwood & Harkness and KHP — become prepetition claims against the estate. Professional fees incurred post-petition are administrative expenses under 11 U.S.C. §503(b) and are subject to reasonableness review by the bankruptcy court.
Calderwood & Harkness's current engagement with TAI is at the following billing rates: $1,650 per hour for partners, $1,050 per hour for senior associates, $850 per hour for associates, and $425 per hour for paralegals. A $500,000 retainer was received at the commencement of the engagement. KHP's engagement provides for a monthly advisory fee of $250,000, plus a success fee (the terms of which are detailed in the engagement letter).
The aggregate professional fees for the first 12 months of a Chapter 11 case — encompassing debtor's counsel, financial advisor, claims agent, creditors' committee counsel and financial advisor, and other court-appointed professionals — are estimated at approximately $18.5 million. This estimate is based on comparable cases of similar size and complexity and assumes a 12-month path to confirmation of a plan of reorganization.
The TAI board should ensure that all professional engagements are properly authorized by board resolution, that the terms of engagement are market-standard and defensible, and that the estate is not burdened with excessive or duplicative administrative costs. In a Chapter 11 case, all professionals retained by the debtor or a committee must be approved by the bankruptcy court, and their fees are subject to periodic review and approval under 11 U.S.C. §330. The board should be prepared for fee objections from creditor constituencies and should work with counsel to ensure that fee applications are well-documented and supportable.
VI. Greek Law Considerations for TSL Board Members
A. Overview
TSL is a Greek Société Anonyme (Anonimi Etairia), and its directors and officers are subject to Greek corporate law and Greek insolvency law. Greek law considerations are relevant to this analysis because (i) TSL's directors — particularly Dimitrios Kostandinos, Elena Kostandinos-Pavlou, and Georgios Andreadis — face potential personal liability under Greek law in addition to any exposure they may have under Delaware law in their capacity as TAI board members, and (ii) the interplay between Greek and Delaware fiduciary duty standards is relevant to the dual-hat directors and to the coordination of the cross-border restructuring.
This memorandum provides only a summary of key Greek law concepts for contextual purposes. Definitive analysis of Greek law obligations is being provided by Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, Athens), which has been retained to advise on all matters of Greek law arising in connection with the TSL restructuring. The summary below is based on preliminary consultations with Greek counsel and should be read subject to their more detailed analysis.
B. Greek Corporate Law Duties
Under Greek Law 4548/2018 (the Greek Companies Act, which replaced the former Codified Law 2190/1920), directors of a Greek Société Anonyme owe duties of care and loyalty to the company. Article 96 of Law 4548/2018 provides that board members must manage the company's affairs with the diligence of a prudent businessperson, acting in the interest of the company and its shareholders. Board members who breach their duties may be held personally liable to the company for damages, and such liability may be asserted by the company, by shareholders holding at least 10% of the share capital (through a derivative action mechanism), or, in insolvency, by the insolvency administrator.
In the context of insolvency, Greek Law 4738/2020 (the Greek Debt Settlement & Insolvency Code, commonly referred to as the "New Greek Insolvency Code," which entered into force on March 1, 2021) imposes additional obligations on directors. Key provisions include:
(a) Obligation to file for insolvency. Under Article 77 of Law 4738/2020, a debtor is obligated to file for insolvency within 30 days of cessation of payments (pausi pliromón), defined as the general and permanent inability to pay debts as they become due. Failure to file within the prescribed period may result in personal liability of the directors for damages caused to creditors by the delay.
(b) Liability for acts worsening the company's position. Directors who engage in transactions or take actions after insolvency is apparent that worsen the company's financial position or that transfer value to insiders at the expense of creditors may face personal liability under both the corporate law duties framework and the insolvency law avoidance provisions.
(c) Criminal liability. In certain circumstances, including fraudulent bankruptcy or mismanagement leading to insolvency, Greek law imposes criminal liability on directors. Articles 338-340 of the Greek Penal Code and the specific provisions of Law 4738/2020 provide for criminal sanctions, including imprisonment, for directors who deliberately or negligently cause or contribute to the insolvency of the company.
TSL board members — Dimitrios Kostandinos, Elena Kostandinos-Pavlou, and Georgios Andreadis — may face personal liability under Greek law for failure to file for insolvency in a timely manner, for actions taken after insolvency that worsen the company's financial position, or for preferential or fraudulent transactions with insiders. The 30-day filing obligation under Article 77 is of particular concern: if TSL's "cessation of payments" can be dated to September 15, 2022 (the date of the liquidity covenant breach) or earlier, the 30-day period may have already expired without a filing. Greek counsel should provide definitive advice on this point.
C. Cross-Border Coordination
If TSL were to file for insolvency under Greek Law 4738/2020, a parallel proceeding under Chapter 15 of the U.S. Bankruptcy Code could be commenced in the United States to obtain recognition of the Greek proceeding as either a "foreign main proceeding" (if TSL's center of main interests, or "COMI," is in Greece) or a "foreign nonmain proceeding" (if TSL has an "establishment" in the United States). Recognition under Chapter 15 would provide TSL with certain protections in the United States, including the automatic stay and the ability to coordinate with any Chapter 11 case filed by TAI.
The COMI analysis for TSL — which is addressed in the separate COMI/Chapter 15 memorandum dated November 8, 2022 — indicates that TSL's COMI is in Piraeus, Greece, based on the location of its registered office, the location of its principal operations and management, and the expectations of its creditors and contractual counterparties. Accordingly, a Greek insolvency proceeding would likely be recognized in the United States as a foreign main proceeding.
The interplay between Greek and Delaware fiduciary duty standards is a relevant consideration for dual-hat directors serving on both the TSL and TAI boards. While the substantive standards are broadly similar in their emphasis on duties of care and loyalty, the specific requirements (including filing deadlines, personal liability provisions, and the availability of exculpation defenses) differ between the two jurisdictions. Directors with dual fiduciary obligations must comply

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