Avenger Flight Group - Chapter 11 Plan Terms

Plan Terms

Overview

• The Debtors commenced these Chapter 11 Cases to sell substantially all of their assets as a going concern (the "Sale"), liquidate their remaining assets, and wind down their businesses in an orderly manner to preserve and maximize the value of the estates' assets for the benefit of all stakeholders.
  • The decision to file was informed by the prepetition challenges the Debtors faced and several months of exploration and deliberation by the Company's board of directors and management.
• In connection with the Debtors' reorganization process, the Debtors, the Official Committee of Unsecured Creditors (the "Committee"), the Prepetition Lenders, and the DIP Lenders negotiated and entered into a global settlement (the "Committee Resolution") as set forth in the Global Resolution Term Sheet filed with the Court on March 11, 2026 (Exhibit C to the Final DIP Order).
• Pursuant to the proposed Plan, which is consistent with and will further implement the Committee Resolution, on and after the Effective Date, the Litigation Trustee will complete the orderly liquidation and wind-down of the Debtors' business, address pending claims (including litigation claims), and make distributions to Creditors.
• The Plan further provides for the limited substantive consolidation of the Debtors' Estates solely for the purposes of voting on the Plan by the Holders of Claims and making Distributions to Holders of Claims.
• There will be no distributions to Holders of Interests.

Sale Transaction

• The Debtors filed a sale/bidding procedures motion [Docket No. 13] seeking, among other things, approval of procedures for the marketing and ultimate sale of substantially all of their assets and for a designee(s) of the Prepetition Lenders (the "Stalking Horse Bidder") to serve as stalking horse bidder, pursuant to a credit bid, subject to a court-approved overbidding process.
  • The marketing process has been and will continue to be implemented by the Debtors' advisor, Seabury Securities LLC.
  • The stalking horse bid is a credit bid in the amount of $125 million, together with the assumption of certain liabilities and the termination of the liens on certain excluded cash.
  • The Court entered an order approving the bidding procedures on March 11, 2026 [Docket No. 161].
  • Ultimately, no overbids were received and the Debtors canceled the auction.
  • The Court subsequently entered the Sale Order on April 8, 2026 [Docket No. 292], approving the sale of substantially all of the Debtors' assets to AFG Topco, LP (together with its designees and assignees, the "Buyer") pursuant to the Asset Purchase Agreement, dated as of February 11, 2026 (the "Sale Agreement").
• Pursuant to the Sale Agreement, any Distributable Assets after funding of the Professional Fee Reserve and the Administrative / Priority / Other Distributions Reserve that do not constitute Litigation Trust Assets shall be transferred to the Buyer from and after the Effective Date.
• Pursuant to the Sale Order and the Sale Agreement, the Buyer agreed not to pursue any preference actions and claims against contractual counterparties whose agreements have been assumed and assigned, go-forward vendors, or other go-forward commercial counterparties of the Buyer, except as agreed in writing by the Debtors, the Required DIP Lenders, the Required Lenders, and the Committee.

DIP Financing

• On February 12, 2026, the Debtors filed their first day motion for approval of a DIP financing facility and the use of the Prepetition Lenders' cash collateral [Docket No. 12].
  • The DIP Facility is a $43.5 million senior secured DIP facility, which includes $14.5 million in new money to be provided by certain Prepetition Lenders, a roll-up of $6 million in bridge financing, and an additional $23 million of prepetition term loan obligations.
  • The DIP Facility is designed to bridge the Debtors to the closing of a value-maximizing sale and is secured by liens on substantially all of the Debtors' assets.
  • Wilmington Trust, National Association serves as administrative and collateral agent under the DIP Documentation (the "DIP Agent").
• The Court entered an interim order on February 13, 2026 [Docket No. 59] and a final order on March 11, 2026 [Docket No. 160] approving the DIP Facility.
• The DIP Facility Claims will be satisfied in full through a credit bid upon the closing of the transactions approved by the Sale Order. Holders of DIP Facility Claims will receive no Distributions or further payments under the Plan on account of their DIP Facility Claims.

Committee Resolution

• Pursuant to section 1123 of the Bankruptcy Code, and in consideration for the classification, distributions, releases, and other benefits provided under the Plan, upon the Effective Date the provisions of the Plan will constitute a good-faith compromise and settlement of all Claims and Interests and controversies resolved pursuant to the Plan, and in particular, a compromise and settlement among the Debtors, the Prepetition Agent, the Prepetition Lenders, and the Committee.
• Consistent with the Committee Resolution, the Plan provides for, as of the Effective Date, the funding of the Plan and the Litigation Trust and the post-Effective-Date implementation thereof, with certain contributed Cash (held as Available Cash as of the Effective Date) in which the DIP Lenders and/or Prepetition Lenders would otherwise hold Liens and would otherwise be entitled to receive.
  • In a Chapter 7 proceeding, absent such concessions by the Prepetition Lenders and the DIP Lenders, general unsecured creditors would likely receive no distribution on account of their claims.
• Notwithstanding any other provision of the Plan, all Litigation and Causes of Action pursued by the Litigation Trustee and the Litigation Trust shall be subject to the terms of the Committee Resolution in all respects.

Available Cash

• "Available Cash" means the aggregate amount of all Cash held by the Debtors on the Effective Date in accordance with the Sale Order and Committee Resolution, including, without limitation, the remaining Base Wind-Down Amount ($500,000) (as defined in the Committee Resolution), if any, and $500,000 for the funding of the Litigation Trust.

Litigation Trust

• On the Effective Date, a Litigation Trust will be established as a grantor trust pursuant to the Litigation Trust Agreement for the benefit of the Beneficiaries, for the purpose of, among other things:
  • Administering the Litigation Trust Assets;
  • Prosecuting and/or resolving all Disputed Unsecured Claims;
  • Investigating and pursuing any claims and Causes of Action that constitute Litigation Trust Assets;
  • Making all Distributions to the Beneficiaries as provided for under the Plan and the Litigation Trust Agreement; and
  • Any other purpose set forth in the Litigation Trust Agreement.
• On the Effective Date, the Litigation Trust Assets shall vest automatically in the Litigation Trust and shall include:
  • $500,000 in Cash to be funded from Available Cash;
  • Any remaining Cash from the Base Wind-Down Amount (as defined in the Committee Resolution);
  • Any excess, unused Cash that was otherwise previously reserved for the payment of the Allowed Professional Fee Claims of the Committee's Professionals in accordance with the Committee Resolution;
  • Any Estate-Retained Causes of Action, including any and all claims and Causes of Action of the Debtors against any former officer, director, employee, partner, member, equity holder, professional services firm, or representative of any Debtor, whether arising by way of counterclaim or otherwise;
  • Any and all remaining Avoidance Actions of the Debtors against any party;
  • Any and all of the Debtors' rights under any director and officer insurance policies, fiduciary policies, or employment practices policies (including any tail policies or coverage thereon) and any proceeds thereof, to the extent that such policies provide coverage on account of any of the foregoing claims and causes of action and to the extent permitted without impairing such policy or estate rights thereunder;
  • All books and records of the Debtors as of the Effective Date (subject to the Sale Order); and
  • Any proceeds realized from the foregoing claims, causes of action, and rights.
• The Litigation Trust will satisfy priority claims from the Administrative / Priority / Other Distributions Reserve and distribute all other net proceeds of Litigation Trust Assets to the Beneficiaries (including Holders of Allowed Unsecured Claims and the Prepetition Lenders on account of their unsecured deficiency claims), generally in accordance with the priority scheme under the Bankruptcy Code, the Plan, and the Litigation Trust Agreement, subject to the LT Distribution Waterfall.
• The identity of the Litigation Trustee, who shall be selected by the Committee and shall be reasonably acceptable to the Debtors, the Required Lenders, and the Required DIP Lenders (as defined in the Final DIP Order), will be disclosed in the Plan Supplement or any amendment thereto.
• The Litigation Trust Agreement shall provide for the establishment of an oversight board (the "Litigation Trust Oversight Board"), the composition, duties, and powers of which shall be set forth in the Litigation Trust Agreement; provided that the Required Lenders shall be entitled to appoint at least one (1) designee to the Litigation Trust Oversight Board.

LT Distribution Waterfall

• The proceeds of the Litigation Trust Assets shall be distributed in the following order of priority:
  • First, to the Litigation Trust to pay any Litigation Trust Expenses;
  • Second, after any Litigation Trust Expenses are paid in full: 40% of such proceeds to the holders of Litigation Trust Interests on account of Allowed Unsecured Claims, and 60% to the holders of Litigation Trust Interests on account of Prepetition Lenders Deficiency Claims, until the Prepetition Lenders Deficiency Claims have been paid in full in cash;
    • Provided, however, that if the Prepetition Lenders Deficiency Claims comprise less than 60% of the total aggregate amount of Prepetition Lenders Deficiency Claims and Allowed Unsecured Claims, then the percentage of proceeds allocated to holders of Litigation Trust Interests on account of Prepetition Lenders Deficiency Claims shall be reduced from 60% to such lesser percentage (and the percentage of proceeds allocated to holders of Litigation Trust Interests on account of Allowed Unsecured Claims shall be increased proportionally); and
  • Third, after the Prepetition Lenders Deficiency Claims have been paid in full in cash, 100% of all subsequent proceeds of the Litigation Trust Assets shall be distributed to the holders of Litigation Trust Interests on account of Allowed Unsecured Claims, up to the Allowed amount of the Allowed Unsecured Claim of each applicable holder.
• For the avoidance of doubt, no holder of a Litigation Trust Interest shall receive any distribution from the Litigation Trust in excess of such holder's Prepetition Lenders Deficiency Claim or Allowed Unsecured Claim, as applicable.

SIM International Settlement

• The Debtors are party to SIM International Agreements related to eleven (11) FFSes. Prior to the Petition Date, the Company, SIM International, and the Prepetition Lenders entered into the SIM International Settlement (the Settlement Agreement and Release entered into as of February 12, 2026), which provides for a global compromise of the Company's obligations under the SIM International Agreements.
  • The SIM International Settlement includes significant concessions from SIM International and secures an ongoing relationship with improved equipment to support Avenger's turnaround and growth plan, while promoting an ongoing relationship with the Buyer of the Debtors' business and assets.
  • On the Petition Date, the Debtors filed a motion for approval of the settlement, which the Court approved by order entered on March 11, 2026 [Docket No. 158].
• The Holders of the SIM International Claims will receive, subject to the terms of the Plan and the SIM International Settlement, the treatment expressly provided for in the SIM International Settlement.
  • To the extent of any inconsistency or conflict between the terms of the Plan and the SIM International Settlement, the SIM International Settlement will control.
  • Pursuant to the SIM International Settlement, the Holders of the SIM International Claims will vote in favor of the Plan.

Treatment of Claims

• Class 1 — Priority Non-Tax Claims: The Litigation Trust shall pay each Holder, from the Administrative / Priority / Other Distributions Reserve, the Allowed amount of its Priority Non-Tax Claim in Cash in full without interest from the Petition Date, as soon as practicable following the later of (a) the Effective Date and (b) the date such Claim becomes Allowed (or as otherwise permitted by law), unless such Holder agrees in writing to less favorable treatment. Class 1 is Unimpaired and deemed to accept the Plan.
• Class 2 — Prepetition Lenders Claims: Except to the extent that a Holder agrees to other treatment, in exchange for full and final satisfaction, settlement, and release of each Class 2 Claim, Holders will receive no Distributions or further payments under the Plan on account of the Prepetition Lenders Secured Claim, and shall receive, on account of the Prepetition Lenders Deficiency Claims, a Pro Rata share of their respective Litigation Trust Interests, which entitle the Beneficiaries thereof to net proceeds of the Litigation Trust Assets in accordance with the LT Distribution Waterfall.
• Class 3 — Secured EDC Claims: Except to the extent previously paid in full, Holders shall receive the treatment provided in the Final DIP Order, and any remaining Allowed Unsecured Claims of such Holders shall be placed in Class 6 and treated as set forth therein.
• Class 4 — Other Secured Claims: Except to the extent previously paid in full, at the option of the Debtors or the Litigation Trust, each Holder shall receive one of the following: (i) retention of its Lien on its Collateral until sold, with the net sale proceeds paid to such Holder in full satisfaction; (ii) a Cash payment equal to the Allowed amount of its Other Secured Claim; or (iii) abandonment of the Collateral to such Holder, in each case in full satisfaction and release of the Other Secured Claim. Class 4 is Unimpaired and deemed to accept the Plan.
• Class 6 — Unsecured Claims: Except to the extent that a Holder of an Allowed Unsecured Claim agrees to a less favorable treatment, in exchange for full and final satisfaction, settlement, release, and discharge of each Allowed Unsecured Claim, Holders shall receive a Pro Rata share of their respective Litigation Trust Interests, which entitle the Beneficiaries thereof to the net proceeds of the Litigation Trust Assets in accordance with the LT Distribution Waterfall.
• Class 7 — Intercompany Claims: On the Effective Date, all Intercompany Claims shall be deemed canceled, extinguished, and of no further force or effect. Holders shall not be entitled to receive or retain any property on account of such Claims.
• Class 8 — Interests: On the Effective Date, all Interests shall be deemed canceled, extinguished, and of no further force or effect. Holders shall not be entitled to receive or retain any property on account of such Interests.

Releases

• The "Released Parties" include, collectively:
  • The Debtors' Independent Manager and postpetition officers and directors, all of whom are employed by the Debtors or the Buyer as of the Petition Date;
  • The Prepetition Lenders Managers;
  • The Debtors' outside professionals and advisors who provided services postpetition, including without limitation Pachulski Stang Ziehl & Jones LLP and SierraConstellation Partners;
  • The Committee and the individual members thereof in their capacity as such, and their professionals;
  • The Prepetition Agent and the Prepetition Lenders, in their respective capacities as such;
  • The DIP Agent and the DIP Lenders, in their respective capacities as such;
  • SIM International;
  • The Buyer; and
  • The Related Persons of the preceding parties, solely in their respective capacities as such.
• Notwithstanding the foregoing, the Buyer shall not be released from any of its obligations under the Sale Order and any related agreements and documents, including the Sale Agreement.
• Debtor/Estate Release: Pursuant to section 1123(b) of the Bankruptcy Code, on and after and subject to the occurrence of the Effective Date, the Debtors and the Estates (the "Debtor/Estate Releasors") shall release each Released Party from any and all claims, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever, including any derivative claims, based on or relating to the Debtors, their businesses or assets, the liquidation, sale, or alternative transaction efforts, the Chapter 11 Cases, and any related transactions, agreements, or events taking place on and before the Effective Date.
  • The release does not extend to claims or liabilities arising out of any act or omission of a Released Party that constitutes fraud, willful misconduct, or gross negligence.
  • The release shall not operate to waive or release any obligations of any party under the Plan or any other document, instrument, or agreement executed to implement the Plan, and shall not act as a discharge of the Debtors.
• Third Party Release: Each Holder of a Claim against the Debtors who (i) votes to accept the Plan and does not affirmatively opt out of the releases; (ii) is deemed to accept the Plan and affirmatively opts in; and/or (iii) votes to reject or is deemed to reject the Plan and affirmatively opts in (collectively, the "Releasing Parties"), together with their respective successors, assigns, transferees, and certain Additional Release Parties, shall release each Released Party from any and all claims, interests, obligations, rights, suits, damages, Causes of Action, remedies, and liabilities whatsoever based on or relating to the same matters covered by the Debtor/Estate Release.
  • The release does not extend to claims or liabilities arising out of fraud, willful misconduct, or gross negligence, and shall not release any obligations of any party under the Plan or any document executed to implement the Plan.
  • As to Additional Release Parties, the Third Party Release applies only to claims and causes of action that (a) are derivative of the claims held by the related Releasing Party, or (b) solely to the extent the Additional Release Party would be obligated to grant a release under applicable non-bankruptcy law if so directed by the related Releasing Party.
• Notwithstanding anything to the contrary, the foregoing releases shall not apply to any claim or Cause of Action that is a Litigation Trust Asset.

Exculpation

• The "Exculpated Parties" — comprising the Debtors, the directors and officers of the Debtors who served during any portion of the cases, the Debtors' professionals retained in these cases, the Committee, the members of the Committee in their capacity as such, each individual who participated in the Committee on behalf of a member, and the Committee's professionals retained in these cases — will neither have nor incur any liability to any entity for any action in good faith taken or omitted to be taken between the Petition Date and Effective Date in connection with or related to the Chapter 11 Cases, the sale or other disposition of the Debtors' assets, or the formulation, preparation, dissemination, implementation, Confirmation, or Consummation of the Plan, the Disclosure Statement, or any agreement created or entered into in connection therewith.
  • This limitation does not affect or modify the obligations created under the Plan or the rights of any Holder of an Allowed Claim to enforce its rights under the Plan, and shall not exculpate any action or inaction constituting willful misconduct, fraud, or gross negligence (subject to determination by final order of a court of competent jurisdiction).
  • Any Exculpated Party shall be entitled to reasonably rely upon the advice of counsel with respect to its duties and responsibilities under the Plan, and such reasonable reliance shall form a defense to any such claim, Cause of Action, or liability.

Conditions Precedent

• Confirmation of the Plan is conditioned upon the satisfaction of each of the following conditions, any one or more of which may be waived by the Debtors with the consent of the Committee and the Required Lenders:
  • The Bankruptcy Court shall have approved the Combined Disclosure Statement and Plan in form and substance acceptable to the Debtors, the Required Lenders, and the Committee;
  • The Debtors shall have reasonably determined that there will be sufficient Cash on the Effective Date to pay (or, with respect to Disputed Claims, to reserve for as required) Allowed Administrative Claims, Non-Tax Priority Claims, and Priority Tax Claims; and
  • The Confirmation Order to be presented at the Confirmation Hearing shall be acceptable to the Debtors, the Required Lenders, and the Committee.
• The occurrence of the Effective Date is conditioned upon the satisfaction of each of the following conditions:
  • A Confirmation Order in form and substance acceptable to the Debtors, the Required Lenders, and the Committee shall have been entered by the Bankruptcy Court and not subject to any stay of effectiveness;
  • The Litigation Trust shall have been created pursuant to the terms of the Plan, the Litigation Trustee shall have been appointed by order of the Bankruptcy Court (which may be the Confirmation Order), and the Litigation Trust Agreement shall have been executed by the Litigation Trustee; and
  • The Administrative / Priority / Other Distributions Reserve and the Professional Fee Reserve shall have been fully funded as described in the Plan.
• To the fullest extent permitted by law, the conditions to the Effective Date may be waived or modified, in whole or in part, at any time in writing by the Debtors with the consent of the Committee and the Required Lenders, without leave from or an order of the Court.

Plan Support

• The Official Committee of Unsecured Creditors appointed in the Chapter 11 Cases supports confirmation of the Plan and urges all voters to vote to accept the Plan.
• Pursuant to the SIM International Settlement, the Holders of the SIM International Claims will vote in favor of the Plan.
• The Debtors strongly recommend that all creditors receiving a Ballot vote in favor of the Plan.