1044-00007 · Client 1044 · Memoranda

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP MEMORANDUM

TO: Victoria Chambers, Partner, White Collar & Investigations Jasmine Thornton, Counsel, Banking & Credit Facilities

FROM: Liam Donahue, Associate, White Collar & Investigations

DATE: September 9, 2022

RE: Analysis of Anti-Corruption Covenants — Meridian Atlantic Bank Revolving Credit Facility Matter No. 1044-00007

I. INTRODUCTION

This memorandum analyzes the anti-corruption representations and covenants contained in that certain Credit Agreement dated as of January 15, 2020 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Thalassa Shipping & Logistics SA, a société anonyme organized under the laws of the Hellenic Republic (the "Borrower" or "TSL"), the lenders from time to time party thereto (the "Lenders"), and Meridian Atlantic Bank, National Association, as administrative agent for the Lenders (in such capacity, the "Agent"). The Credit Agreement governs a $120,000,000 senior secured revolving credit facility (the "Facility"), which was executed on January 15, 2020 and has a stated maturity date of January 15, 2025.

This analysis has been prepared in connection with, and should be read in light of, the potential exposure under the United States Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), arising from certain port-facilitation payments identified in the Preliminary Scoping Memorandum prepared by the undersigned and dated August 1, 2022 (the "Scoping Memorandum"). As detailed in the Scoping Memorandum, the payments at issue consist of aggregate expediting fees totaling approximately €876,000 (equivalent to approximately $920,000 at the June 2022 EUR/USD exchange rate of €1 = $1.05), paid by Thalassa West Africa SARL ("TWA"), a wholly owned subsidiary of TSL, to Goldenshore Maritime Consultants Ltd. ("Goldenshore") over the period from March 2018 through May 2022. These payments are the subject of an ongoing internal review being conducted by Calderwood & Harkness LLP ("C&H") in coordination with Northpoint Forensic Advisors LLC.

As of June 30, 2022, per TSL's treasury report for the second quarter of fiscal year 2022, the Borrower has $74,000,000 in outstanding borrowings drawn on the $120,000,000 Facility. Gerald Fontaine, Managing Director, Shipping & Offshore Finance, at Meridian Atlantic Bank, National Association (383 Madison Avenue, New York, New York 10179), serves as TSL's primary relationship manager for purposes of the Facility.

The purpose of this memorandum is to (a) identify the specific provisions of the Credit Agreement that bear on TSL's anti-corruption obligations, (b) analyze whether the Goldenshore payments may give rise to a breach of those provisions, (c) assess the potential consequences of any such breach, including the risk of acceleration and commitment termination, and (d) set forth practical considerations and preliminary recommendations regarding TSL's approach to the Agent and the Lender group in light of these issues. This memorandum does not address the underlying FCPA analysis in detail; that analysis is the subject of a separate memorandum currently in preparation.

II. RELEVANT PROVISIONS

Set forth below are the key provisions of the Credit Agreement that are implicated by the potential FCPA exposure. We have reproduced the operative language verbatim where appropriate, with our annotations following each provision.

A. Section 5.18 — Anti-Corruption Laws

Section 5.18 of the Credit Agreement contains the Borrower's representation and warranty regarding compliance with anti-corruption laws. The full text of Section 5.18 is as follows:

"The Borrower and its Subsidiaries have conducted their businesses in compliance with the United States Foreign Corrupt Practices Act of 1977, as amended (the 'FCPA'), the U.K. Bribery Act 2010, and all other applicable anti-corruption laws and regulations."

"Neither the Borrower nor any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee, or affiliate of the Borrower or any Subsidiary has directly or indirectly used any corporate funds for any unlawful contribution, gift, entertainment, or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or violated or is in violation of any provision of the FCPA, the U.K. Bribery Act 2010, or any other applicable anti-corruption law."

Several features of this representation are noteworthy for present purposes:

First, the representation expressly covers not only the Borrower itself but also its "Subsidiaries." As discussed in Part III.A below, TWA is a wholly owned subsidiary of TSL and is therefore squarely within the scope of this representation.

Second, the representation addresses both direct and indirect payments. The language "directly or indirectly" is broadly drafted and is designed to capture payments routed through intermediaries, which is precisely the structure at issue here.

Third, and critically, the knowledge qualifier embedded in the second paragraph of Section 5.18 applies only to the conduct of "directors, officers, agents, employees, or affiliates" of the Borrower or any Subsidiary. The qualifier does not modify the representation as it pertains to the Borrower's or any Subsidiary's own conduct. This distinction has significant implications for whether TSL can invoke a knowledge defense, as discussed in Part III.A below.

B. Section 4.02(c) — Conditions to Each Borrowing

Section 4.02 of the Credit Agreement sets forth the conditions precedent to each borrowing under the Facility. Section 4.02(c) provides, in relevant part, that:

Each request for a borrowing under the Facility shall constitute a representation and warranty by the Borrower that (i) the representations and warranties set forth in Article V (including, without limitation, Section 5.18) are true and correct in all material respects as of the date of such borrowing (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date), and (ii) no Default or Event of Default has occurred and is continuing or would result from such borrowing.

The practical effect of Section 4.02(c) is that the anti-corruption representation contained in Section 5.18 is not merely a static, one-time representation made as of the closing date. Rather, it is re-made — and deemed re-made — each time the Borrower submits a borrowing request. This "bring-down" mechanism is standard in revolving credit facilities and has the consequence of creating multiple potential breach points, as analyzed in Part III.B below.

C. Section 6.10 — Affirmative Covenant (Anti-Corruption)

Section 6.10 of the Credit Agreement imposes a continuing affirmative obligation on the Borrower with respect to anti-corruption compliance. The relevant language provides:

"The Borrower shall maintain in effect and enforce policies and procedures designed to promote and achieve compliance by the Borrower, its Subsidiaries, and their respective directors, officers, employees, and agents with the FCPA and all other applicable anti-corruption laws."

Unlike Section 5.18, which is a point-in-time representation regarding past and present compliance, Section 6.10 is a forward-looking affirmative covenant that requires the Borrower to maintain an active compliance infrastructure on an ongoing basis. The distinction is important: a borrower could, in theory, be in compliance with Section 5.18 (i.e., no actual corrupt payments have been made) but still be in breach of Section 6.10 if its compliance policies and procedures are inadequate. Conversely, as discussed further in Part III.D below, deficiencies in TSL's compliance program may provide an independent basis for finding a covenant breach, separate from the question of whether the Goldenshore payments themselves violated the FCPA.

D. Section 8.01(d) — Events of Default

Section 8.01(d) of the Credit Agreement provides that an Event of Default occurs if:

"any representation or warranty made or deemed made by the Borrower herein, in any other Loan Document, or in any certificate, document, or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been false or misleading in any material respect when made or deemed made."

A material breach of the anti-corruption representation in Section 5.18 would therefore trigger an Event of Default under Section 8.01(d). Importantly, the phrase "deemed made" captures each instance in which the Section 5.18 representation is re-made through the bring-down mechanism of Section 4.02(c).

Upon the occurrence of an Event of Default, Section 8.02 of the Credit Agreement provides the Agent (acting at the direction of the Required Lenders, defined as Lenders holding more than 50% of the aggregate commitments) with the following remedies:

(i) Acceleration. The Agent may declare all outstanding obligations under the Credit Agreement immediately due and payable, without presentment, demand, protest, or other notice of any kind, all of which are expressly waived by the Borrower.

(ii) Commitment Termination. The Agent may terminate the Lenders' commitment to make further advances under the Facility, thereby cutting off the Borrower's access to any undrawn portion of the revolving commitment.

(iii) Other Remedies. The Agent may exercise any and all other rights and remedies available under the Credit Agreement, the other Loan Documents, or applicable law, including the enforcement of security interests in the collateral pledged by the Borrower.

The interplay between these provisions creates a cascading risk profile: a breach of Section 5.18, if deemed material, triggers Section 8.01(d), which in turn activates the full panoply of remedies under Section 8.02.

III. ANALYSIS

A. Potential Breach of Section 5.18

The central question under Section 5.18 is whether the expediting fees paid by TWA to Goldenshore constitute "direct or indirect unlawful payment[s] to any foreign or domestic government official or employee from corporate funds" within the meaning of the representation.

The factual predicate for this analysis is as follows. As detailed in the Scoping Memorandum, between March 2018 and May 2022, TWA paid aggregate expediting fees of approximately €876,000 (approximately $920,000) to Goldenshore Maritime Consultants Ltd. Goldenshore is a limited liability company incorporated in the Republic of Côte d'Ivoire. Moussa Diallo holds a 40% ownership interest in Goldenshore. Mr. Diallo is the brother-in-law of Captain Ibrahim Touré, who serves as Director of Port Operations at the Port Autonome d'Abidjan. The remaining 60% ownership of Goldenshore is held by interests that have not yet been fully identified; clarification of the beneficial ownership structure is a priority item for the ongoing forensic review.

If the expediting fees paid by TWA to Goldenshore were, in fact, passed through — in whole or in part — to Captain Touré or to other officials at the Port Autonome d'Abidjan or the Nigeria Ports Authority, then the representation in Section 5.18 that neither the Borrower nor any Subsidiary has "made any direct or indirect unlawful payment to any foreign or domestic government official or employee" would be false as of each date on which it was made or deemed made. Several specific observations support this conclusion:

The representation expressly covers Subsidiaries. TWA, as a société à responsabilité limitée organized under the laws of the Republic of Côte d'Ivoire, is a wholly owned subsidiary of TSL and falls squarely within the definition of "Subsidiary" as used in the Credit Agreement. The payments at issue were made directly by TWA, not by TSL itself, but this distinction is immaterial under the plain language of Section 5.18, which extends to "the Borrower and its Subsidiaries" without qualification.

The representation covers indirect payments. The language "directly or indirectly" is deliberately expansive and was drafted specifically to capture the use of intermediaries to funnel payments to government officials. The payment structure here — in which TWA paid Goldenshore, and Goldenshore may have passed funds through to Captain Touré — is precisely the type of arrangement that the "indirectly" language is designed to reach. The familial and business relationship between Moussa Diallo (40% owner of Goldenshore) and Captain Touré (Director of Port Operations at the Port Autonome d'Abidjan, and Mr. Diallo's brother-in-law) provides a strong inferential basis for concluding that at least some portion of the expediting fees was intended to reach, and did reach, Captain Touré or other government officials. This inference is further supported by the pattern of payments, the absence of any documented services rendered by Goldenshore that would justify the fee amounts, and the timing of the payments relative to port-clearance approvals, as documented in the Scoping Memorandum.

The knowledge qualifier does not protect TSL. This is a critical point. The "to the knowledge of the Borrower" qualifier in the second paragraph of Section 5.18 modifies only the representation as it pertains to the conduct of "any director, officer, agent, employee, or affiliate of the Borrower or any Subsidiary." The qualifier does not apply to the representation regarding the Borrower's or any Subsidiary's own direct conduct. The first clause of the second paragraph — "Neither the Borrower nor any Subsidiary . . . has directly or indirectly . . . made any direct or indirect unlawful payment" — is unqualified by any knowledge limitation. Accordingly, TSL cannot invoke a knowledge defense to insulate itself from a breach arising from TWA's direct authorization and payment of the expediting fees. This is not a case in which a rogue employee acted without corporate authorization; rather, Cédric Anouma, the Managing Director of TWA, was the authorized signatory who approved each of the expediting-fee payments. Mr. Anouma's actions are directly attributable to TWA as a corporate entity, and by extension, to TSL under the Subsidiary coverage of Section 5.18.

In sum, if the underlying factual predicate is confirmed — that is, if the forensic review establishes that the Goldenshore payments were in fact passed through to government officials — the Section 5.18 representation would be false, and TSL would be in breach of a core representation under the Credit Agreement.

B. Continuing Representation — Section 4.02(c)

The bring-down mechanism in Section 4.02(c) significantly amplifies the consequences of a breach of Section 5.18. As noted above, each borrowing request constitutes a deemed re-making of the representations and warranties in Article V, including Section 5.18, as of the date of such borrowing. The representation must be "true and correct in all material respects" as of each such date.

Based on information available from TSL's treasury records, the Borrower has submitted at least seven borrowing requests since March 2018, which is the inception of the relationship between TWA and Goldenshore. The most recent borrowing request was submitted on or about June 1, 2022. If the Section 5.18 representation was false when made or deemed made — that is, if the Goldenshore payments to government officials were ongoing at the time of each borrowing request — then each such request constitutes a separate and independent breach of the Credit Agreement. This is significant because it means that the breach is not a single, historical event; rather, it is a recurring misrepresentation that has been re-made multiple times over a period of more than four years.

The outstanding principal balance under the Facility as of June 30, 2022 was $74,000,000. We have not yet confirmed whether any additional borrowing requests have been submitted since June 30, 2022. If so, any such draws would compound the exposure by adding additional instances of the deemed representation and by increasing the total outstanding indebtedness subject to potential acceleration.

This analysis underscores the urgency of the recommendation in Part V below regarding the monitoring and potential suspension of further borrowing requests during the pendency of the internal review.

C. Event of Default — Section 8.01(d)

A breach of the Section 5.18 representation, if "material," triggers an Event of Default under Section 8.01(d). The Credit Agreement does not define the term "material" for purposes of Section 8.01(d), nor does it specify a quantitative threshold. The materiality determination is therefore a qualitative assessment that would be made by the Agent, the Required Lenders, or, in the event of a dispute, a court of competent jurisdiction.

We believe that a breach of Section 5.18 arising from the Goldenshore payments would likely be deemed material for the following reasons:

Magnitude of the payments. The aggregate expediting fees total approximately €876,000 (approximately $920,000). While this amount is modest relative to the $120,000,000 Facility or TSL's overall financial profile, it is a significant sum in absolute terms and is well in excess of any de minimis threshold that might reasonably be applied. Courts and lenders have consistently treated corrupt payments to government officials as inherently material regardless of their dollar amount relative to the borrower's overall operations.

Nature of the conduct. The alleged conduct involves payments to government officials in exchange for favorable treatment in connection with port operations. This is precisely the type of conduct that anti-corruption representations and covenants are designed to address. Unlike a technical or inadvertent breach of a financial covenant, a breach of an anti-corruption representation goes to the integrity and lawfulness of the borrower's business operations. Lenders and courts have recognized that such breaches carry a qualitative seriousness that transcends their quantitative dimensions.

Duration and pattern of conduct. The Goldenshore payments span a period of more than four years, from March 2018 through May 2022, and involve at least 14 separate wire transfers. This is not an isolated or aberrational transaction; it is a sustained pattern of conduct that suggests systemic deficiencies in the Borrower's compliance infrastructure.

Implication of the Agent's own operations. Of the 14 wire transfers identified to date, approximately $423,000 was routed through the New York branch of Meridian Atlantic Bank, National Association itself, acting as a U.S. dollar correspondent bank for the underlying transactions. This fact directly implicates the Agent's own operations and creates a heightened sensitivity for Meridian Atlantic, which may have its own regulatory exposure (including potential Bank Secrecy Act and anti-money laundering obligations) arising from the processing of these wire transfers. The Agent is therefore unlikely to take a lenient view of the materiality question.

Conclusion on materiality. In light of the foregoing factors, we believe that a court or the Agent would likely conclude that a breach of Section 5.18 arising from the Goldenshore payments is material for purposes of Section 8.01(d).

Consequences upon Event of Default. If an Event of Default is declared under Section 8.01(d), the remedies available to the Agent under Section 8.02 are severe. The Agent, acting at the direction of the Required Lenders, may (i) declare all $74,000,000 in outstanding borrowings immediately due and payable without further notice or demand, (ii) terminate the Lenders' commitment to make further advances, thereby eliminating TSL's access to the remaining $46,000,000 of undrawn capacity under the Facility, and (iii) exercise any and all other remedies available under the Credit Agreement, the Loan Documents, or applicable law, including enforcement of security interests in the pledged collateral. In practical terms, an acceleration of $74,000,000 in outstanding indebtedness would represent a severe liquidity crisis for TSL, the consequences of which are discussed in Part IV below.

D. Affirmative Covenant — Section 6.10

Independent of the analysis under Section 5.18, TSL may also be in breach of the affirmative covenant set forth in Section 6.10, which requires the Borrower to "maintain in effect and enforce policies and procedures designed to promote and achieve compliance" with the FCPA and other applicable anti-corruption laws.

The evidence developed to date, as documented in the Scoping Memorandum and in the Interim Status observations circulated to the team on August 22, 2022, strongly suggests that TSL's anti-corruption compliance program is inadequate to satisfy the requirements of Section 6.10. The principal deficiencies are as follows:

Outdated and incomplete policy. TSL's Global Anti-Bribery Policy is a 14-page document dated November 2016. The policy has not been updated or revised in over six years. It does not mention the FCPA by name, despite the fact that the Credit Agreement specifically references the FCPA in both the representation (Section 5.18) and the affirmative covenant (Section 6.10). The policy does not address the use of third-party agents or intermediaries — a critical gap given that the Goldenshore payments were made precisely through such an intermediary relationship. The policy does not require due diligence on agents' beneficial owners or government affiliations, does not establish gift-and-hospitality thresholds, and does not provide a mechanism for reporting suspected violations, such as a whistleblower hotline or anonymous reporting channel.

Inadequate training. The training records obtained from TWA are incomplete and reflect a fundamentally deficient training effort. In 2019, anti-corruption training was provided to only 38 of 145 TWA employees, representing a coverage rate of approximately 26.2%. In 2020, training reached only 22 employees, or approximately 15.2% of the TWA workforce. No training records exist for 2018, 2021, or 2022. Neither of the documented training sessions addressed the FCPA or the specific risks associated with the use of third-party agents, which are among the most common vectors for corrupt payments in the shipping and logistics industry.

Absence of third-party due diligence. No due diligence was conducted on Goldenshore Maritime Consultants Ltd. prior to the execution of the Agency Agreement between TWA and Goldenshore. A basic due diligence review would have revealed Moussa Diallo's 40% ownership interest in Goldenshore and his familial relationship with Captain Ibrahim Touré, Director of Port Operations at the Port Autonome d'Abidjan. The failure to conduct such due diligence is itself a significant compliance failure and is directly relevant to the adequacy of TSL's policies and procedures.

Significance. The deficiency of TSL's compliance program may constitute an independent breach of the affirmative covenant in Section 6.10, separate from and in addition to the potential breach of the anti-corruption representation in Section 5.18. A breach of Section 6.10 may, in certain respects, be easier to establish than a breach of Section 5.18, because it does not require proof that an actual corrupt payment was made — only that the Borrower's policies and procedures were inadequate to satisfy the "designed to promote and achieve compliance" standard. The evidence catalogued above provides a strong basis for concluding that TSL's compliance program falls well short of that standard.

A breach of Section 6.10 would also constitute an Event of Default under the Credit Agreement, subject to any applicable cure period. The practical consequence is that even if the factual record with respect to the Goldenshore payments remains inconclusive, TSL may still face an Event of Default arising from the inadequacy of its compliance infrastructure.

IV. PRACTICAL CONSIDERATIONS

The legal analysis set forth in Part III must be evaluated in the context of several practical considerations that will shape TSL's approach to the credit-facility issue. We address these considerations below.

1. Proactive vs. Reactive Approach to Meridian Atlantic

A threshold strategic question for TSL is whether to proactively disclose the Goldenshore issue to Meridian Atlantic or to await the completion of the internal review before making any disclosure. There are legitimate arguments on both sides of this question, and the optimal approach will depend on how the factual record develops.

Advantages of Proactive Disclosure. A proactive approach — that is, disclosing the existence of the potential compliance issue to the Agent before the Agent learns of it independently — offers several potential benefits. First, proactive disclosure may build goodwill with the Agent and the Lender group, demonstrating that TSL is a transparent and responsible borrower that takes its compliance obligations seriously. Second, proactive disclosure reduces the risk that the Agent will learn of the issue through other channels, such as a formal inquiry from the Securities and Exchange Commission, press reporting, or outreach by a whistleblower to the Agent or individual Lenders directly. If the Agent learns of the issue independently, the resulting dynamic is likely to be significantly more adversarial than if TSL initiates the conversation. Third, proactive disclosure is more likely to facilitate a cooperative outcome, such as a waiver or standstill agreement, because it demonstrates good faith and cooperation on the part of the Borrower.

Risks of Proactive Disclosure. At the same time, proactive disclosure carries meaningful risks. Disclosure may trigger immediate remedial demands from the Agent, including demands for enhanced reporting, compliance certifications, or the engagement of an independent compliance monitor. The Agent may elect to suspend further advances under the Facility pending resolution of the issue, which would reduce TSL's liquidity at a time when the outcome of the internal review is uncertain. Perhaps most significantly, premature disclosure — before the factual record is fully developed — creates a risk that TSL will provide inaccurate or incomplete information to the Agent, which could itself give rise to additional liability or undermine the credibility of subsequent communications. It is essential that any disclosure to the Agent be based on a solid and verified factual foundation.

Reactive Approach (Wait for Factual Record). The alternative is to defer disclosure until the internal review is complete (or at least substantially advanced), so that TSL can present a complete, credible, and well-organized narrative to the Agent. This approach preserves optionality and allows TSL's management and advisors to make a fully informed decision about the timing, scope, and framing of any disclosure. The principal risk of this approach is that the Agent may learn of the issue independently before TSL is prepared to disclose, in which case TSL may appear to have been evasive or to have concealed material information while continuing to draw on the Facility. This risk is not hypothetical: the SEC whistleblower tip (TCR No. 2022-WB-08341, discussed in the Scoping Memorandum) remains pending, and there is no assurance that the SEC or DOJ will not take action that becomes publicly visible before the internal review is complete.

2. Lender Relationship

Gerald Fontaine, Managing Director, Shipping & Offshore Finance, at Meridian Atlantic Bank, National Association, has served as TSL's primary relationship manager since the Facility was executed in January 2020. Mr. Fontaine is understood to have a constructive working relationship with TSL's treasury function and has been generally supportive of TSL's borrowing needs.

If and when a disclosure is made, a preliminary conversation with Mr. Fontaine — framed as an early-stage compliance matter under review by outside counsel, without disclosing specific facts that might waive privilege — may be the least disruptive way to introduce the issue. Such a conversation would signal to the Agent that TSL is taking the matter seriously and is being proactive, while preserving TSL's ability to control the timing and scope of more detailed disclosures.

Any such conversation must be carefully calibrated and should be conducted jointly with TSL's General Counsel, Dimitra Karavelis-Stavrou. C&H must advise TSL in advance on what can and cannot be disclosed without waiving attorney-client privilege, and a protocol for the conversation should be documented in writing before it takes place.

We note that C&H has represented Meridian Atlantic Bank, National Association in unrelated lending matters in the past. A conflict check was performed by the C&H General Counsel's office, and no conflict was identified (reference CC-2022-1194, dated June 28, 2022). While the absence of a formal conflict is clear, the prior relationship may be a double-edged sword as a practical matter: it may facilitate constructive engagement with the Agent, given the existing professional familiarity, but it could also create a perception issue if the Agent later concludes that C&H was aware of the compliance issue while simultaneously representing Meridian Atlantic in other matters. We will monitor this dynamic and escalate any concerns as appropriate.

3. Refinancing Risk

The Facility matures on January 15, 2025, approximately 28 months from the date of this memorandum. This maturity date creates a medium-term horizon within which the credit-facility issue must be resolved. If Meridian Atlantic exercises its default remedies — including acceleration of the $74,000,000 in outstanding borrowings or termination of the Lenders' commitment — TSL would face an immediate and severe liquidity shortfall. Even if acceleration does not occur, the pendency of the FCPA investigation and the potential covenant breach may cause Meridian Atlantic to decline to refinance the Facility at maturity, forcing TSL to source $74,000,000 (or such other amount as may be outstanding at that time) in alternative financing.

The current shipping credit market is constrained. Post-pandemic dislocation, rising interest rates, and increased regulatory scrutiny of the shipping sector have reduced the availability of committed revolving credit facilities, particularly for mid-market borrowers. An FCPA-tainted borrower — that is, a borrower that is the subject of a known or suspected FCPA investigation — may face significant difficulty securing replacement facilities from other lenders, as compliance-sensitive institutions may be unwilling to extend credit to a borrower with unresolved anti-corruption exposure.

TSL's financial profile is, on its own terms, strong. The Company's FY 2021 financials, audited by Kouvalis & Demopoulos SA, reflect revenue of approximately €487 million and EBITDA of approximately €61.3 million. TSL operates a fleet of 34 dry-bulk and general-cargo vessels and 12 container feeders, which together provide a meaningful collateral base for secured lending. However, the reputational taint associated with an FCPA investigation could offset these creditworthiness factors in the eyes of prospective lenders, particularly those with robust compliance screening procedures. The risk of being unable to secure replacement financing on commercially acceptable terms — or at all — is a material consideration that weighs in favor of a cooperative approach to Meridian Atlantic.

4. Waiver Possibility

If TSL can demonstrate that it is taking prompt and meaningful remedial action, the Agent and the Required Lenders may be willing to grant a waiver of the covenant breach or to enter into a standstill agreement pursuant to which the Agent would forbear from exercising default remedies for a specified period. This is a common outcome in lender relationships where the borrower is cooperative, transparent, and demonstrably committed to remediating the underlying issue.

Remedial actions that would support a waiver request include, but are not limited to, the following:

(a) Completing the internal investigation being conducted by C&H in coordination with Northpoint Forensic Advisors LLC and presenting the results to the Agent in a comprehensive and credible manner.

(b) Enhancing the anti-corruption compliance program, including the implementation of a robust third-party due diligence program, FCPA-specific training for all employees and agents, and a revised Global Anti-Bribery Policy that addresses the deficiencies identified in Part III.D above.

(c) Suspending all expediting-fee payments to Goldenshore Maritime Consultants Ltd. pending the outcome of the investigation.

(d) Terminating or restructuring the Goldenshore Agency Agreement as appropriate based on the findings of the investigation.

(e) Evaluating and, if appropriate, pursuing voluntary self-disclosure to the U.S. Department of Justice and/or the Securities and Exchange Commission, which would further demonstrate TSL's commitment to cooperation and remediation.

A waiver, if granted, may be expected to come with conditions. Typical conditions in this context include enhanced reporting obligations (e.g., periodic certifications regarding compliance program implementation), compliance certifications by senior management, and, in some cases, the appointment of an independent compliance monitor at the Borrower's expense. The costs associated with these conditions should be factored into TSL's overall remediation budget.

The Scoping Memorandum estimated total remediation costs of approximately $350,000 to $750,000, inclusive of forensic accounting work by Northpoint Forensic Advisors LLC, enhancements to the compliance program, and the potential engagement of a third-party compliance monitor. These estimates remain preliminary and will be refined as the scope of the remediation effort becomes clearer.

5. Interaction with DOJ/SEC Voluntary Self-Disclosure

The credit-facility analysis does not exist in isolation; it must be coordinated with TSL's broader strategy regarding potential voluntary self-disclosure to the U.S. Department of Justice's FCPA Unit and/or the Securities and Exchange Commission's Division of Enforcement.

If TSL ultimately elects to pursue voluntary self-disclosure, having already addressed the credit-facility issue cooperatively with Meridian Atlantic will strengthen the narrative that TSL acted promptly and in good faith to remediate the underlying conduct. Both the DOJ's FCPA Corporate Enforcement Policy and the SEC's Seaboard Framework reward companies that demonstrate prompt remedial action, including proactive engagement with affected counterparties and stakeholders. A cooperative resolution with the Agent would be a concrete and tangible demonstration of such remedial action.

Conversely, if the DOJ or SEC opens a formal investigation before the credit-facility issue is addressed, there is a significant risk that the Agent will learn of the investigation through public filings (e.g., Form 8-K disclosures), subpoenas served on Meridian Atlantic or other parties, or media reporting. Discovery of the issue through these channels — rather than through proactive disclosure by the Borrower — would be significantly worse for the lender relationship and would substantially reduce the likelihood of obtaining a waiver or standstill.

As of the date of this memorandum, the SEC whistleblower tip (TCR No. 2022-WB-08341), identified in the Scoping Memorandum, remains pending. No formal inquiry, subpoena, investigative demand, or enforcement action has been initiated by the DOJ or the SEC. However, the pendency of the whistleblower tip is itself a source of uncertainty, and we cannot predict with confidence the timing or nature of any action the SEC may take in response to the tip. This uncertainty reinforces the need for a deliberate and well-timed disclosure strategy that accounts for the possibility of external developments.

V. RECOMMENDATIONS

Based on the foregoing analysis, we make the following preliminary recommendations:

1. Defer Disclosure to Meridian Atlantic Pending Completion of the Factual Record. We recommend that TSL not make any disclosure to Meridian Atlantic, whether to Gerald Fontaine or to any other representative of the Agent or the Lender group, until the factual record developed through the internal review is sufficiently complete to support a credible and comprehensive narrative. A disclosure strategy should be developed jointly by C&H and TSL management, specifically including Dimitra Karavelis-Stavrou (General Counsel), Alexandros Fitsakis (Chief Financial Officer), and with input from Nikolaos Karavelis in his capacity as controlling shareholder and Chairman of the Board. Premature or incomplete disclosure could undermine TSL's credibility and limit its ability to negotiate a favorable outcome with the Agent.

2. Prioritize Completion of the Internal Review. We recommend that TSL prioritize the engagement and activation of Northpoint Forensic Advisors LLC (Sandra Bellingham, CPA, CFE; 1700 K Street NW, Suite 600, Washington, DC 20006) to complete the forensic accounting workstreams that are essential to developing a complete factual record. Key outstanding document requests include TWA bank statements from Banque Equatoriale de Commerce SA (the depository bank for TWA's operating accounts in Abidjan), petty-cash records for the TWA Abidjan office, the complete set of invoices issued by Goldenshore to TWA, and wire-transfer confirmations for all payments to Goldenshore, including confirmations from both the originating bank and any intermediary banks (including Meridian Atlantic's New York branch). Without these documents, the factual record will remain incomplete and TSL will be unable to present a credible narrative to the Agent, the DOJ, or the SEC.

3. Prepare a Draft Waiver Request and Standstill Letter. We recommend that C&H prepare, and hold in reserve, a draft waiver request and standstill letter addressed to the Agent. The draft should reference the specific remedial actions TSL has undertaken or committed to undertake, and should request that the Agent forbear from exercising any default remedies under Section 8.02 for a specified period (we recommend requesting 120 to 180 days) while the investigation is completed and remedial measures are implemented. This document should be finalized and ready for delivery on short notice, in the event that disclosure becomes necessary — whether as a result of a planned proactive approach or in response to external developments such as an SEC inquiry.

4. Monitor and Consider Suspending Borrowing Requests. Each additional borrowing request submitted under the Facility reaffirms the Section 5.18 representation and creates an additional potential breach point. We recommend that TSL carefully monitor all borrowing requests and consider whether it is operationally feasible to minimize or suspend further draws during the pendency of the internal review. We note that the Company's annual U.S. charter revenue, estimated at approximately $34,000,000 (derived primarily from time-charter agreements with Ironwood Commodity Trading LLC and Cascadia Grain Exports Inc.), may provide sufficient liquidity to reduce or eliminate reliance on the Facility for the duration of the review period. TSL's treasury function should model the cash-flow impact of a temporary draw suspension and report its findings to C&H and management promptly.

5. Coordinate with Papadakis & Lekkas LLP on Greek Regulatory Obligations. We recommend that C&H coordinate with Stavros Lekkas of Papadakis & Lekkas LLP (28 Vasilissis Sofias Avenue, Athens 106 74, Greece), TSL's Greek counsel, on any regulatory disclosure obligations that may arise under Greek law if a breach of the Credit Agreement is confirmed. In particular, we note that the Hellenic Capital Markets Commission may impose disclosure or notification requirements on companies organized under Greek law that experience material defaults under credit facilities or that are the subject of foreign regulatory investigations. This assessment should be initiated promptly so that TSL is not caught off guard by a Greek regulatory obligation that runs in parallel with the U.S. disclosure timeline.

6. Assess Nigerian Regulatory Disclosure Obligations. We recommend that C&H consider whether Okafor Bassey & Partners (Ngozi Okafor, 4th Floor, Marina Towers, 22 Marina Street, Lagos Island, Lagos, Nigeria), TSL's Nigerian counsel, should be engaged to assess whether Nigerian banking regulations or anti-corruption laws impose independent disclosure obligations on Thalassa Nigeria Limited ("TNL") with respect to its banking relationships in Nigeria. Given that the Goldenshore payments relate in part to port operations in Nigeria (specifically, the Nigeria Ports Authority), and given that TNL maintains local banking relationships in Lagos, there may be Nigerian regulatory considerations that must be addressed in coordination with the broader disclosure strategy.

This memorandum has been prepared solely for the internal use of Calderwood & Harkness LLP and its client, Thalassa Shipping & Logistics SA, in connection with the ongoing privileged internal review described herein. This memorandum is protected by the attorney-client privilege and the work product doctrine. No portion of this memorandum may be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP and Thalassa Shipping & Logistics SA.

Prepared by:

Liam Donahue Associate, White Collar & Investigations Calderwood & Harkness LLP

Available for questions or further analysis as needed.

CALDERWOOD & HARKNESS LLP — PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP MEMORANDUM
TO: Victoria Chambers, Partner, White Collar & Investigations Jasmine Thornton, Counsel, Banking & Credit Facilities
FROM: Liam Donahue, Associate, White Collar & Investigations
DATE: September 9, 2022
RE: Analysis of Anti-Corruption Covenants — Meridian Atlantic Bank Revolving Credit Facility Matter No. 1044-00007
I. INTRODUCTION
This memorandum analyzes the anti-corruption representations and covenants contained in that certain Credit Agreement dated as of January 15, 2020 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Thalassa Shipping & Logistics SA, a société anonyme organized under the laws of the Hellenic Republic (the "Borrower" or "TSL"), the lenders from time to time party thereto (the "Lenders"), and Meridian Atlantic Bank, National Association, as administrative agent for the Lenders (in such capacity, the "Agent"). The Credit Agreement governs a $120,000,000 senior secured revolving credit facility (the "Facility"), which was executed on January 15, 2020 and has a stated maturity date of January 15, 2025.
This analysis has been prepared in connection with, and should be read in light of, the potential exposure under the United States Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), arising from certain port-facilitation payments identified in the Preliminary Scoping Memorandum prepared by the undersigned and dated August 1, 2022 (the "Scoping Memorandum"). As detailed in the Scoping Memorandum, the payments at issue consist of aggregate expediting fees totaling approximately €876,000 (equivalent to approximately $920,000 at the June 2022 EUR/USD exchange rate of €1 = $1.05), paid by Thalassa West Africa SARL ("TWA"), a wholly owned subsidiary of TSL, to Goldenshore Maritime Consultants Ltd. ("Goldenshore") over the period from March 2018 through May 2022. These payments are the subject of an ongoing internal review being conducted by Calderwood & Harkness LLP ("C&H") in coordination with Northpoint Forensic Advisors LLC.
As of June 30, 2022, per TSL's treasury report for the second quarter of fiscal year 2022, the Borrower has $74,000,000 in outstanding borrowings drawn on the $120,000,000 Facility. Gerald Fontaine, Managing Director, Shipping & Offshore Finance, at Meridian Atlantic Bank, National Association (383 Madison Avenue, New York, New York 10179), serves as TSL's primary relationship manager for purposes of the Facility.
The purpose of this memorandum is to (a) identify the specific provisions of the Credit Agreement that bear on TSL's anti-corruption obligations, (b) analyze whether the Goldenshore payments may give rise to a breach of those provisions, (c) assess the potential consequences of any such breach, including the risk of acceleration and commitment termination, and (d) set forth practical considerations and preliminary recommendations regarding TSL's approach to the Agent and the Lender group in light of these issues. This memorandum does not address the underlying FCPA analysis in detail; that analysis is the subject of a separate memorandum currently in preparation.
II. RELEVANT PROVISIONS
Set forth below are the key provisions of the Credit Agreement that are implicated by the potential FCPA exposure. We have reproduced the operative language verbatim where appropriate, with our annotations following each provision.
A. Section 5.18 — Anti-Corruption Laws
Section 5.18 of the Credit Agreement contains the Borrower's representation and warranty regarding compliance with anti-corruption laws. The full text of Section 5.18 is as follows:
"The Borrower and its Subsidiaries have conducted their businesses in compliance with the United States Foreign Corrupt Practices Act of 1977, as amended (the 'FCPA'), the U.K. Bribery Act 2010, and all other applicable anti-corruption laws and regulations."
"Neither the Borrower nor any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee, or affiliate of the Borrower or any Subsidiary has directly or indirectly used any corporate funds for any unlawful contribution, gift, entertainment, or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or violated or is in violation of any provision of the FCPA, the U.K. Bribery Act 2010, or any other applicable anti-corruption law."
Several features of this representation are noteworthy for present purposes:
First, the representation expressly covers not only the Borrower itself but also its "Subsidiaries." As discussed in Part III.A below, TWA is a wholly owned subsidiary of TSL and is therefore squarely within the scope of this representation.
Second, the representation addresses both direct and indirect payments. The language "directly or indirectly" is broadly drafted and is designed to capture payments routed through intermediaries, which is precisely the structure at issue here.
Third, and critically, the knowledge qualifier embedded in the second paragraph of Section 5.18 applies only to the conduct of "directors, officers, agents, employees, or affiliates" of the Borrower or any Subsidiary. The qualifier does not modify the representation as it pertains to the Borrower's or any Subsidiary's own conduct. This distinction has significant implications for whether TSL can invoke a knowledge defense, as discussed in Part III.A below.
B. Section 4.02(c) — Conditions to Each Borrowing
Section 4.02 of the Credit Agreement sets forth the conditions precedent to each borrowing under the Facility. Section 4.02(c) provides, in relevant part, that:
Each request for a borrowing under the Facility shall constitute a representation and warranty by the Borrower that (i) the representations and warranties set forth in Article V (including, without limitation, Section 5.18) are true and correct in all material respects as of the date of such borrowing (except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date), and (ii) no Default or Event of Default has occurred and is continuing or would result from such borrowing.
The practical effect of Section 4.02(c) is that the anti-corruption representation contained in Section 5.18 is not merely a static, one-time representation made as of the closing date. Rather, it is re-made — and deemed re-made — each time the Borrower submits a borrowing request. This "bring-down" mechanism is standard in revolving credit facilities and has the consequence of creating multiple potential breach points, as analyzed in Part III.B below.
C. Section 6.10 — Affirmative Covenant (Anti-Corruption)
Section 6.10 of the Credit Agreement imposes a continuing affirmative obligation on the Borrower with respect to anti-corruption compliance. The relevant language provides:
"The Borrower shall maintain in effect and enforce policies and procedures designed to promote and achieve compliance by the Borrower, its Subsidiaries, and their respective directors, officers, employees, and agents with the FCPA and all other applicable anti-corruption laws."
Unlike Section 5.18, which is a point-in-time representation regarding past and present compliance, Section 6.10 is a forward-looking affirmative covenant that requires the Borrower to maintain an active compliance infrastructure on an ongoing basis. The distinction is important: a borrower could, in theory, be in compliance with Section 5.18 (i.e., no actual corrupt payments have been made) but still be in breach of Section 6.10 if its compliance policies and procedures are inadequate. Conversely, as discussed further in Part III.D below, deficiencies in TSL's compliance program may provide an independent basis for finding a covenant breach, separate from the question of whether the Goldenshore payments themselves violated the FCPA.
D. Section 8.01(d) — Events of Default
Section 8.01(d) of the Credit Agreement provides that an Event of Default occurs if:
"any representation or warranty made or deemed made by the Borrower herein, in any other Loan Document, or in any certificate, document, or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been false or misleading in any material respect when made or deemed made."
A material breach of the anti-corruption representation in Section 5.18 would therefore trigger an Event of Default under Section 8.01(d). Importantly, the phrase "deemed made" captures each instance in which the Section 5.18 representation is re-made through the bring-down mechanism of Section 4.02(c).
Upon the occurrence of an Event of Default, Section 8.02 of the Credit Agreement provides the Agent (acting at the direction of the Required Lenders, defined as Lenders holding more than 50% of the aggregate commitments) with the following remedies:
(i) Acceleration. The Agent may declare all outstanding obligations under the Credit Agreement immediately due and payable, without presentment, demand, protest, or other notice of any kind, all of which are expressly waived by the Borrower.
(ii) Commitment Termination. The Agent may terminate the Lenders' commitment to make further advances under the Facility, thereby cutting off the Borrower's access to any undrawn portion of the revolving commitment.
(iii) Other Remedies. The Agent may exercise any and all other rights and remedies available under the Credit Agreement, the other Loan Documents, or applicable law, including the enforcement of security interests in the collateral pledged by the Borrower.
The interplay between these provisions creates a cascading risk profile: a breach of Section 5.18, if deemed material, triggers Section 8.01(d), which in turn activates the full panoply of remedies under Section 8.02.
III. ANALYSIS
A. Potential Breach of Section 5.18
The central question under Section 5.18 is whether the expediting fees paid by TWA to Goldenshore constitute "direct or indirect unlawful payment[s] to any foreign or domestic government official or employee from corporate funds" within the meaning of the representation.
The factual predicate for this analysis is as follows. As detailed in the Scoping Memorandum, between March 2018 and May 2022, TWA paid aggregate expediting fees of approximately €876,000 (approximately $920,000) to Goldenshore Maritime Consultants Ltd. Goldenshore is a limited liability company incorporated in the Republic of Côte d'Ivoire. Moussa Diallo holds a 40% ownership interest in Goldenshore. Mr. Diallo is the brother-in-law of Captain Ibrahim Touré, who serves as Director of Port Operations at the Port Autonome d'Abidjan. The remaining 60% ownership of Goldenshore is held by interests that have not yet been fully identified; clarification of the beneficial ownership structure is a priority item for the ongoing forensic review.
If the expediting fees paid by TWA to Goldenshore were, in fact, passed through — in whole or in part — to Captain Touré or to other officials at the Port Autonome d'Abidjan or the Nigeria Ports Authority, then the representation in Section 5.18 that neither the Borrower nor any Subsidiary has "made any direct or indirect unlawful payment to any foreign or domestic government official or employee" would be false as of each date on which it was made or deemed made. Several specific observations support this conclusion:
The representation expressly covers Subsidiaries. TWA, as a société à responsabilité limitée organized under the laws of the Republic of Côte d'Ivoire, is a wholly owned subsidiary of TSL and falls squarely within the definition of "Subsidiary" as used in the Credit Agreement. The payments at issue were made directly by TWA, not by TSL itself, but this distinction is immaterial under the plain language of Section 5.18, which extends to "the Borrower and its Subsidiaries" without qualification.
The representation covers indirect payments. The language "directly or indirectly" is deliberately expansive and was drafted specifically to capture the use of intermediaries to funnel payments to government officials. The payment structure here — in which TWA paid Goldenshore, and Goldenshore may have passed funds through to Captain Touré — is precisely the type of arrangement that the "indirectly" language is designed to reach. The familial and business relationship between Moussa Diallo (40% owner of Goldenshore) and Captain Touré (Director of Port Operations at the Port Autonome d'Abidjan, and Mr. Diallo's brother-in-law) provides a strong inferential basis for concluding that at least some portion of the expediting fees was intended to reach, and did reach, Captain Touré or other government officials. This inference is further supported by the pattern of payments, the absence of any documented services rendered by Goldenshore that would justify the fee amounts, and the timing of the payments relative to port-clearance approvals, as documented in the Scoping Memorandum.
The knowledge qualifier does not protect TSL. This is a critical point. The "to the knowledge of the Borrower" qualifier in the second paragraph of Section 5.18 modifies only the representation as it pertains to the conduct of "any director, officer, agent, employee, or affiliate of the Borrower or any Subsidiary." The qualifier does not apply to the representation regarding the Borrower's or any Subsidiary's own direct conduct. The first clause of the second paragraph — "Neither the Borrower nor any Subsidiary . . . has directly or indirectly . . . made any direct or indirect unlawful payment" — is unqualified by any knowledge limitation. Accordingly, TSL cannot invoke a knowledge defense to insulate itself from a breach arising from TWA's direct authorization and payment of the expediting fees. This is not a case in which a rogue employee acted without corporate authorization; rather, Cédric Anouma, the Managing Director of TWA, was the authorized signatory who approved each of the expediting-fee payments. Mr. Anouma's actions are directly attributable to TWA as a corporate entity, and by extension, to TSL under the Subsidiary coverage of Section 5.18.
In sum, if the underlying factual predicate is confirmed — that is, if the forensic review establishes that the Goldenshore payments were in fact passed through to government officials — the Section 5.18 representation would be false, and TSL would be in breach of a core representation under the Credit Agreement.
B. Continuing Representation — Section 4.02(c)
The bring-down mechanism in Section 4.02(c) significantly amplifies the consequences of a breach of Section 5.18. As noted above, each borrowing request constitutes a deemed re-making of the representations and warranties in Article V, including Section 5.18, as of the date of such borrowing. The representation must be "true and correct in all material respects" as of each such date.
Based on information available from TSL's treasury records, the Borrower has submitted at least seven borrowing requests since March 2018, which is the inception of the relationship between TWA and Goldenshore. The most recent borrowing request was submitted on or about June 1, 2022. If the Section 5.18 representation was false when made or deemed made — that is, if the Goldenshore payments to government officials were ongoing at the time of each borrowing request — then each such request constitutes a separate and independent breach of the Credit Agreement. This is significant because it means that the breach is not a single, historical event; rather, it is a recurring misrepresentation that has been re-made multiple times over a period of more than four years.
The outstanding principal balance under the Facility as of June 30, 2022 was $74,000,000. We have not yet confirmed whether any additional borrowing requests have been submitted since June 30, 2022. If so, any such draws would compound the exposure by adding additional instances of the deemed representation and by increasing the total outstanding indebtedness subject to potential acceleration.
This analysis underscores the urgency of the recommendation in Part V below regarding the monitoring and potential suspension of further borrowing requests during the pendency of the internal review.
C. Event of Default — Section 8.01(d)
A breach of the Section 5.18 representation, if "material," triggers an Event of Default under Section 8.01(d). The Credit Agreement does not define the term "material" for purposes of Section 8.01(d), nor does it specify a quantitative threshold. The materiality determination is therefore a qualitative assessment that would be made by the Agent, the Required Lenders, or, in the event of a dispute, a court of competent jurisdiction.
We believe that a breach of Section 5.18 arising from the Goldenshore payments would likely be deemed material for the following reasons:
Magnitude of the payments. The aggregate expediting fees total approximately €876,000 (approximately $920,000). While this amount is modest relative to the $120,000,000 Facility or TSL's overall financial profile, it is a significant sum in absolute terms and is well in excess of any de minimis threshold that might reasonably be applied. Courts and lenders have consistently treated corrupt payments to government officials as inherently material regardless of their dollar amount relative to the borrower's overall operations.
Nature of the conduct. The alleged conduct involves payments to government officials in exchange for favorable treatment in connection with port operations. This is precisely the type of conduct that anti-corruption representations and covenants are designed to address. Unlike a technical or inadvertent breach of a financial covenant, a breach of an anti-corruption representation goes to the integrity and lawfulness of the borrower's business operations. Lenders and courts have recognized that such breaches carry a qualitative seriousness that transcends their quantitative dimensions.
Duration and pattern of conduct. The Goldenshore payments span a period of more than four years, from March 2018 through May 2022, and involve at least 14 separate wire transfers. This is not an isolated or aberrational transaction; it is a sustained pattern of conduct that suggests systemic deficiencies in the Borrower's compliance infrastructure.
Implication of the Agent's own operations. Of the 14 wire transfers identified to date, approximately $423,000 was routed through the New York branch of Meridian Atlantic Bank, National Association itself, acting as a U.S. dollar correspondent bank for the underlying transactions. This fact directly implicates the Agent's own operations and creates a heightened sensitivity for Meridian Atlantic, which may have its own regulatory exposure (including potential Bank Secrecy Act and anti-money laundering obligations) arising from the processing of these wire transfers. The Agent is therefore unlikely to take a lenient view of the materiality question.
Conclusion on materiality. In light of the foregoing factors, we believe that a court or the Agent would likely conclude that a breach of Section 5.18 arising from the Goldenshore payments is material for purposes of Section 8.01(d).
Consequences upon Event of Default. If an Event of Default is declared under Section 8.01(d), the remedies available to the Agent under Section 8.02 are severe. The Agent, acting at the direction of the Required Lenders, may (i) declare all $74,000,000 in outstanding borrowings immediately due and payable without further notice or demand, (ii) terminate the Lenders' commitment to make further advances, thereby eliminating TSL's access to the remaining $46,000,000 of undrawn capacity under the Facility, and (iii) exercise any and all other remedies available under the Credit Agreement, the Loan Documents, or applicable law, including enforcement of security interests in the pledged collateral. In practical terms, an acceleration of $74,000,000 in outstanding indebtedness would represent a severe liquidity crisis for TSL, the consequences of which are discussed in Part IV below.
D. Affirmative Covenant — Section 6.10
Independent of the analysis under Section 5.18, TSL may also be in breach of the affirmative covenant set forth in Section 6.10, which requires the Borrower to "maintain in effect and enforce policies and procedures designed to promote and achieve compliance" with the FCPA and other applicable anti-corruption laws.
The evidence developed to date, as documented in the Scoping Memorandum and in the Interim Status observations circulated to the team on August 22, 2022, strongly suggests that TSL's anti-corruption compliance program is inadequate to satisfy the requirements of Section 6.10. The principal deficiencies are as follows:
Outdated and incomplete policy. TSL's Global Anti-Bribery Policy is a 14-page document dated November 2016. The policy has not been updated or revised in over six years. It does not mention the FCPA by name, despite the fact that the Credit Agreement specifically references the FCPA in both the representation (Section 5.18) and the affirmative covenant (Section 6.10). The policy does not address the use of third-party agents or intermediaries — a critical gap given that the Goldenshore payments were made precisely through such an intermediary relationship. The policy does not require due diligence on agents' beneficial owners or government affiliations, does not establish gift-and-hospitality thresholds, and does not provide a mechanism for reporting suspected violations, such as a whistleblower hotline or anonymous reporting channel.
Inadequate training. The training records obtained from TWA are incomplete and reflect a fundamentally deficient training effort. In 2019, anti-corruption training was provided to only 38 of 145 TWA employees, representing a coverage rate of approximately 26.2%. In 2020, training reached only 22 employees, or approximately 15.2% of the TWA workforce. No training records exist for 2018, 2021, or 2022. Neither of the documented training sessions addressed the FCPA or the specific risks associated with the use of third-party agents, which are among the most common vectors for corrupt payments in the shipping and logistics industry.
Absence of third-party due diligence. No due diligence was conducted on Goldenshore Maritime Consultants Ltd. prior to the execution of the Agency Agreement between TWA and Goldenshore. A basic due diligence review would have revealed Moussa Diallo's 40% ownership interest in Goldenshore and his familial relationship with Captain Ibrahim Touré, Director of Port Operations at the Port Autonome d'Abidjan. The failure to conduct such due diligence is itself a significant compliance failure and is directly relevant to the adequacy of TSL's policies and procedures.
Significance. The deficiency of TSL's compliance program may constitute an independent breach of the affirmative covenant in Section 6.10, separate from and in addition to the potential breach of the anti-corruption representation in Section 5.18. A breach of Section 6.10 may, in certain respects, be easier to establish than a breach of Section 5.18, because it does not require proof that an actual corrupt payment was made — only that the Borrower's policies and procedures were inadequate to satisfy the "designed to promote and achieve compliance" standard. The evidence catalogued above provides a strong basis for concluding that TSL's compliance program falls well short of that standard.
A breach of Section 6.10 would also constitute an Event of Default under the Credit Agreement, subject to any applicable cure period. The practical consequence is that even if the factual record with respect to the Goldenshore payments remains inconclusive, TSL may still face an Event of Default arising from the inadequacy of its compliance infrastructure.
IV. PRACTICAL CONSIDERATIONS
The legal analysis set forth in Part III must be evaluated in the context of several practical considerations that will shape TSL's approach to the credit-facility issue. We address these considerations below.
1. Proactive vs. Reactive Approach to Meridian Atlantic
A threshold strategic question for TSL is whether to proactively disclose the Goldenshore issue to Meridian Atlantic or to await the completion of the internal review before making any disclosure. There are legitimate arguments on both sides of this question, and the optimal approach will depend on how the factual record develops.
Advantages of Proactive Disclosure. A proactive approach — that is, disclosing the existence of the potential compliance issue to the Agent before the Agent learns of it independently — offers several potential benefits. First, proactive disclosure may build goodwill with the Agent and the Lender group, demonstrating that TSL is a transparent and responsible borrower that takes its compliance obligations seriously. Second, proactive disclosure reduces the risk that the Agent will learn of the issue through other channels, such as a formal inquiry from the Securities and Exchange Commission, press reporting, or outreach by a whistleblower to the Agent or individual Lenders directly. If the Agent learns of the issue independently, the resulting dynamic is likely to be significantly more adversarial than if TSL initiates the conversation. Third, proactive disclosure is more likely to facilitate a cooperative outcome, such as a waiver or standstill agreement, because it demonstrates good faith and cooperation on the part of the Borrower.
Risks of Proactive Disclosure. At the same time, proactive disclosure carries meaningful risks. Disclosure may trigger immediate remedial demands from the Agent, including demands for enhanced reporting, compliance certifications, or the engagement of an independent compliance monitor. The Agent may elect to suspend further advances under the Facility pending resolution of the issue, which would reduce TSL's liquidity at a time when the outcome of the internal review is uncertain. Perhaps most significantly, premature disclosure — before the factual record is fully developed — creates a risk that TSL will provide inaccurate or incomplete information to the Agent, which could itself give rise to additional liability or undermine the credibility of subsequent communications. It is essential that any disclosure to the Agent be based on a solid and verified factual foundation.
Reactive Approach (Wait for Factual Record). The alternative is to defer disclosure until the internal review is complete (or at least substantially advanced), so that TSL can present a complete, credible, and well-organized narrative to the Agent. This approach preserves optionality and allows TSL's management and advisors to make a fully informed decision about the timing, scope, and framing of any disclosure. The principal risk of this approach is that the Agent may learn of the issue independently before TSL is prepared to disclose, in which case TSL may appear to have been evasive or to have concealed material information while continuing to draw on the Facility. This risk is not hypothetical: the SEC whistleblower tip (TCR No. 2022-WB-08341, discussed in the Scoping Memorandum) remains pending, and there is no assurance that the SEC or DOJ will not take action that becomes publicly visible before the internal review is complete.
2. Lender Relationship
Gerald Fontaine, Managing Director, Shipping & Offshore Finance, at Meridian Atlantic Bank, National Association, has served as TSL's primary relationship manager since the Facility was executed in January 2020. Mr. Fontaine is understood to have a constructive working relationship with TSL's treasury function and has been generally supportive of TSL's borrowing needs.
If and when a disclosure is made, a preliminary conversation with Mr. Fontaine — framed as an early-stage compliance matter under review by outside counsel, without disclosing specific facts that might waive privilege — may be the least disruptive way to introduce the issue. Such a conversation would signal to the Agent that TSL is taking the matter seriously and is being proactive, while preserving TSL's ability to control the timing and scope of more detailed disclosures.
Any such conversation must be carefully calibrated and should be conducted jointly with TSL's General Counsel, Dimitra Karavelis-Stavrou. C&H must advise TSL in advance on what can and cannot be disclosed without waiving attorney-client privilege, and a protocol for the conversation should be documented in writing before it takes place.
We note that C&H has represented Meridian Atlantic Bank, National Association in unrelated lending matters in the past. A conflict check was performed by the C&H General Counsel's office, and no conflict was identified (reference CC-2022-1194, dated June 28, 2022). While the absence of a formal conflict is clear, the prior relationship may be a double-edged sword as a practical matter: it may facilitate constructive engagement with the Agent, given the existing professional familiarity, but it could also create a perception issue if the Agent later concludes that C&H was aware of the compliance issue while simultaneously representing Meridian Atlantic in other matters. We will monitor this dynamic and escalate any concerns as appropriate.
3. Refinancing Risk
The Facility matures on January 15, 2025, approximately 28 months from the date of this memorandum. This maturity date creates a medium-term horizon within which the credit-facility issue must be resolved. If Meridian Atlantic exercises its default remedies — including acceleration of the $74,000,000 in outstanding borrowings or termination of the Lenders' commitment — TSL would face an immediate and severe liquidity shortfall. Even if acceleration does not occur, the pendency of the FCPA investigation and the potential covenant breach may cause Meridian Atlantic to decline to refinance the Facility at maturity, forcing TSL to source $74,000,000 (or such other amount as may be outstanding at that time) in alternative financing.
The current shipping credit market is constrained. Post-pandemic dislocation, rising interest rates, and increased regulatory scrutiny of the shipping sector have reduced the availability of committed revolving credit facilities, particularly for mid-market borrowers. An FCPA-tainted borrower — that is, a borrower that is the subject of a known or suspected FCPA investigation — may face significant difficulty securing replacement facilities from other lenders, as compliance-sensitive institutions may be unwilling to extend credit to a borrower with unresolved anti-corruption exposure.
TSL's financial profile is, on its own terms, strong. The Company's FY 2021 financials, audited by Kouvalis & Demopoulos SA, reflect revenue of approximately €487 million and EBITDA of approximately €61.3 million. TSL operates a fleet of 34 dry-bulk and general-cargo vessels and 12 container feeders, which together provide a meaningful collateral base for secured lending. However, the reputational taint associated with an FCPA investigation could offset these creditworthiness factors in the eyes of prospective lenders, particularly those with robust compliance screening procedures. The risk of being unable to secure replacement financing on commercially acceptable terms — or at all — is a material consideration that weighs in favor of a cooperative approach to Meridian Atlantic.
4. Waiver Possibility
If TSL can demonstrate that it is taking prompt and meaningful remedial action, the Agent and the Required Lenders may be willing to grant a waiver of the covenant breach or to enter into a standstill agreement pursuant to which the Agent would forbear from exercising default remedies for a specified period. This is a common outcome in lender relationships where the borrower is cooperative, transparent, and demonstrably committed to remediating the underlying issue.
Remedial actions that would support a waiver request include, but are not limited to, the following:
(a) Completing the internal investigation being conducted by C&H in coordination with Northpoint Forensic Advisors LLC and presenting the results to the Agent in a comprehensive and credible manner.
(b) Enhancing the anti-corruption compliance program, including the implementation of a robust third-party due diligence program, FCPA-specific training for all employees and agents, and a revised Global Anti-Bribery Policy that addresses the deficiencies identified in Part III.D above.
(c) Suspending all expediting-fee payments to Goldenshore Maritime Consultants Ltd. pending the outcome of the investigation.
(d) Terminating or restructuring the Goldenshore Agency Agreement as appropriate based on the findings of the investigation.
(e) Evaluating and, if appropriate, pursuing voluntary self-disclosure to the U.S. Department of Justice and/or the Securities and Exchange Commission, which would further demonstrate TSL's commitment to cooperation and remediation.
A waiver, if granted, may be expected to come with conditions. Typical conditions in this context include enhanced reporting obligations (e.g., periodic certifications regarding compliance program implementation), compliance certifications by senior management, and, in some cases, the appointment of an independent compliance monitor at the Borrower's expense. The costs associated with these conditions should be factored into TSL's overall remediation budget.
The Scoping Memorandum estimated total remediation costs of approximately $350,000 to $750,000, inclusive of forensic accounting work by Northpoint Forensic Advisors LLC, enhancements to the compliance program, and the potential engagement of a third-party compliance monitor. These estimates remain preliminary and will be refined as the scope of the remediation effort becomes clearer.
5. Interaction with DOJ/SEC Voluntary Self-Disclosure
The credit-facility analysis does not exist in isolation; it must be coordinated with TSL's broader strategy regarding potential voluntary self-disclosure to the U.S. Department of Justice's FCPA Unit and/or the Securities and Exchange Commission's Division of Enforcement.
If TSL ultimately elects to pursue voluntary self-disclosure, having already addressed the credit-facility issue cooperatively with Meridian Atlantic will strengthen the narrative that TSL acted promptly and in good faith to remediate the underlying conduct. Both the DOJ's FCPA Corporate Enforcement Policy and the SEC's Seaboard Framework reward companies that demonstrate prompt remedial action, including proactive engagement with affected counterparties and stakeholders. A cooperative resolution with the Agent would be a concrete and tangible demonstration of such remedial action.
Conversely, if the DOJ or SEC opens a formal investigation before the credit-facility issue is addressed, there is a significant risk that the Agent will learn of the investigation through public filings (e.g., Form 8-K disclosures), subpoenas served on Meridian Atlantic or other parties, or media reporting. Discovery of the issue through these channels — rather than through proactive disclosure by the Borrower — would be significantly worse for the lender relationship and would substantially reduce the likelihood of obtaining a waiver or standstill.
As of the date of this memorandum, the SEC whistleblower tip (TCR No. 2022-WB-08341), identified in the Scoping Memorandum, remains pending. No formal inquiry, subpoena, investigative demand, or enforcement action has been initiated by the DOJ or the SEC. However, the pendency of the whistleblower tip is itself a source of uncertainty, and we cannot predict with confidence the timing or nature of any action the SEC may take in response to the tip. This uncertainty reinforces the need for a deliberate and well-timed disclosure strategy that accounts for the possibility of external developments.
V. RECOMMENDATIONS
Based on the foregoing analysis, we make the following preliminary recommendations:
1. Defer Disclosure to Meridian Atlantic Pending Completion of the Factual Record. We recommend that TSL not make any disclosure to Meridian Atlantic, whether to Gerald Fontaine or to any other representative of the Agent or the Lender group, until the factual record developed through the internal review is sufficiently complete to support a credible and comprehensive narrative. A disclosure strategy should be developed jointly by C&H and TSL management, specifically including Dimitra Karavelis-Stavrou (General Counsel), Alexandros Fitsakis (Chief Financial Officer), and with input from Nikolaos Karavelis in his capacity as controlling shareholder and Chairman of the Board. Premature or incomplete disclosure could undermine TSL's credibility and limit its ability to negotiate a favorable outcome with the Agent.
2. Prioritize Completion of the Internal Review. We recommend that TSL prioritize the engagement and activation of Northpoint Forensic Advisors LLC (Sandra Bellingham, CPA, CFE; 1700 K Street NW, Suite 600, Washington, DC 20006) to complete the forensic accounting workstreams that are essential to developing a complete factual record. Key outstanding document requests include TWA bank statements from Banque Equatoriale de Commerce SA (the depository bank for TWA's operating accounts in Abidjan), petty-cash records for the TWA Abidjan office, the complete set of invoices issued by Goldenshore to TWA, and wire-transfer confirmations for all payments to Goldenshore, including confirmations from both the originating bank and any intermediary banks (including Meridian Atlantic's New York branch). Without these documents, the factual record will remain incomplete and TSL will be unable to present a credible narrative to the Agent, the DOJ, or the SEC.
3. Prepare a Draft Waiver Request and Standstill Letter. We recommend that C&H prepare, and hold in reserve, a draft waiver request and standstill letter addressed to the Agent. The draft should reference the specific remedial actions TSL has undertaken or committed to undertake, and should request that the Agent forbear from exercising any default remedies under Section 8.02 for a specified period (we recommend requesting 120 to 180 days) while the investigation is completed and remedial measures are implemented. This document should be finalized and ready for delivery on short notice, in the event that disclosure becomes necessary — whether as a result of a planned proactive approach or in response to external developments such as an SEC inquiry.
4. Monitor and Consider Suspending Borrowing Requests. Each additional borrowing request submitted under the Facility reaffirms the Section 5.18 representation and creates an additional potential breach point. We recommend that TSL carefully monitor all borrowing requests and consider whether it is operationally feasible to minimize or suspend further draws during the pendency of the internal review. We note that the Company's annual U.S. charter revenue, estimated at approximately $34,000,000 (derived primarily from time-charter agreements with Ironwood Commodity Trading LLC and Cascadia Grain Exports Inc.), may provide sufficient liquidity to reduce or eliminate reliance on the Facility for the duration of the review period. TSL's treasury function should model the cash-flow impact of a temporary draw suspension and report its findings to C&H and management promptly.
5. Coordinate with Papadakis & Lekkas LLP on Greek Regulatory Obligations. We recommend that C&H coordinate with Stavros Lekkas of Papadakis & Lekkas LLP (28 Vasilissis Sofias Avenue, Athens 106 74, Greece), TSL's Greek counsel, on any regulatory disclosure obligations that may arise under Greek law if a breach of the Credit Agreement is confirmed. In particular, we note that the Hellenic Capital Markets Commission may impose disclosure or notification requirements on companies organized under Greek law that experience material defaults under credit facilities or that are the subject of foreign regulatory investigations. This assessment should be initiated promptly so that TSL is not caught off guard by a Greek regulatory obligation that runs in parallel with the U.S. disclosure timeline.
6. Assess Nigerian Regulatory Disclosure Obligations. We recommend that C&H consider whether Okafor Bassey & Partners (Ngozi Okafor, 4th Floor, Marina Towers, 22 Marina Street, Lagos Island, Lagos, Nigeria), TSL's Nigerian counsel, should be engaged to assess whether Nigerian banking regulations or anti-corruption laws impose independent disclosure obligations on Thalassa Nigeria Limited ("TNL") with respect to its banking relationships in Nigeria. Given that the Goldenshore payments relate in part to port operations in Nigeria (specifically, the Nigeria Ports Authority), and given that TNL maintains local banking relationships in Lagos, there may be Nigerian regulatory considerations that must be addressed in coordination with the broader disclosure strategy.
This memorandum has been prepared solely for the internal use of Calderwood & Harkness LLP and its client, Thalassa Shipping & Logistics SA, in connection with the ongoing privileged internal review described herein. This memorandum is protected by the attorney-client privilege and the work product doctrine. No portion of this memorandum may be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP and Thalassa Shipping & Logistics SA.
Prepared by:
Liam Donahue Associate, White Collar & Investigations Calderwood & Harkness LLP
Available for questions or further analysis as needed.
CALDERWOOD & HARKNESS LLP — PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP MEMORANDUM

I. INTRODUCTION

II. RELEVANT PROVISIONS

III. ANALYSIS

IV. PRACTICAL CONSIDERATIONS

V. RECOMMENDATIONS

Record

Parties

Dates

Amounts