1044-00003 · Client 1044 · documents

supplemental-engagement-letter-tax.docx DOCUMENT Finance & Banking

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CALDERWOOD & HARKNESS LLP 780 Third Avenue New York, New York 10017

Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com

November 5, 2022

VIA EMAIL AND OVERNIGHT COURIER

Georgios Andreadis Chief Executive Officer Thalassa Shipping & Logistics Société Anonyme 42 Akti Miaouli Piraeus 18538, Greece

Marcus Hale President Thalassa Americas Inc. 1400 McKinney Street, Suite 2200 Houston, Texas 77010

Matter No. 1044-00003

Dear Mr. Andreadis and Mr. Hale:

1. Reference to Original Engagement Letter

This Supplemental Engagement Letter (this "Supplemental Letter") supplements, and is incorporated into, the Engagement Letter dated October 25, 2022 (the "Original Engagement Letter"), between Calderwood & Harkness LLP ("C&H" or the "Firm") and Thalassa Shipping & Logistics Société Anonyme, a Greek société anonyme ("TSL"), and Thalassa Americas Inc., a Delaware corporation ("TAI," and together with TSL, the "Clients"), bearing matter number 1044-00003.

As you are aware, the Original Engagement Letter set forth the scope of C&H's engagement to advise the Clients on the following matters: (i) Chapter 11 contingency planning for TAI; (ii) negotiation of an out-of-court restructuring of the Clients' outstanding indebtedness; (iii) cross-border coordination with Greek counsel Vassiliou & Demetriou Law Offices in connection with the foregoing; and (iv) tax structuring advice related to the restructuring alternatives under consideration.

The Original Engagement Letter identified Nathaniel Bower as Responsible Partner for the engagement and Colette Whitman as Billing Partner. Those designations remain unchanged. This Supplemental Letter is intended to formalize the addition of Sylvia Hartwell, Specialist Partner in C&H's Tax Practice Group, to the engagement team and to more specifically define the scope of tax advisory services to be rendered in connection with the matter. Since the commencement of our engagement, it has become apparent that the complexity and magnitude of the tax issues implicated by the various restructuring alternatives warrant a detailed delineation of the tax advisory workstreams to be performed, and this Supplemental Letter serves that purpose.

All terms and conditions of the Original Engagement Letter remain in full force and effect except as expressly supplemented herein. In the event of any conflict or inconsistency between the provisions of this Supplemental Letter and the provisions of the Original Engagement Letter, this Supplemental Letter shall control with respect to the Tax Advisory Scope described herein. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Original Engagement Letter.

2. Background

TSL is a Greek-headquartered private shipping and logistics conglomerate, founded in 1987 by the Kostandinos family, that owns and operates a fleet of approximately fifty (50) vessels, consisting of thirty-eight (38) dry-bulk carriers and twelve (12) container vessels, with operations spanning major trade routes across Europe, Asia, the Americas, and the Middle East. TSL's substantial U.S. operations are conducted through its wholly-owned Delaware subsidiary, TAI, which is treated as a C-Corporation for U.S. federal income tax purposes (Employer Identification Number: 84-3291057). TSL's Greek Tax Identification Number (AFM) is 998214763.

TSL currently faces a severe liquidity crisis driven by a sustained collapse in dry-bulk charter rates, significant vessel impairments recognized in the Clients' most recent financial statements, and covenant breaches under TSL's $685 million Senior Secured Credit Facility (dated June 15, 2019), for which Nordbank International AG serves as Administrative Agent and Collateral Agent. These financial pressures have created an urgent need for a comprehensive restructuring of the Clients' capital structure.

As of September 30, 2022, total consolidated indebtedness of TSL and its subsidiaries is approximately $847.3 million, composed of the following:

(a) Senior Secured Credit Facility: Approximately $540 million outstanding, consisting of (i) a Term Loan A tranche of $270 million, (ii) a Revolving Credit Facility drawn to $185 million, and (iii) a U.S. Tranche Term Loan B of $85 million;

(b) Mezzanine Notes: Approximately $112.3 million outstanding, consisting of the original $100 million principal amount plus $12.3 million in payment-in-kind ("PIK") interest capitalized through September 30, 2022, held by Dralvecen Mezzanine Capital LLC, bearing interest at a rate of 11.5% on a PIK toggle basis;

(c) Senior Unsecured Notes: $50 million in aggregate principal amount of 8.25% Senior Unsecured Notes due 2025, issued under an indenture for which Garrison Trust Company serves as indenture trustee;

(d) Intercompany Note: A $76.4 million subordinated intercompany note from TAI (as maker) to TSL (as holder), bearing interest at 5.0% per annum; and

(e) Trade Payables: Approximately $38.7 million in trade payables and other accrued liabilities across the consolidated enterprise.

C&H is currently pursuing a dual-track approach on behalf of the Clients: Chapter 11 contingency planning for TAI, with the proposed venue being the United States Bankruptcy Court for the Southern District of Texas, Houston Division, and simultaneous negotiation of an out-of-court restructuring with the Clients' various creditor constituencies, including the lenders under the Senior Secured Credit Facility, Dralvecen Mezzanine Capital LLC, the holders of the Senior Unsecured Notes, and the trade creditor community.

The restructuring alternatives currently under consideration involve the potential cancellation, modification, or exchange of significant indebtedness of TSL and TAI, equity-for-debt exchanges that would result in the issuance of new equity interests in TSL to certain creditor constituencies, cross-border fund flows between Greek and U.S. entities, restructuring of the intercompany note between TSL and TAI, and potential equity contributions by KFO Holdings Société Anonyme (the Kostandinos family holding company). Each of these alternatives raises substantial U.S. federal income tax, international tax, and potentially Greek tax issues that require the specialized tax advisory services described in this Supplemental Letter.

3. Scope of Tax Advisory Services

Set forth below is a detailed description of the specific tax advisory workstreams that Sylvia Hartwell and her team will undertake in connection with the engagement. The workstreams described below are intended to be comprehensive but not exhaustive; additional tax issues may arise as the restructuring alternatives are refined, and Section 3.7 below addresses the process for expanding the scope as necessary.

3.1 Cancellation-of-Debt Income ("CODI") Analysis Under §108 of the Internal Revenue Code

C&H will provide a comprehensive analysis of the potential cancellation-of-debt income ("CODI") arising under §61(a)(12) of the Internal Revenue Code of 1986, as amended (the "Code"), in connection with any restructuring, modification, exchange, or cancellation of the outstanding indebtedness of TSL or TAI. This analysis will encompass, without limitation, the following:

(a) Quantification of Potential CODI. Analysis and quantification of the potential CODI that would arise in connection with any restructuring, modification, or exchange of (i) the Mezzanine Notes (approximately $112.3 million outstanding, including capitalized PIK interest), (ii) the Senior Secured Credit Facility (approximately $540 million outstanding), (iii) the Senior Unsecured Notes ($50 million outstanding), (iv) the intercompany note ($76.4 million), and (v) any other indebtedness of TSL or TAI. This analysis will take into account the adjusted issue price of each instrument, the fair market value of any consideration delivered in exchange, and any other relevant factors under applicable provisions of the Code and Treasury Regulations.

(b) Bankruptcy Exclusion — §108(a)(1)(A). Analysis of the availability of the bankruptcy exclusion under §108(a)(1)(A) of the Code, which would apply to the extent that the discharge of indebtedness occurs in a case under Title 11 of the United States Code. This exclusion would be potentially applicable if TAI were to file a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and the debt discharge were granted by the bankruptcy court, or pursuant to a confirmed plan of reorganization. Our analysis will address the scope and limitations of this exclusion, including its application to debtor entities versus non-debtor affiliates.

(c) Insolvency Exclusion — §108(a)(1)(B). Analysis of the availability of the insolvency exclusion under §108(a)(1)(B) of the Code, which would apply to the extent that TSL or TAI is "insolvent" (within the meaning of §108(d)(3) of the Code, i.e., the excess of liabilities over the fair market value of assets) immediately before the discharge of indebtedness. This analysis will require a determination of insolvency on an entity-by-entity basis, taking into account the fair market value of each entity's assets (including vessels, receivables, equity interests in subsidiaries, and other property) and the face amount and adjusted issue price of each entity's liabilities as of the relevant measurement date. We will coordinate with Kensington Veltrian Partners LLC to obtain the requisite asset valuations for this purpose.

(d) Tax Attribute Reduction Under §108(b). To the extent that CODI is excluded from gross income under §108(a)(1)(A) or §108(a)(1)(B), the Code requires a corresponding reduction in certain tax attributes of the debtor. C&H will analyze the ordering rules under §108(b)(2) for the reduction of (i) net operating losses ("NOLs") and NOL carryovers, (ii) general business credits, (iii) minimum tax credits, (iv) capital loss carryovers, (v) basis of the debtor's property, (vi) passive activity loss and credit carryovers, and (vii) foreign tax credit carryovers. We will model the impact of attribute reduction on each entity's post-restructuring tax position and advise on whether an election under §108(b)(5) to reduce the basis of depreciable property before reducing NOLs would be advantageous.

(e) Deemed Exchange Analysis Under Treasury Regulation §1.1001-3. Analysis of whether any proposed modification to the terms of the Senior Secured Credit Facility, the Mezzanine Notes, the Senior Unsecured Notes, or the intercompany note would constitute a "significant modification" triggering a deemed exchange of the old debt instrument for a new debt instrument under Treasury Regulation §1.1001-3. A deemed exchange may give rise to CODI to the extent the adjusted issue price of the old instrument exceeds the issue price of the new instrument. Our analysis will address the specific tests for significance under Treasury Regulation §1.1001-3(e), including changes in yield, timing of payments, obligor, collateral, and other terms.

(f) Particular Focus on Mezzanine Notes. Given that the restructuring alternatives under consideration include a potential exchange of the Mezzanine Notes for new equity interests in TSL, a partial haircut of the outstanding principal balance, or an exchange into new second-lien secured notes at a reduced principal amount, particular attention will be devoted to the CODI consequences for TSL (as issuer) of any such exchange, modification, or partial cancellation. The $112.3 million outstanding balance of the Mezzanine Notes (inclusive of $12.3 million in capitalized PIK interest) represents a significant potential source of CODI, and the analysis will consider whether and to what extent the bankruptcy exclusion, insolvency exclusion, or other provisions of §108 may mitigate or eliminate the resulting tax liability.

3.2 Cross-Border Tax Structuring

C&H will analyze the cross-border tax implications of the restructuring alternatives under consideration, including the following:

(a) U.S.-Greece Income Tax Treaty. Analysis of the application of the Convention Between the United States of America and the Hellenic Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the "U.S.-Greece Treaty") to interest payments, dividend distributions, and any deemed income arising in connection with the restructuring. This analysis will include a review of the relevant treaty articles governing the taxation of business profits, interest, dividends, and capital gains, as well as the limitation on benefits ("LOB") provisions, to determine the availability of treaty-rate reductions or exemptions.

(b) Withholding Tax on Intercompany Interest Payments. Analysis of U.S. federal withholding tax obligations under §§1441 and 1442 of the Code on interest payments made by TAI to TSL under the $76.4 million subordinated intercompany note, which currently bears interest at a rate of 5.0% per annum. Under the Code, interest payments from a U.S. obligor to a foreign payee are generally subject to a 30% withholding tax, subject to reduction under an applicable income tax treaty. We will analyze the availability of a reduced treaty rate under the U.S.-Greece Treaty and the procedural requirements for claiming such reduced rate, including the filing of IRS Form W-8BEN-E by TSL and compliance with any applicable certification requirements.

(c) Implications of Interest Rate Modification. If the restructuring involves a reduction of the interest rate on the intercompany note from 5.0% to a lower rate, we will analyze the withholding tax implications of such modification, including whether the modification constitutes a deemed exchange that would alter the withholding obligations on payments under the modified note. We will also consider whether a below-market interest rate on the intercompany note could give rise to deemed distribution treatment under §§7872 and 482 of the Code.

(d) Controlled Foreign Corporation and Subpart F Income Considerations. Analysis of the implications of TAI's status as a wholly-owned U.S. subsidiary of TSL, a Greek parent corporation, under the Controlled Foreign Corporation ("CFC") and Subpart F income provisions of Subchapter N of the Code (§§951 through 965). Although the typical CFC analysis focuses on the U.S. shareholder's inclusion of income from a foreign subsidiary, the inverse structure presented here — where the foreign parent holds the U.S. subsidiary — raises distinct questions regarding the characterization of income, earnings and profits, and deemed distributions arising from restructuring transactions. We will analyze whether any income recognized by TAI in connection with the restructuring (including CODI, if applicable) could create deemed distribution consequences or otherwise affect TSL's tax position under Subpart F or related provisions.

(e) GILTI Implications. Analysis of the Global Intangible Low-Taxed Income ("GILTI") provisions under §951A of the Code, to the extent applicable given TSL's foreign parent structure. While GILTI is generally applicable to U.S. shareholders of CFCs, we will analyze whether any aspect of the restructuring alternatives could trigger GILTI inclusions for any U.S. persons with direct or indirect interests in TSL or its subsidiaries.

3.3 PIK Capitalization and Original Issue discount ("OID") Treatment

C&H will analyze the U.S. federal income tax treatment of PIK interest capitalization and original issue discount in connection with the existing Mezzanine Notes and any modified or newly issued debt instruments, including the following:

(a) PIK Interest Treatment. Analysis of the tax treatment of the PIK interest capitalization under the existing Mezzanine Notes. The Mezzanine Notes bear interest at 11.5% on a PIK toggle basis, with all interest having been paid in kind (i.e., capitalized to principal) since the second quarter of 2022, resulting in $12.3 million in capitalized PIK interest through September 30, 2022. We will analyze the timing and character of income recognition by the holder (Dralvecen Mezzanine Capital LLC) and the corresponding deduction, if any, available to the issuer (TSL), under the applicable provisions of the Code and Treasury Regulations governing PIK obligations, including the OID rules of §§1272 through 1275.

(b) OID Arising from Modification or Exchange. Analysis of original issue discount implications arising from any modification, exchange, or refinancing of the Senior Secured Credit Facility or the Mezzanine Notes, including:

(i) Whether a proposed amendment of the Senior Secured Credit Facility — such as a maturity extension, conversion of cash-pay interest to PIK, principal reduction, covenant resets, or any combination thereof — constitutes a "significant modification" under Treasury Regulation §1.1001-3, potentially giving rise to a deemed exchange of the old instrument for a new instrument and a new OID computation. We will apply the specific significance tests set forth in Treasury Regulation §1.1001-3(e), including the yield test (change in yield exceeding the greater of 25 basis points or 5% of the annual yield of the unmodified instrument), the timing test, and the tests for changes in obligor, nature of the instrument, and collateral.

(ii) The OID treatment of any new second-lien notes that may be issued to Dralvecen Mezzanine Capital LLC in exchange for the existing Mezzanine Notes. If the issue price of such new notes (determined under §§1273 and 1274 of the Code) is less than the stated redemption price at maturity, the resulting OID will be amortized over the term of the new notes under the constant-yield method of §1272, with consequences for both the issuer and the holder.

(iii) The treatment of any amendment fee or consent fee paid by the Clients in kind (rather than in cash) in connection with the restructuring. We will analyze whether such fees constitute additional OID, additional stated interest, or separate consideration, and the timing and character of income recognition and deductibility accordingly.

3.4 Greek/U.S. Treaty Considerations and Greek Tax Law Coordination

C&H will coordinate with Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, 15 Vasilissis Sofias Avenue, Athens 10674, Greece) on the Greek tax law implications of the restructuring, in order to ensure that the U.S. tax analysis is conducted with full awareness of the Greek tax consequences and that the overall restructuring is structured in a tax-efficient manner across both jurisdictions. The areas of coordination will include the following:

(a) Greek Tax Treatment of Debt Forgiveness. Coordination regarding the Greek tax treatment of debt forgiveness or cancellation-of-indebtedness income equivalents under Greek domestic tax law, including whether any exclusions, exemptions, or deferral provisions analogous to §108 of the Code are available under the Greek Income Tax Code (Kodikas Forologias Eisodimatos).

(b) Equity Contribution by KFO Holdings. Coordination regarding the Greek tax implications of any equity contribution by KFO Holdings Société Anonyme (the Kostandinos family holding company) into TSL, including the potential applicability of Greek stamp duty (telos chartosimou), capital contributions tax, concentration tax, or other transfer taxes imposed under Greek law on capital increases or equity infusions.

(c) Greek Withholding Tax on Outbound Payments. Coordination regarding Greek withholding tax obligations on payments made by TSL to non-Greek lenders, including Nordbank International AG, Harborstone Bank, Pacifica Trade Finance, Continental Maritime Lending, Triton Credit Partners, Laurentian Shipping Fund II, Caspian Asset Management, Pelagos Institutional Credit Fund, and Dralvecen Mezzanine Capital LLC, and the availability of reduced withholding rates under applicable income tax treaties between Greece and the jurisdictions in which such lenders are resident, as well as any exemptions available under European Union directives (including the Interest and Royalties Directive, to the extent applicable).

(d) Treaty and EU Directive Interaction. Coordination on the interaction between Greek domestic tax law, the U.S.-Greece Income Tax Treaty, and any applicable EU directives, to identify potential conflicts, overlaps, or planning opportunities that may affect the structuring of the restructuring transactions.

Important Note: C&H does not hold itself out as qualified to render, and will not render, opinions on Greek tax law. All Greek tax advice will be provided by Vassiliou & Demetriou Law Offices in their capacity as the Clients' Greek legal counsel. C&H's role with respect to Greek tax matters is limited to coordination with Vassiliou & Demetriou to ensure that the U.S. and Greek tax analyses are consistent and that the restructuring is structured in a manner that takes into account the tax consequences in both jurisdictions.

3.5 Intercompany Transaction Tax Analysis

C&H will provide a tax analysis of the $76.4 million subordinated intercompany note from TAI (as maker) to TSL (as holder), including the following:

(a) Modification Analysis. Analysis of the U.S. federal income tax consequences of any proposed modification to the intercompany note, including an interest rate reduction (from the current 5.0% to a lower rate), maturity extension, principal adjustment, or conversion of cash-pay interest to PIK, under Treasury Regulation §1.1001-3. We will determine whether any such modification, individually or in the aggregate, constitutes a "significant modification" giving rise to a deemed exchange, and will analyze the CODI, OID, and other tax consequences of any such deemed exchange.

(b) Transfer Pricing Considerations. Analysis of transfer pricing considerations under §482 of the Code with respect to the intercompany note and any other related-party transactions between TSL and TAI. Section 482 authorizes the Internal Revenue Service to distribute, apportion, or allocate gross income, deductions, credits, or allowances among two or more organizations, trades, or businesses owned or controlled by the same interests, if it determines that such allocation is necessary to prevent evasion of taxes or to clearly reflect income. We will analyze whether the terms of the intercompany note (including the interest rate, maturity, subordination, and other terms) are consistent with arm's-length principles, and will advise on any adjustments that may be warranted to avoid potential §482 exposure. This analysis will take into account the Treasury Regulations under §482 governing intercompany loans, including Treasury Regulation §1.482-2(a).

(c) Debt vs. Equity Recharacterization. Analysis of the potential for recharacterization of the intercompany note as equity for U.S. federal income tax purposes. The distinction between debt and equity in the intercompany context is a highly fact-intensive inquiry governed by a body of case law (including Fin Hay Realty Co. v. United States, 398 F.2d 694 (3d Cir. 1968), and its progeny) and IRS guidelines, including the factors enumerated in the legislative history of §385 of the Code. We will analyze the relevant factors — including the debt-to-equity ratio of TAI, the presence or absence of a fixed maturity date, the subordination of the note to arm's-length creditors, the proportionality of the note to equity holdings, and the ability of TAI to service the note — and advise on the risk of recharacterization and any steps that may be taken to mitigate such risk.

3.6 Equity Restructuring Tax Implications

C&H will analyze the U.S. federal income tax implications of any equity restructuring of TSL undertaken in connection with the restructuring, including the following:

(a) Dilution of Kostandinos Family Equity Interest. Tax analysis of any issuance of new equity interests in TSL in connection with a mezzanine-for-equity exchange, including the dilution of the Kostandinos family's equity interest. The Kostandinos family currently holds approximately 80% of the outstanding equity of TSL through KFO Holdings Société Anonyme (Dimitrios Kostandinos holding 62% and Elena Kostandinos-Pavlou holding 18%). Any issuance of new equity to Dralvecen Mezzanine Capital LLC or other creditors in exchange for indebtedness would dilute the family's interest and may have tax consequences for both the existing equity holders and the recipients of the new equity.

(b) §351 and §368 Reorganization Analysis. Analysis of the potential applicability of §351 of the Code (transfers to controlled corporations) and the reorganization provisions of §368 of the Code (including, without limitation, the "E" reorganization (recapitalization) and the "G" reorganization (transfer of assets in a Title 11 case)) to any equity-for-debt exchange. We will advise on whether any proposed transaction qualifies for tax-free or tax-deferred treatment under these provisions and, if not, the tax consequences to each party.

(c) Tax Consequences to Dralvecen Mezzanine Capital LLC. Analysis of the U.S. federal income tax consequences to Dralvecen Mezzanine Capital LLC, a Delaware limited liability company, of receiving equity in TSL (a Greek société anonyme) in exchange for its Mezzanine Notes. This analysis will address, among other things, the recognition of gain or loss by Dralvecen on the exchange, the determination of Dralvecen's tax basis in the TSL equity received, the holding period of such equity, and any implications under the passive foreign investment company ("PFIC") rules of §§1291 through 1298 of the Code that may arise from Dralvecen's ownership of shares in a foreign corporation.

3.7 Additional Tax Matters

The tax advisory workstreams described in Sections 3.1 through 3.6 above reflect the current scope of the anticipated tax advisory services based on the restructuring alternatives under consideration as of the date of this Supplemental Letter. C&H reserves the right to expand the scope of tax advisory services as the restructuring alternatives are refined, additional issues are identified, or new restructuring proposals are received from the Clients' creditor constituencies, subject to mutual agreement with the Clients and consistent with the billing terms described in Section 5 below.

Any additional workstreams not described herein will be documented in writing, whether by supplemental letter or email confirmation, between Sylvia Hartwell and the Clients' Chief Financial Officer, Irini Dalakoura, with a copy to Nathaniel Bower. No additional workstream will be commenced without prior written confirmation from Ms. Dalakoura or another duly authorized representative of the Clients.

4. Tax Advisory Team

The tax advisory services described in this Supplemental Letter will be led by Sylvia Hartwell, Specialist Partner in C&H's Tax Practice Group. Sylvia will serve as lead tax partner responsible for the direction, supervision, and quality control of all tax advisory workstreams described herein. Sylvia has extensive experience advising on restructuring tax matters, including CODI analysis under §108 of the Code, cross-border tax structuring, original issue discount and PIK interest treatment, transfer pricing, and debt-for-equity exchanges, with particular depth in the shipping and maritime sector. Sylvia has been a partner at C&H since 2011 and is recognized as a leading practitioner in the field of restructuring tax by Larkspur Corporation, The Legal 500, and Tax Directors Handbook.

Sylvia will be supported by members of C&H's Tax Practice Group, including senior associates and associates who will be identified to the Clients as they are staffed on the engagement. In addition, as needed, associates from the Bankruptcy & Restructuring Practice Group already staffed on the matter — including Amy Chesterton, Lead Associate, and Nathan Ikeda, Working Associate — will provide support on tax-related aspects of the Chapter 11 contingency planning and out-of-court restructuring workstreams.

All tax advisory work will be coordinated with Nathaniel Bower in his capacity as Responsible Partner for the engagement and with the broader C&H engagement team to ensure full integration of the tax advisory workstreams with the Chapter 11 contingency planning and out-of-court restructuring workstreams. Sylvia will participate in regular team meetings and client calls as appropriate and will be available to present tax analysis directly to the Clients, their boards of directors, or their creditor constituencies as the restructuring process requires.

5. Billing Arrangements

All tax advisory services rendered pursuant to this Supplemental Letter will be billed at the same hourly rates set forth in the Original Engagement Letter dated October 25, 2022, which are as follows:

Time incurred by Sylvia Hartwell will be billed at the partner rate of $1,650 per hour. Time incurred by other members of C&H's Tax Practice Group will be billed at the rate corresponding to the applicable timekeeper category set forth above.

All fees and disbursements for tax advisory services rendered under this Supplemental Letter will be included in the consolidated monthly invoices for matter 1044-00003, which will be prepared under the direction of Colette Whitman in her capacity as Billing Partner for the engagement. Tax advisory fees and disbursements will be identified as a separate line item or sub-category on each monthly invoice to facilitate the Clients' internal tracking and allocation of professional fees.

Fees and disbursements for tax advisory services will draw against the $500,000 retainer deposited by TSL on October 28, 2022, to the extent such retainer has not been fully applied to other fees and disbursements under the Original Engagement Letter. To the extent the retainer is exhausted, all subsequent fees and disbursements will be payable in accordance with the payment terms set forth in the Original Engagement Letter.

Out-of-pocket disbursements incurred in connection with the tax advisory services — including, without limitation, charges for legal research databases (Westmark Data Systems, Westmark Services Inc. Tax, and similar services), travel expenses (air, ground transportation, lodging, and meals), courier and delivery fees, long-distance communications, and photocopying — will be billed at cost without markup.

6. Coordination with Other Advisors

The tax advisory services provided by C&H under this Supplemental Letter will be coordinated with the Clients' other professional advisors to ensure that the tax analysis is integrated into the broader restructuring process and that all advisors are operating with a consistent set of assumptions and conclusions. Specifically:

(a) Financial Advisor. C&H's tax advisory team will coordinate with the Clients' financial advisor, Kensington Veltrian Partners LLC (James Calloway, Managing Director, 300 Park Avenue, 12th Floor, New York, New York 10022), particularly with respect to financial modeling of CODI, OID, tax attribute reduction, and other tax impacts on the restructuring alternatives. The financial advisor's valuation work and liquidity analysis will be critical inputs to C&H's insolvency analysis under §108(a)(1)(B) and to the determination of issue prices for new or modified debt instruments under the OID rules. C&H will work collaboratively with Kensington Veltrian to ensure that tax considerations are reflected in the financial models being used to evaluate restructuring alternatives.

(b) Independent Auditors. C&H will coordinate with the Clients' independent auditors, Grainger, Holt & Associates LLP (Malcolm Holt, Lead Engagement Partner, 25 Cabot Square, Canary Wharf, London E14 4QA, United Kingdom), to the extent that tax advisory conclusions impact the Clients' financial reporting, deferred tax asset or liability calculations, uncertain tax position analysis (including ASC 740 reserves), or other aspects of the audit work.

(c) Greek Legal Counsel. C&H will coordinate on cross-border tax matters with Vassiliou & Demetriou Law Offices as described in Section 3.4 above.

For the avoidance of doubt, C&H will not serve as tax return preparer for TSL, TAI, or any affiliated entity. This engagement is limited to advisory and transactional tax analysis in connection with the restructuring, and does not encompass the preparation, review, or filing of any tax returns, estimated tax payments, information returns, or withholding tax forms on behalf of the Clients.

7. Confidentiality and Privilege

All tax advice provided under this Supplemental Letter, including all memoranda, analyses, opinion letters, presentations, emails, and other work product prepared by C&H's tax advisory team, is subject to the attorney-client privilege, the work product doctrine, and the tax practitioner privilege under §7525 of the Internal Revenue Code, to the fullest extent applicable under law.

All tax memoranda, analyses, draft opinion letters, and other written work product prepared in connection with this engagement will be prominently marked with the following legend:

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

The Clients are advised that the protections afforded by the attorney-client privilege, the work product doctrine, and the tax practitioner privilege may be waived by voluntary disclosure of privileged communications or work product to third parties who are not within the scope of the common-interest or joint-defense privilege. The Clients should consult with C&H before sharing any tax advice or work product with third parties, including creditors, creditor committees, or potential investors.

The confidentiality provisions set forth in the Original Engagement Letter apply with equal force to all tax advisory work product prepared under this Supplemental Letter, and the Clients' obligations to protect the confidentiality of C&H's tax advice are in addition to, and not in lieu of, any other confidentiality obligations arising under applicable law, regulation, or agreement.

8. Limitation of Scope; No Tax Return Preparation

This engagement is limited to the tax advisory services described in Section 3 herein, all of which are rendered in connection with the restructuring of TSL's and TAI's indebtedness and related capital structure. Without limiting the generality of the foregoing:

(a) C&H will not prepare, review, sign, or file any tax returns, amended tax returns, estimated tax payments, information returns (including IRS Forms 1042, 1042-S, 5471, 5472, or 8865), or any other filings with the Internal Revenue Service, any state or local taxing authority, or any foreign taxing authority on behalf of TSL, TAI, or any affiliated entity.

(b) C&H's tax advice does not extend to state and local tax matters (including, without limitation, state income tax, franchise tax, sales and use tax, property tax, and unclaimed property) unless specifically requested by the Clients and agreed in writing by Sylvia Hartwell. Should state and local tax issues arise that the Clients wish C&H to address, such expansion of scope will be documented in accordance with Section 3.7 above.

(c) C&H's tax advice does not extend to employee benefit, compensation, or ERISA-related tax matters, including the tax treatment of any employee retention, severance, or incentive programs that may be implemented in connection with the restructuring, unless specifically agreed in writing.

9. Incorporation of Original Engagement Terms

Except as expressly supplemented herein, all terms and conditions of the Original Engagement Letter dated October 25, 2022 — including, without limitation, provisions governing billing and payment terms, the retainer, conflicts of interest, ethical walls, termination of the engagement, limitation of liability, indemnification, dispute resolution (including the agreement to submit disputes to binding arbitration administered by JAMS in New York, New York), choice of law (New York), and all other general terms — remain in full force and effect and are incorporated herein by reference as if set forth in full. The Clients' execution of this Supplemental Letter shall not be construed as a novation or amendment of the Original Engagement Letter except to the extent expressly stated herein.

10. Acknowledgment and Agreement

We would appreciate your confirming your agreement to the supplemental scope of services and terms set forth in this letter by countersigning below and returning a copy to my attention. This Supplemental Letter may be executed in counterparts, each of which shall be deemed an original, and may be executed and delivered by facsimile, portable document format (PDF), or other electronic transmission, with the same force and effect as if originally executed.

We look forward to continuing our work with you on this important matter. Please do not hesitate to contact Nathaniel Bower at (212) 554-7100 or nbower@calderwoodharkness.com, or Sylvia Hartwell at (212) 554-7245 or shartwell@calderwoodharkness.com, with any questions.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Nathaniel Bower

Title: Partner, Bankruptcy & Restructuring

Responsible Partner

By: ________

Name: Sylvia Hartwell

Title: Partner, Tax Practice Group

Specialist Partner

ACKNOWLEDGMENT AND AGREEMENT

The undersigned hereby acknowledge receipt of the foregoing Supplemental Engagement Letter dated November 5, 2022, and confirm their agreement, on behalf of the respective entities identified below, to the supplemental scope of tax advisory services and the terms and conditions set forth therein.

THALASSA SHIPPING & LOGISTICS SOCIÉTÉ ANONYME

By: ________

Name: Georgios Andreadis

Title: Chief Executive Officer

Date: ________

THALASSA AMERICAS INC.

By: ________

Name: Marcus Hale

Title: President

Date: ________

cc:

Irini Dalakoura, Chief Financial Officer, Thalassa Shipping & Logistics Société Anonyme

Diana Restrepo, Vice President — Finance, Thalassa Americas Inc.

Stavros Papageorgiou, General Counsel (Greece), Thalassa Shipping & Logistics Société Anonyme

Colette Whitman, Billing Partner, Calderwood & Harkness LLP

Amy Chesterton, Lead Associate, Calderwood & Harkness LLP

Timekeeper Category	Hourly Rate
Partners	$1,650
Senior Associates	$1,050
Associates	$850
Paralegals	$425

CALDERWOOD & HARKNESS LLP 780 Third Avenue New York, New York 10017
Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com
November 5, 2022
VIA EMAIL AND OVERNIGHT COURIER
Georgios Andreadis Chief Executive Officer Thalassa Shipping & Logistics Société Anonyme 42 Akti Miaouli Piraeus 18538, Greece
Marcus Hale President Thalassa Americas Inc. 1400 McKinney Street, Suite 2200 Houston, Texas 77010
Matter No. 1044-00003
Dear Mr. Andreadis and Mr. Hale:
1. Reference to Original Engagement Letter
This Supplemental Engagement Letter (this "Supplemental Letter") supplements, and is incorporated into, the Engagement Letter dated October 25, 2022 (the "Original Engagement Letter"), between Calderwood & Harkness LLP ("C&H" or the "Firm") and Thalassa Shipping & Logistics Société Anonyme, a Greek société anonyme ("TSL"), and Thalassa Americas Inc., a Delaware corporation ("TAI," and together with TSL, the "Clients"), bearing matter number 1044-00003.
As you are aware, the Original Engagement Letter set forth the scope of C&H's engagement to advise the Clients on the following matters: (i) Chapter 11 contingency planning for TAI; (ii) negotiation of an out-of-court restructuring of the Clients' outstanding indebtedness; (iii) cross-border coordination with Greek counsel Vassiliou & Demetriou Law Offices in connection with the foregoing; and (iv) tax structuring advice related to the restructuring alternatives under consideration.
The Original Engagement Letter identified Nathaniel Bower as Responsible Partner for the engagement and Colette Whitman as Billing Partner. Those designations remain unchanged. This Supplemental Letter is intended to formalize the addition of Sylvia Hartwell, Specialist Partner in C&H's Tax Practice Group, to the engagement team and to more specifically define the scope of tax advisory services to be rendered in connection with the matter. Since the commencement of our engagement, it has become apparent that the complexity and magnitude of the tax issues implicated by the various restructuring alternatives warrant a detailed delineation of the tax advisory workstreams to be performed, and this Supplemental Letter serves that purpose.
All terms and conditions of the Original Engagement Letter remain in full force and effect except as expressly supplemented herein. In the event of any conflict or inconsistency between the provisions of this Supplemental Letter and the provisions of the Original Engagement Letter, this Supplemental Letter shall control with respect to the Tax Advisory Scope described herein. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Original Engagement Letter.
2. Background
TSL is a Greek-headquartered private shipping and logistics conglomerate, founded in 1987 by the Kostandinos family, that owns and operates a fleet of approximately fifty (50) vessels, consisting of thirty-eight (38) dry-bulk carriers and twelve (12) container vessels, with operations spanning major trade routes across Europe, Asia, the Americas, and the Middle East. TSL's substantial U.S. operations are conducted through its wholly-owned Delaware subsidiary, TAI, which is treated as a C-Corporation for U.S. federal income tax purposes (Employer Identification Number: 84-3291057). TSL's Greek Tax Identification Number (AFM) is 998214763.
TSL currently faces a severe liquidity crisis driven by a sustained collapse in dry-bulk charter rates, significant vessel impairments recognized in the Clients' most recent financial statements, and covenant breaches under TSL's $685 million Senior Secured Credit Facility (dated June 15, 2019), for which Nordbank International AG serves as Administrative Agent and Collateral Agent. These financial pressures have created an urgent need for a comprehensive restructuring of the Clients' capital structure.
As of September 30, 2022, total consolidated indebtedness of TSL and its subsidiaries is approximately $847.3 million, composed of the following:
(a) Senior Secured Credit Facility: Approximately $540 million outstanding, consisting of (i) a Term Loan A tranche of $270 million, (ii) a Revolving Credit Facility drawn to $185 million, and (iii) a U.S. Tranche Term Loan B of $85 million;
(b) Mezzanine Notes: Approximately $112.3 million outstanding, consisting of the original $100 million principal amount plus $12.3 million in payment-in-kind ("PIK") interest capitalized through September 30, 2022, held by Dralvecen Mezzanine Capital LLC, bearing interest at a rate of 11.5% on a PIK toggle basis;
(c) Senior Unsecured Notes: $50 million in aggregate principal amount of 8.25% Senior Unsecured Notes due 2025, issued under an indenture for which Garrison Trust Company serves as indenture trustee;
(d) Intercompany Note: A $76.4 million subordinated intercompany note from TAI (as maker) to TSL (as holder), bearing interest at 5.0% per annum; and
(e) Trade Payables: Approximately $38.7 million in trade payables and other accrued liabilities across the consolidated enterprise.
C&H is currently pursuing a dual-track approach on behalf of the Clients: Chapter 11 contingency planning for TAI, with the proposed venue being the United States Bankruptcy Court for the Southern District of Texas, Houston Division, and simultaneous negotiation of an out-of-court restructuring with the Clients' various creditor constituencies, including the lenders under the Senior Secured Credit Facility, Dralvecen Mezzanine Capital LLC, the holders of the Senior Unsecured Notes, and the trade creditor community.
The restructuring alternatives currently under consideration involve the potential cancellation, modification, or exchange of significant indebtedness of TSL and TAI, equity-for-debt exchanges that would result in the issuance of new equity interests in TSL to certain creditor constituencies, cross-border fund flows between Greek and U.S. entities, restructuring of the intercompany note between TSL and TAI, and potential equity contributions by KFO Holdings Société Anonyme (the Kostandinos family holding company). Each of these alternatives raises substantial U.S. federal income tax, international tax, and potentially Greek tax issues that require the specialized tax advisory services described in this Supplemental Letter.
3. Scope of Tax Advisory Services
Set forth below is a detailed description of the specific tax advisory workstreams that Sylvia Hartwell and her team will undertake in connection with the engagement. The workstreams described below are intended to be comprehensive but not exhaustive; additional tax issues may arise as the restructuring alternatives are refined, and Section 3.7 below addresses the process for expanding the scope as necessary.
3.1 Cancellation-of-Debt Income ("CODI") Analysis Under §108 of the Internal Revenue Code
C&H will provide a comprehensive analysis of the potential cancellation-of-debt income ("CODI") arising under §61(a)(12) of the Internal Revenue Code of 1986, as amended (the "Code"), in connection with any restructuring, modification, exchange, or cancellation of the outstanding indebtedness of TSL or TAI. This analysis will encompass, without limitation, the following:
(a) Quantification of Potential CODI. Analysis and quantification of the potential CODI that would arise in connection with any restructuring, modification, or exchange of (i) the Mezzanine Notes (approximately $112.3 million outstanding, including capitalized PIK interest), (ii) the Senior Secured Credit Facility (approximately $540 million outstanding), (iii) the Senior Unsecured Notes ($50 million outstanding), (iv) the intercompany note ($76.4 million), and (v) any other indebtedness of TSL or TAI. This analysis will take into account the adjusted issue price of each instrument, the fair market value of any consideration delivered in exchange, and any other relevant factors under applicable provisions of the Code and Treasury Regulations.
(b) Bankruptcy Exclusion — §108(a)(1)(A). Analysis of the availability of the bankruptcy exclusion under §108(a)(1)(A) of the Code, which would apply to the extent that the discharge of indebtedness occurs in a case under Title 11 of the United States Code. This exclusion would be potentially applicable if TAI were to file a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and the debt discharge were granted by the bankruptcy court, or pursuant to a confirmed plan of reorganization. Our analysis will address the scope and limitations of this exclusion, including its application to debtor entities versus non-debtor affiliates.
(c) Insolvency Exclusion — §108(a)(1)(B). Analysis of the availability of the insolvency exclusion under §108(a)(1)(B) of the Code, which would apply to the extent that TSL or TAI is "insolvent" (within the meaning of §108(d)(3) of the Code, i.e., the excess of liabilities over the fair market value of assets) immediately before the discharge of indebtedness. This analysis will require a determination of insolvency on an entity-by-entity basis, taking into account the fair market value of each entity's assets (including vessels, receivables, equity interests in subsidiaries, and other property) and the face amount and adjusted issue price of each entity's liabilities as of the relevant measurement date. We will coordinate with Kensington Veltrian Partners LLC to obtain the requisite asset valuations for this purpose.
(d) Tax Attribute Reduction Under §108(b). To the extent that CODI is excluded from gross income under §108(a)(1)(A) or §108(a)(1)(B), the Code requires a corresponding reduction in certain tax attributes of the debtor. C&H will analyze the ordering rules under §108(b)(2) for the reduction of (i) net operating losses ("NOLs") and NOL carryovers, (ii) general business credits, (iii) minimum tax credits, (iv) capital loss carryovers, (v) basis of the debtor's property, (vi) passive activity loss and credit carryovers, and (vii) foreign tax credit carryovers. We will model the impact of attribute reduction on each entity's post-restructuring tax position and advise on whether an election under §108(b)(5) to reduce the basis of depreciable property before reducing NOLs would be advantageous.
(e) Deemed Exchange Analysis Under Treasury Regulation §1.1001-3. Analysis of whether any proposed modification to the terms of the Senior Secured Credit Facility, the Mezzanine Notes, the Senior Unsecured Notes, or the intercompany note would constitute a "significant modification" triggering a deemed exchange of the old debt instrument for a new debt instrument under Treasury Regulation §1.1001-3. A deemed exchange may give rise to CODI to the extent the adjusted issue price of the old instrument exceeds the issue price of the new instrument. Our analysis will address the specific tests for significance under Treasury Regulation §1.1001-3(e), including changes in yield, timing of payments, obligor, collateral, and other terms.
(f) Particular Focus on Mezzanine Notes. Given that the restructuring alternatives under consideration include a potential exchange of the Mezzanine Notes for new equity interests in TSL, a partial haircut of the outstanding principal balance, or an exchange into new second-lien secured notes at a reduced principal amount, particular attention will be devoted to the CODI consequences for TSL (as issuer) of any such exchange, modification, or partial cancellation. The $112.3 million outstanding balance of the Mezzanine Notes (inclusive of $12.3 million in capitalized PIK interest) represents a significant potential source of CODI, and the analysis will consider whether and to what extent the bankruptcy exclusion, insolvency exclusion, or other provisions of §108 may mitigate or eliminate the resulting tax liability.
3.2 Cross-Border Tax Structuring
C&H will analyze the cross-border tax implications of the restructuring alternatives under consideration, including the following:
(a) U.S.-Greece Income Tax Treaty. Analysis of the application of the Convention Between the United States of America and the Hellenic Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the "U.S.-Greece Treaty") to interest payments, dividend distributions, and any deemed income arising in connection with the restructuring. This analysis will include a review of the relevant treaty articles governing the taxation of business profits, interest, dividends, and capital gains, as well as the limitation on benefits ("LOB") provisions, to determine the availability of treaty-rate reductions or exemptions.
(b) Withholding Tax on Intercompany Interest Payments. Analysis of U.S. federal withholding tax obligations under §§1441 and 1442 of the Code on interest payments made by TAI to TSL under the $76.4 million subordinated intercompany note, which currently bears interest at a rate of 5.0% per annum. Under the Code, interest payments from a U.S. obligor to a foreign payee are generally subject to a 30% withholding tax, subject to reduction under an applicable income tax treaty. We will analyze the availability of a reduced treaty rate under the U.S.-Greece Treaty and the procedural requirements for claiming such reduced rate, including the filing of IRS Form W-8BEN-E by TSL and compliance with any applicable certification requirements.
(c) Implications of Interest Rate Modification. If the restructuring involves a reduction of the interest rate on the intercompany note from 5.0% to a lower rate, we will analyze the withholding tax implications of such modification, including whether the modification constitutes a deemed exchange that would alter the withholding obligations on payments under the modified note. We will also consider whether a below-market interest rate on the intercompany note could give rise to deemed distribution treatment under §§7872 and 482 of the Code.
(d) Controlled Foreign Corporation and Subpart F Income Considerations. Analysis of the implications of TAI's status as a wholly-owned U.S. subsidiary of TSL, a Greek parent corporation, under the Controlled Foreign Corporation ("CFC") and Subpart F income provisions of Subchapter N of the Code (§§951 through 965). Although the typical CFC analysis focuses on the U.S. shareholder's inclusion of income from a foreign subsidiary, the inverse structure presented here — where the foreign parent holds the U.S. subsidiary — raises distinct questions regarding the characterization of income, earnings and profits, and deemed distributions arising from restructuring transactions. We will analyze whether any income recognized by TAI in connection with the restructuring (including CODI, if applicable) could create deemed distribution consequences or otherwise affect TSL's tax position under Subpart F or related provisions.
(e) GILTI Implications. Analysis of the Global Intangible Low-Taxed Income ("GILTI") provisions under §951A of the Code, to the extent applicable given TSL's foreign parent structure. While GILTI is generally applicable to U.S. shareholders of CFCs, we will analyze whether any aspect of the restructuring alternatives could trigger GILTI inclusions for any U.S. persons with direct or indirect interests in TSL or its subsidiaries.
3.3 PIK Capitalization and Original Issue discount ("OID") Treatment
C&H will analyze the U.S. federal income tax treatment of PIK interest capitalization and original issue discount in connection with the existing Mezzanine Notes and any modified or newly issued debt instruments, including the following:
(a) PIK Interest Treatment. Analysis of the tax treatment of the PIK interest capitalization under the existing Mezzanine Notes. The Mezzanine Notes bear interest at 11.5% on a PIK toggle basis, with all interest having been paid in kind (i.e., capitalized to principal) since the second quarter of 2022, resulting in $12.3 million in capitalized PIK interest through September 30, 2022. We will analyze the timing and character of income recognition by the holder (Dralvecen Mezzanine Capital LLC) and the corresponding deduction, if any, available to the issuer (TSL), under the applicable provisions of the Code and Treasury Regulations governing PIK obligations, including the OID rules of §§1272 through 1275.
(b) OID Arising from Modification or Exchange. Analysis of original issue discount implications arising from any modification, exchange, or refinancing of the Senior Secured Credit Facility or the Mezzanine Notes, including:
(i) Whether a proposed amendment of the Senior Secured Credit Facility — such as a maturity extension, conversion of cash-pay interest to PIK, principal reduction, covenant resets, or any combination thereof — constitutes a "significant modification" under Treasury Regulation §1.1001-3, potentially giving rise to a deemed exchange of the old instrument for a new instrument and a new OID computation. We will apply the specific significance tests set forth in Treasury Regulation §1.1001-3(e), including the yield test (change in yield exceeding the greater of 25 basis points or 5% of the annual yield of the unmodified instrument), the timing test, and the tests for changes in obligor, nature of the instrument, and collateral.
(ii) The OID treatment of any new second-lien notes that may be issued to Dralvecen Mezzanine Capital LLC in exchange for the existing Mezzanine Notes. If the issue price of such new notes (determined under §§1273 and 1274 of the Code) is less than the stated redemption price at maturity, the resulting OID will be amortized over the term of the new notes under the constant-yield method of §1272, with consequences for both the issuer and the holder.
(iii) The treatment of any amendment fee or consent fee paid by the Clients in kind (rather than in cash) in connection with the restructuring. We will analyze whether such fees constitute additional OID, additional stated interest, or separate consideration, and the timing and character of income recognition and deductibility accordingly.
3.4 Greek/U.S. Treaty Considerations and Greek Tax Law Coordination
C&H will coordinate with Vassiliou & Demetriou Law Offices (Alexandros Vassiliou, Lead Partner, 15 Vasilissis Sofias Avenue, Athens 10674, Greece) on the Greek tax law implications of the restructuring, in order to ensure that the U.S. tax analysis is conducted with full awareness of the Greek tax consequences and that the overall restructuring is structured in a tax-efficient manner across both jurisdictions. The areas of coordination will include the following:
(a) Greek Tax Treatment of Debt Forgiveness. Coordination regarding the Greek tax treatment of debt forgiveness or cancellation-of-indebtedness income equivalents under Greek domestic tax law, including whether any exclusions, exemptions, or deferral provisions analogous to §108 of the Code are available under the Greek Income Tax Code (Kodikas Forologias Eisodimatos).
(b) Equity Contribution by KFO Holdings. Coordination regarding the Greek tax implications of any equity contribution by KFO Holdings Société Anonyme (the Kostandinos family holding company) into TSL, including the potential applicability of Greek stamp duty (telos chartosimou), capital contributions tax, concentration tax, or other transfer taxes imposed under Greek law on capital increases or equity infusions.
(c) Greek Withholding Tax on Outbound Payments. Coordination regarding Greek withholding tax obligations on payments made by TSL to non-Greek lenders, including Nordbank International AG, Harborstone Bank, Pacifica Trade Finance, Continental Maritime Lending, Triton Credit Partners, Laurentian Shipping Fund II, Caspian Asset Management, Pelagos Institutional Credit Fund, and Dralvecen Mezzanine Capital LLC, and the availability of reduced withholding rates under applicable income tax treaties between Greece and the jurisdictions in which such lenders are resident, as well as any exemptions available under European Union directives (including the Interest and Royalties Directive, to the extent applicable).
(d) Treaty and EU Directive Interaction. Coordination on the interaction between Greek domestic tax law, the U.S.-Greece Income Tax Treaty, and any applicable EU directives, to identify potential conflicts, overlaps, or planning opportunities that may affect the structuring of the restructuring transactions.
Important Note: C&H does not hold itself out as qualified to render, and will not render, opinions on Greek tax law. All Greek tax advice will be provided by Vassiliou & Demetriou Law Offices in their capacity as the Clients' Greek legal counsel. C&H's role with respect to Greek tax matters is limited to coordination with Vassiliou & Demetriou to ensure that the U.S. and Greek tax analyses are consistent and that the restructuring is structured in a manner that takes into account the tax consequences in both jurisdictions.
3.5 Intercompany Transaction Tax Analysis
C&H will provide a tax analysis of the $76.4 million subordinated intercompany note from TAI (as maker) to TSL (as holder), including the following:
(a) Modification Analysis. Analysis of the U.S. federal income tax consequences of any proposed modification to the intercompany note, including an interest rate reduction (from the current 5.0% to a lower rate), maturity extension, principal adjustment, or conversion of cash-pay interest to PIK, under Treasury Regulation §1.1001-3. We will determine whether any such modification, individually or in the aggregate, constitutes a "significant modification" giving rise to a deemed exchange, and will analyze the CODI, OID, and other tax consequences of any such deemed exchange.
(b) Transfer Pricing Considerations. Analysis of transfer pricing considerations under §482 of the Code with respect to the intercompany note and any other related-party transactions between TSL and TAI. Section 482 authorizes the Internal Revenue Service to distribute, apportion, or allocate gross income, deductions, credits, or allowances among two or more organizations, trades, or businesses owned or controlled by the same interests, if it determines that such allocation is necessary to prevent evasion of taxes or to clearly reflect income. We will analyze whether the terms of the intercompany note (including the interest rate, maturity, subordination, and other terms) are consistent with arm's-length principles, and will advise on any adjustments that may be warranted to avoid potential §482 exposure. This analysis will take into account the Treasury Regulations under §482 governing intercompany loans, including Treasury Regulation §1.482-2(a).
(c) Debt vs. Equity Recharacterization. Analysis of the potential for recharacterization of the intercompany note as equity for U.S. federal income tax purposes. The distinction between debt and equity in the intercompany context is a highly fact-intensive inquiry governed by a body of case law (including Fin Hay Realty Co. v. United States, 398 F.2d 694 (3d Cir. 1968), and its progeny) and IRS guidelines, including the factors enumerated in the legislative history of §385 of the Code. We will analyze the relevant factors — including the debt-to-equity ratio of TAI, the presence or absence of a fixed maturity date, the subordination of the note to arm's-length creditors, the proportionality of the note to equity holdings, and the ability of TAI to service the note — and advise on the risk of recharacterization and any steps that may be taken to mitigate such risk.
3.6 Equity Restructuring Tax Implications
C&H will analyze the U.S. federal income tax implications of any equity restructuring of TSL undertaken in connection with the restructuring, including the following:
(a) Dilution of Kostandinos Family Equity Interest. Tax analysis of any issuance of new equity interests in TSL in connection with a mezzanine-for-equity exchange, including the dilution of the Kostandinos family's equity interest. The Kostandinos family currently holds approximately 80% of the outstanding equity of TSL through KFO Holdings Société Anonyme (Dimitrios Kostandinos holding 62% and Elena Kostandinos-Pavlou holding 18%). Any issuance of new equity to Dralvecen Mezzanine Capital LLC or other creditors in exchange for indebtedness would dilute the family's interest and may have tax consequences for both the existing equity holders and the recipients of the new equity.
(b) §351 and §368 Reorganization Analysis. Analysis of the potential applicability of §351 of the Code (transfers to controlled corporations) and the reorganization provisions of §368 of the Code (including, without limitation, the "E" reorganization (recapitalization) and the "G" reorganization (transfer of assets in a Title 11 case)) to any equity-for-debt exchange. We will advise on whether any proposed transaction qualifies for tax-free or tax-deferred treatment under these provisions and, if not, the tax consequences to each party.
(c) Tax Consequences to Dralvecen Mezzanine Capital LLC. Analysis of the U.S. federal income tax consequences to Dralvecen Mezzanine Capital LLC, a Delaware limited liability company, of receiving equity in TSL (a Greek société anonyme) in exchange for its Mezzanine Notes. This analysis will address, among other things, the recognition of gain or loss by Dralvecen on the exchange, the determination of Dralvecen's tax basis in the TSL equity received, the holding period of such equity, and any implications under the passive foreign investment company ("PFIC") rules of §§1291 through 1298 of the Code that may arise from Dralvecen's ownership of shares in a foreign corporation.
3.7 Additional Tax Matters
The tax advisory workstreams described in Sections 3.1 through 3.6 above reflect the current scope of the anticipated tax advisory services based on the restructuring alternatives under consideration as of the date of this Supplemental Letter. C&H reserves the right to expand the scope of tax advisory services as the restructuring alternatives are refined, additional issues are identified, or new restructuring proposals are received from the Clients' creditor constituencies, subject to mutual agreement with the Clients and consistent with the billing terms described in Section 5 below.
Any additional workstreams not described herein will be documented in writing, whether by supplemental letter or email confirmation, between Sylvia Hartwell and the Clients' Chief Financial Officer, Irini Dalakoura, with a copy to Nathaniel Bower. No additional workstream will be commenced without prior written confirmation from Ms. Dalakoura or another duly authorized representative of the Clients.
4. Tax Advisory Team
The tax advisory services described in this Supplemental Letter will be led by Sylvia Hartwell, Specialist Partner in C&H's Tax Practice Group. Sylvia will serve as lead tax partner responsible for the direction, supervision, and quality control of all tax advisory workstreams described herein. Sylvia has extensive experience advising on restructuring tax matters, including CODI analysis under §108 of the Code, cross-border tax structuring, original issue discount and PIK interest treatment, transfer pricing, and debt-for-equity exchanges, with particular depth in the shipping and maritime sector. Sylvia has been a partner at C&H since 2011 and is recognized as a leading practitioner in the field of restructuring tax by Larkspur Corporation, The Legal 500, and Tax Directors Handbook.
Sylvia will be supported by members of C&H's Tax Practice Group, including senior associates and associates who will be identified to the Clients as they are staffed on the engagement. In addition, as needed, associates from the Bankruptcy & Restructuring Practice Group already staffed on the matter — including Amy Chesterton, Lead Associate, and Nathan Ikeda, Working Associate — will provide support on tax-related aspects of the Chapter 11 contingency planning and out-of-court restructuring workstreams.
All tax advisory work will be coordinated with Nathaniel Bower in his capacity as Responsible Partner for the engagement and with the broader C&H engagement team to ensure full integration of the tax advisory workstreams with the Chapter 11 contingency planning and out-of-court restructuring workstreams. Sylvia will participate in regular team meetings and client calls as appropriate and will be available to present tax analysis directly to the Clients, their boards of directors, or their creditor constituencies as the restructuring process requires.
5. Billing Arrangements
All tax advisory services rendered pursuant to this Supplemental Letter will be billed at the same hourly rates set forth in the Original Engagement Letter dated October 25, 2022, which are as follows:
Time incurred by Sylvia Hartwell will be billed at the partner rate of $1,650 per hour. Time incurred by other members of C&H's Tax Practice Group will be billed at the rate corresponding to the applicable timekeeper category set forth above.
All fees and disbursements for tax advisory services rendered under this Supplemental Letter will be included in the consolidated monthly invoices for matter 1044-00003, which will be prepared under the direction of Colette Whitman in her capacity as Billing Partner for the engagement. Tax advisory fees and disbursements will be identified as a separate line item or sub-category on each monthly invoice to facilitate the Clients' internal tracking and allocation of professional fees.
Fees and disbursements for tax advisory services will draw against the $500,000 retainer deposited by TSL on October 28, 2022, to the extent such retainer has not been fully applied to other fees and disbursements under the Original Engagement Letter. To the extent the retainer is exhausted, all subsequent fees and disbursements will be payable in accordance with the payment terms set forth in the Original Engagement Letter.
Out-of-pocket disbursements incurred in connection with the tax advisory services — including, without limitation, charges for legal research databases (Westmark Data Systems, Westmark Services Inc. Tax, and similar services), travel expenses (air, ground transportation, lodging, and meals), courier and delivery fees, long-distance communications, and photocopying — will be billed at cost without markup.
6. Coordination with Other Advisors
The tax advisory services provided by C&H under this Supplemental Letter will be coordinated with the Clients' other professional advisors to ensure that the tax analysis is integrated into the broader restructuring process and that all advisors are operating with a consistent set of assumptions and conclusions. Specifically:
(a) Financial Advisor. C&H's tax advisory team will coordinate with the Clients' financial advisor, Kensington Veltrian Partners LLC (James Calloway, Managing Director, 300 Park Avenue, 12th Floor, New York, New York 10022), particularly with respect to financial modeling of CODI, OID, tax attribute reduction, and other tax impacts on the restructuring alternatives. The financial advisor's valuation work and liquidity analysis will be critical inputs to C&H's insolvency analysis under §108(a)(1)(B) and to the determination of issue prices for new or modified debt instruments under the OID rules. C&H will work collaboratively with Kensington Veltrian to ensure that tax considerations are reflected in the financial models being used to evaluate restructuring alternatives.
(b) Independent Auditors. C&H will coordinate with the Clients' independent auditors, Grainger, Holt & Associates LLP (Malcolm Holt, Lead Engagement Partner, 25 Cabot Square, Canary Wharf, London E14 4QA, United Kingdom), to the extent that tax advisory conclusions impact the Clients' financial reporting, deferred tax asset or liability calculations, uncertain tax position analysis (including ASC 740 reserves), or other aspects of the audit work.
(c) Greek Legal Counsel. C&H will coordinate on cross-border tax matters with Vassiliou & Demetriou Law Offices as described in Section 3.4 above.
For the avoidance of doubt, C&H will not serve as tax return preparer for TSL, TAI, or any affiliated entity. This engagement is limited to advisory and transactional tax analysis in connection with the restructuring, and does not encompass the preparation, review, or filing of any tax returns, estimated tax payments, information returns, or withholding tax forms on behalf of the Clients.
7. Confidentiality and Privilege
All tax advice provided under this Supplemental Letter, including all memoranda, analyses, opinion letters, presentations, emails, and other work product prepared by C&H's tax advisory team, is subject to the attorney-client privilege, the work product doctrine, and the tax practitioner privilege under §7525 of the Internal Revenue Code, to the fullest extent applicable under law.
All tax memoranda, analyses, draft opinion letters, and other written work product prepared in connection with this engagement will be prominently marked with the following legend:
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
The Clients are advised that the protections afforded by the attorney-client privilege, the work product doctrine, and the tax practitioner privilege may be waived by voluntary disclosure of privileged communications or work product to third parties who are not within the scope of the common-interest or joint-defense privilege. The Clients should consult with C&H before sharing any tax advice or work product with third parties, including creditors, creditor committees, or potential investors.
The confidentiality provisions set forth in the Original Engagement Letter apply with equal force to all tax advisory work product prepared under this Supplemental Letter, and the Clients' obligations to protect the confidentiality of C&H's tax advice are in addition to, and not in lieu of, any other confidentiality obligations arising under applicable law, regulation, or agreement.
8. Limitation of Scope; No Tax Return Preparation
This engagement is limited to the tax advisory services described in Section 3 herein, all of which are rendered in connection with the restructuring of TSL's and TAI's indebtedness and related capital structure. Without limiting the generality of the foregoing:
(a) C&H will not prepare, review, sign, or file any tax returns, amended tax returns, estimated tax payments, information returns (including IRS Forms 1042, 1042-S, 5471, 5472, or 8865), or any other filings with the Internal Revenue Service, any state or local taxing authority, or any foreign taxing authority on behalf of TSL, TAI, or any affiliated entity.
(b) C&H's tax advice does not extend to state and local tax matters (including, without limitation, state income tax, franchise tax, sales and use tax, property tax, and unclaimed property) unless specifically requested by the Clients and agreed in writing by Sylvia Hartwell. Should state and local tax issues arise that the Clients wish C&H to address, such expansion of scope will be documented in accordance with Section 3.7 above.
(c) C&H's tax advice does not extend to employee benefit, compensation, or ERISA-related tax matters, including the tax treatment of any employee retention, severance, or incentive programs that may be implemented in connection with the restructuring, unless specifically agreed in writing.
9. Incorporation of Original Engagement Terms
Except as expressly supplemented herein, all terms and conditions of the Original Engagement Letter dated October 25, 2022 — including, without limitation, provisions governing billing and payment terms, the retainer, conflicts of interest, ethical walls, termination of the engagement, limitation of liability, indemnification, dispute resolution (including the agreement to submit disputes to binding arbitration administered by JAMS in New York, New York), choice of law (New York), and all other general terms — remain in full force and effect and are incorporated herein by reference as if set forth in full. The Clients' execution of this Supplemental Letter shall not be construed as a novation or amendment of the Original Engagement Letter except to the extent expressly stated herein.
10. Acknowledgment and Agreement
We would appreciate your confirming your agreement to the supplemental scope of services and terms set forth in this letter by countersigning below and returning a copy to my attention. This Supplemental Letter may be executed in counterparts, each of which shall be deemed an original, and may be executed and delivered by facsimile, portable document format (PDF), or other electronic transmission, with the same force and effect as if originally executed.
We look forward to continuing our work with you on this important matter. Please do not hesitate to contact Nathaniel Bower at (212) 554-7100 or nbower@calderwoodharkness.com, or Sylvia Hartwell at (212) 554-7245 or shartwell@calderwoodharkness.com, with any questions.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Nathaniel Bower
Title: Partner, Bankruptcy & Restructuring
Responsible Partner
By: ________
Name: Sylvia Hartwell
Title: Partner, Tax Practice Group
Specialist Partner
ACKNOWLEDGMENT AND AGREEMENT
The undersigned hereby acknowledge receipt of the foregoing Supplemental Engagement Letter dated November 5, 2022, and confirm their agreement, on behalf of the respective entities identified below, to the supplemental scope of tax advisory services and the terms and conditions set forth therein.
THALASSA SHIPPING & LOGISTICS SOCIÉTÉ ANONYME
By: ________
Name: Georgios Andreadis
Title: Chief Executive Officer
Date: ________
THALASSA AMERICAS INC.
By: ________
Name: Marcus Hale
Title: President
Date: ________
cc:
Irini Dalakoura, Chief Financial Officer, Thalassa Shipping & Logistics Société Anonyme
Diana Restrepo, Vice President — Finance, Thalassa Americas Inc.
Stavros Papageorgiou, General Counsel (Greece), Thalassa Shipping & Logistics Société Anonyme
Colette Whitman, Billing Partner, Calderwood & Harkness LLP
Amy Chesterton, Lead Associate, Calderwood & Harkness LLP
Timekeeper Category | Hourly Rate
Partners | $1,650
Senior Associates | $1,050
Associates | $850
Paralegals | $425

CALDERWOOD & HARKNESS LLP 780 Third Avenue New York, New York 10017

VIA EMAIL AND OVERNIGHT COURIER

CALDERWOOD & HARKNESS LLP

ACKNOWLEDGMENT AND AGREEMENT

THALASSA SHIPPING & LOGISTICS SOCIÉTÉ ANONYME

THALASSA AMERICAS INC.

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