Aviation ESOP Valuation Report

Letter of Transmittal

1. Summary of Salient Facts and Conclusions

Exhibit 1. Salient facts

Exhibit 2. The proposal, and the conclusion

2. Scope of the Assignment

Purpose, intended use, and intended user

The purpose of this assignment is to develop an opinion of the fair market value of one hundred percent of the common stock of Cardington Aviation Services, Inc. and to advise the trustee whether the consideration proposed for those shares is adequate consideration within the meaning of section 3(18)(B) of the Employee Retirement Income Security Act. The intended user is the trustee and its counsel. The sellers, the company, its lenders, and its employees are not intended users, and none of them may rely on this report.

Standard of value

The standard of value is fair market value: the price at which the stock would change hands between a willing buyer and a willing seller, neither under compulsion and both having reasonable knowledge of the relevant facts. That is the standard ERISA imposes and it is the standard the Internal Revenue Service applies to closely held stock under Revenue Ruling 59-60. It is not investment value, and it is not the value of the company to these particular buyers. Section 19 explains why one consequence of that, the treatment of the S corporation election, cuts against the price the sellers propose.

What we were asked to do, and what we were not

Independence

Valuation Takes Flight LLC has no present or prospective interest in the company or its stock, no relationship with either selling shareholder, no relationship with the investment bank that prepared the sellers' analysis, and no interest in whether the transaction closes. Our fee is fixed, agreed before the work began, and is not contingent on the value reported, on the transaction closing, or on any other outcome. We have performed no services for this company or these shareholders in the three years preceding this engagement.

That paragraph is not a formality. The published process standard requires the trustee to obtain written confirmation that the valuation advisor has no relationship with the sponsor, any counterparty, or any party structuring the transaction, and the case law treats interlocking relationships among the trustee, the banker, and the appraiser as evidence that the process failed. Section 31 records how that requirement was satisfied.

Reporting standard

This is a sample. It is written in the form of a detailed valuation report and follows the structure we use in engagements of this type. It should not be treated as a report prepared under any professional standard, and no party should rely on it.

3. Assumptions and Limiting Conditions

General assumptions

1. We assume the certificate, the ratings, the operations specifications, the leases, and the term sheet furnished to us are complete and accurate. We read them. We are not attorneys and we offer no legal interpretation of them.
2. We assume the company holds good title to its personal property, free of liens other than those disclosed.
3. We assume the financial statements audited by the company's accountants for the five years ended June 30, 2026 are fairly stated. We did not audit them. The normalization adjustments in Section 12 are ours.
4. We assume no change in the applicable law, regulation, or Federal Aviation Administration policy between the effective date and the date of any transaction.
5. We assume the plan will be qualified under section 401(a) of the Internal Revenue Code and will hold the stock as an employee stock ownership plan within the meaning of section 4975(e)(7).
6. Projections in this report are not forecasts and are not guaranteed. They are the cash flows a buyer would model at the effective date on the information then available.

Extraordinary assumption regarding certificate continuity

We assume the repair station certificate remains in force through and after the transaction. This is an extraordinary assumption and its use might have affected the conclusion. The privileges of a repair station are not transferable. Section 8 sets out why a purchase of stock is on better ground than a purchase of assets, and also why the trustee should obtain a written opinion of aviation counsel rather than rely on ours.

Extraordinary assumption regarding environmental condition

We assume the premises at both airports are free of hazardous material and that no remediation obligation attaches to the company. We performed no environmental assessment. This is an extraordinary assumption. A repair station that has run a plating line, a paint booth, and a parts washer for three decades carries an ordinary risk of release, and aqueous film forming foam in a hangar suppression system is a recognized source of per and polyfluoroalkyl substances. A Phase I assessment with a foam specific scope should precede closing, and the trustee should not treat this report as a substitute for one.

Hypothetical conditions

None were used.

Limiting conditions

1. This report is a sample. The company, the airports, the parties, and every figure in it are illustrative. Nothing in it is an opinion of value for any real company, and no fiduciary should rely on it for any purpose.
2. Neither this report nor any part of it may be distributed, quoted, or referred to without our written consent.
3. The opinion applies only as of the effective date and only for the intended use.
4. Nothing in this report is legal, tax, or investment advice.

4. Adequate Consideration: the Two Part Standard

Section 3(18)(B) of the Employee Retirement Income Security Act defines adequate consideration for an asset with no generally recognized market as the fair market value of the asset as determined in good faith by the trustee or named fiduciary. That sentence carries two requirements, and a transaction has to satisfy both.

Exhibit 3. The two parts, and who bears each

Why the second part cannot be bought

The most quoted sentence in the ESOP valuation case law says that reliance on an expert is not a magic wand a fiduciary may wave over a transaction to ensure its responsibilities are fulfilled. It comes from the Fourth Circuit's decision affirming a judgment against a trustee that engaged a well known appraiser, received a report, and accepted it. The court found the trustee had not investigated the appraiser's qualifications, had not given the appraiser complete information, had not questioned the assumptions, and had not satisfied itself that reliance was justified.

An appraisal firm that tells a trustee its report discharges the trustee's duty is describing a service it cannot deliver. What a report can do is make the trustee's questioning possible: state every assumption, show every calculation, disclose every input that could not be obtained, and say plainly where the analysis is weak. That is the standard this report is written to.

What the cases have actually cost

Exhibit 4. Two decided cases, and what the errors were worth

5. The Regulatory Record and Where It Stands

A trustee reading this in 2026 is entitled to ask what the Department of Labor currently requires. The honest answer is that fifty two years after ERISA there is still no final regulation defining how good faith fair market value is to be determined, and that the enforcement posture has changed twice in eighteen months.

Exhibit 5. The record

What the withdrawn proposal would have required

It is worth setting out, because it tells a trustee what the agency thinks even though it cannot enforce it. The proposal defined fair market value in conventional terms and required a good faith process resting on an independent fiduciary and a qualified independent appraiser with no other business relationship with the sponsor or the seller and no interest contingent on the transaction closing. Its optional safe harbor would have required a single class of stock, internal loan terms matching the senior debt, a second monitoring fiduciary, no warrants to the sellers, sellers relinquishing control rights, seller notes priced at senior rather than subordinated rates, and trustee fiduciary liability insurance covering at least twenty percent of the purchase price.

Three of those conditions bear directly on the transaction in front of you. The term sheet grants the sellers warrants, which Section 28 quantifies. The seller note is priced at 9.50 percent against senior debt at 8.15 percent, a spread of 135 basis points. And the sellers continue to own the building at Tolliver Regional Airport and to lease it to the company. None of that is unlawful. All of it is the pattern the agency proposed to exclude from a safe harbor, and a trustee should be able to say why it accepted each one.

What the change in enforcement posture does not change

It does not change the standard of value. Section 3(18)(B) still requires fair market value, and a price above fair market value is still a prohibited transaction under section 406. It does not change the case law, which is the work of courts rather than the Department. And it does not reach private litigation, which is where the majority of ESOP valuation claims now originate: participants sue, and a participant class does not consult a Field

Assistance Bulletin before filing.

6. How We Value Aviation Companies for ESOP Purposes

An aviation service business is not a generic services company with hangars. Four things about it change the analysis, and a valuation that treats them as narrative colour rather than as inputs will produce a number that is wrong in a predictable direction.

1. Separate the enterprise into components that behave differently

Real property held under a ground lease, tangible personal property and tooling, working capital, and the certificate and relationship intangible do not carry the same risk, do not depreciate on the same clock, and do not transfer on the same terms. Section 18 decomposes the enterprise before it adjusts anything.

2. Value the leasehold as a wasting interest, not as real estate

The Brenner improvements revert to the sponsor in 7 years without compensation. The company will still need premises. Section 16 carries the cost of re providing them into the terminal value rather than assuming the enterprise continues on today's rent forever.

3. Apply the transferability haircut as a visible step

A guideline multiple drawn from transactions in generically comparable service firms embeds an assumption that the target's intangible earnings are durable and transferable. A repair station certificate is neither. Section 18 reduces the intangible component explicitly and shows the calculation, rather than burying the judgment in an unexplained multiple.

4. Test the projection against capacity, not only against history

The published process standard asks whether a projection is reasonable against the company's own five year history on seven metrics. That test is necessary and it is not sufficient. A projection can sit comfortably inside the historical range and still be unachievable, because a shop cannot bill hours it cannot staff. Section 13 runs the historical test and Section 14 runs the capacity test.

5. Model the three claims on cash together

A leveraged ESOP has to service acquisition debt, fund the mandatory facility capital that aviation operations require, and satisfy a growing obligation to repurchase shares. The three compete for the same cyclical cash flow and a downcycle brings them into direct conflict. Section 23 models them together and Section 24

stresses them.

6. Do not charge the same risk twice

The finite ground lease appears in the terminal value. It is therefore not also loaded into the discount rate. The company specific premium in Section 15 carries a small allowance for the leasehold, and Section 15 says exactly what that allowance is for.

7. Say what could not be obtained

The good faith standard rewards disclosure of the gaps. Section 30 lists the four items this engagement could not resolve and what each would change.

7. The Company

Cardington was founded in 1994 by two engineers who had run the maintenance department of a regional operator. It began as a single airframe shop at Brenner Municipal Airport and added avionics in 2003, an accessory and component shop in 2009, and the Tolliver Regional Airport line station in 2016. Both founders remain shareholders. One is the president and one is the director of maintenance named on the certificate.

Exhibit 6. Operating metrics

Exhibit 7. Revenue, direct cost, and gross margin by line Twelve months ended June 30, 2026. Individual lines are rounded and may not sum exactly to the totals shown.

Exhibit 8. Customer concentration

Concentration of this order is a risk factor, and Section 15 prices it. What matters as much as the percentage is the basis of the relationship. Three of the five largest customers, together 30.8 percent of revenue, are served on purchase orders rather than under a contract that survives a change of ownership. Section 18 treats that as one reason the intangible component does not transfer at full value.

8. The Certificates, and What Transfers

A repair station's earnings come from a certificate. The certificate does not transfer with the stock in the way a customer list or a building does, and the extent to which it carries through a change of ownership is the single most important legal question in this valuation.

Exhibit 9. Certificate and ratings held

What the regulation says

The privileges of a repair station are not transferable. 14 CFR 145.57(b) provides that if the holder of a repair station certificate sells or transfers its assets and the new owner chooses to operate as a repair station, the new owner must apply for an amended or new certificate. 14 CFR 145.57(a) requires a request in a form acceptable to the Administrator for a change in name, location, or rating.

The transaction in front of the trustee is a purchase of stock rather than a purchase of assets. The corporate holder of the certificate does not change; its shareholders do. That distinction matters and it favours the plan. Federal Aviation Administration guidance to inspectors nonetheless directs them to consult counsel where a question arises whether a change in stockholder ownership amounts to a transfer of repair station assets, which means the outcome is a matter of administrative judgment rather than a matter of right.

Exhibit 10. What a change of ownership puts at risk

9. The Facilities and the Ground Lease

Exhibit 11. The two facilities

The ground lease is the problem

Seven years remain. At expiration the hangar, the shop, the paint booth, the compressed air and vacuum systems, and every other improvement the company has paid for become the sponsor's property, and the company has no right to compensation and no right to renew. There is a ten year option and it is exercisable at the sponsor's discretion at a rent reset to market.

A valuation that carries today's rent into a terminal value forever is assuming the company keeps premises it will not own on terms it does not have. Section 16 does not do that. It carries an explicit annual cost from the reversion date, being the difference between the contract rent of $0.46 per square foot and a concluded market ground rent of $1.34, and it discounts that cost back through the terminal value. Section 23 separately carries $1,450,000 of facility capital in the year following the reversion, because whatever happens the company will be paying to re provide something.

The related party lease is a separate issue

The Tolliver Regional Airport building is owned by an entity the selling shareholders will continue to own after closing. The company pays $9.75 per square foot against a market rate of $7.40. Section 12 restates the rent to market for valuation purposes, which increases normalized earnings by $51,700 a year. It does not solve the problem. After closing the plan will own a company that pays above market rent to the people who sold it the company, under a lease with 3.5 years remaining and options only at the tenant's election. Section 30 recommends what to do about it.

10. The Market for Business Aviation Maintenance

The market is strong and the constraint is labor. Both statements matter to this valuation, and they pull in opposite directions.

Exhibit 12. Market evidence considered

The company's own experience matches the published evidence. Two authorized airframe positions have been open for eleven months. Wage rates for licensed airframe and powerplant technicians in the local market rose 6.1 percent in the last twelve months. Utilization is 71.5 percent, which is close to the practical ceiling for a shop that also runs an aircraft on ground desk, and the order backlog stands at 14 weeks against a five year average of 9.

11. Historical Financial Performance

Exhibit 13. Five year history, normalized Illustrative figures for a sample engagement.

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Revenue compounded at 5.7 percent over the five years. Normalized earnings compounded at 4.6 percent. The gap between those two figures is the whole story of this business at this moment: revenue is growing and margin is not, because the rate increases the shop has pushed through have been consumed by the wage increases it has had to pay to keep the technicians who bill those hours. Margin fell from 13.8 percent in fiscal 2022 to 13.2 percent in fiscal 2026.

This matters in Section 13, where management projects margin expanding to 13.8 percent. Nothing in the five year record points that way, and the published labor cost evidence in Section 10 points the other way.

12. Normalizing Earnings

Reported earnings of a company owned by the two people who run it reflect their compensation choices and their tax planning. Normalization restates them as the earnings the plan would inherit. Every adjustment below is supported by a document.

Exhibit 15. Overhead as reported

Exhibit 16. Normalization of earnings

Exhibit 17. Support for each adjustment

Four of the eight adjustments reduce earnings. The last of them is the one most often omitted, and omitting it flatters the enterprise value by roughly $769,847 at the multiple this report concludes. An ESOP company carries costs a private company does not, every year, and a buyer that ignores them is valuing a company that will not exist after closing.

13. Management's Projection and the Seven Metric Test

The sellers' financial advisor built its conclusion on a projection management prepared in support of the transaction. The published process standard requires that projection to be assessed for reasonableness against the company's own five year history and against comparable company data on seven metrics, and requires that where the projection meets or exceeds historical performance the material assumptions supporting it be documented and explained. We ran that test.

Exhibit 18. Management's projection against the five year history

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What the test shows, and what it misses

Three of the seven metrics fail the test outright. Management projects return on assets of 23.8 percent against a five year history of 14.2 percent, return on equity of 41.2 percent against 23.1 percent, and free cash flow of 10.9 percent of revenue against 5.1 percent. Those are not refinements of the historical record. They are a different business.

A fourth fails in the direction that flatters value while looking conservative. Management projects capital expenditure at 1.80 percent of revenue against a five year average of 2.21 percent. Lower capital spending raises free cash flow and therefore raises value. In a business that depends on calibrated test equipment, tooling, and a paint booth, a forecast below the historical average needs an explanation, and none was offered.

Now the part the seven metric test does not catch. Management projects revenue growth of 5.8 percent. The five year history is 5.7 percent. On the test as written, the projection passes: it is below the historical rate. It is nonetheless unachievable, because the historical rate was produced by rate increases and by one heavy inspection program that ran through fiscal 2024 and 2025 and has ended, and because the shop is at 71.5 percent utilization with two positions it has been unable to fill for eleven months. Revenue growth cannot be assessed without asking where the hours come from.

14. The Projection We Developed

Revenue at a repair station is billable technicians, multiplied by available hours, multiplied by utilization, multiplied by a rate. We projected each of the four rather than projecting the product.

Exhibit 20. Capacity model underlying the growth rate

Exhibit 21. Projection assumptions

15. Discount Rate

Exhibit 22. Cost of equity, modified capital asset pricing model

Exhibit 23. Company specific risk premium, itemized

The allowance for the ground lease is 30 basis points and no more, because the reversion is already in the cash flow model. Section 16 carries the cost of re providing the premises through the terminal value. What the 30 points cover is the residual: the sponsor's consent right on a change of control, the possibility that the ten year option is refused, and the disruption a relocation would cause. Loading the reversion itself into the discount rate as well would price the same risk in two places.

Exhibit 24. Weighted average cost of capital

The 30 percent debt weight is the structure an industry participant would carry, not the structure this transaction creates. Fair market value is the price between a hypothetical willing buyer and a hypothetical willing seller, and the leverage a particular buyer chooses to use is a financing decision rather than an attribute of the company. Section 23 uses the actual proposed structure, because that section is asking a different question.

16. Income Approach

Exhibit 25. Discounted cash flow Illustrative figures for a sample engagement.

Exhibit 26. Terminal value and conclusion

The terminal value is 55 percent of the indicated enterprise value. That share is high, and it is high in every five year discounted cash flow of a stable business. It does not follow that the discount rate is what decides the answer. Section 27 shows the opposite: the three explicit period assumptions move the value by $2,547,795

between them against $688,372 for the rate, because the explicit period assumptions also drive the terminal cash flow they are capitalizing. The high terminal share is why the treatment of the ground lease belongs in the terminal value rather than in a footnote: $669,852 of the terminal value is removed by the cost of re providing premises the company will not own after June 30, 2033.

17. Market Approach

Transactions in privately held maintenance businesses are not public, and the published multiple literature for aviation service companies is thin. What exists supports a range rather than a point, and the range is wide enough that the market approach is a check on the income approach rather than a substitute for it.

Exhibit 27. Guideline evidence considered

Exhibit 28. Concluded multiple

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The two adjustments are modest and they are specific. Concentration reduces the multiple because a buyer of a business whose largest customer is 18.4 percent of revenue on purchase orders prices that fact. The ground lease reduces it because seven years of remaining term at the principal facility is short against the set, which is drawn from operators on longer tenure or on owned real estate.

The result is 4.670 times normalized EBITDA, or $14,238,932 of enterprise value, against $15,259,333 from the income approach. The two indications differ by 7.2 percent. Section 18 weights them 60 percent to the income approach and 40 percent to the market approach, because the income approach models the capacity constraint and the reversion directly while the market approach can only carry them as adjustments to a multiple.

18. Component Decomposition and the Transferability Haircut

A single enterprise value hides the fact that the enterprise is made of four things that behave differently. One reverts to a landlord in seven years. One can be loaded onto a truck. One turns over every ninety days. And one exists at the acceptance of a federal administrator and in the memory of a handful of customers.

Exhibit 30. Weighted enterprise value before adjustment

Exhibit 31. The four components

Exhibit 32. Tangible personal property at fair value in continued use

Exhibit 33. The transferability haircut

Exhibit 34. Effect of the haircut on enterprise value

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19. From Enterprise Value to Equity Value

Exhibit 36. Equity bridge

Exhibit 37. Balance sheet items at the effective date

The S corporation election, and why it is not in this number

On closing the company will elect S corporation status. Because a plan is a tax exempt shareholder, a company owned entirely by an employee stock ownership plan pays no federal income tax. That is a real and substantial benefit. It is the reason ESOP transactions can carry leverage that would be imprudent in a taxable company, and Section 23 relies on it when it tests whether this company can service the debt.

It is not in fair market value, and stating that plainly is worth doing because it is one of the places this report runs against the sellers. Fair market value is the price between a hypothetical willing buyer and a hypothetical willing seller. The exemption from federal income tax is not available to the universe of hypothetical buyers. It is available to this buyer because of what this buyer is. Adding it to fair market value would let the plan pay the seller for a benefit the plan itself creates, and the correct treatment is to value the company on a taxed basis and to let the plan keep the benefit of its own status.

Had we taken the other view, the indicated value would have been materially higher and the plan would have paid the sellers for a benefit the plan itself creates. We note it because the sellers' analysis takes the other view, and because a trustee reading two reports with different answers is entitled to know where they diverge.

20. Control: What the Plan Obtains and What It Does Not

The plan is buying one hundred percent of the stock, so the question of whether to add a control premium looks settled. It is not. What a control premium pays for is the ability to change things, and this plan will acquire a company whose two most important assets sit outside its control.

Exhibit 38. Attributes of control, tested one at a time

We applied no control premium and we took no discount for lack of control. The reasoning is the same in both directions. The plan will appoint the board through the trustee, and the earnings in Section 12 are stated on a control basis because shareholder compensation has already been normalized to market. A premium on top of control level earnings would charge the plan twice for the same thing, which is the error the Fourth Circuit itemized at $8,186,000 in the case discussed in Section 4.

Against that, the company cannot transfer its own premises without the sponsor's consent, cannot operate without a certificate held at the Administrator's acceptance, cannot change the individuals named to that certificate without notification and acceptance, and leases one of its two facilities from the people selling it the company. A buyer of one hundred percent of this company does not obtain the freedom of action a control premium assumes. The sellers' analysis applies a premium of 7 percent. Section 27 removes it, worth $1,091,466.

21. Marketability and the Put Option

A minority interest in a private company is illiquid, and the discounts observed in the restricted stock studies cluster in the twenty five to forty percent range, with the pre offering studies higher still. An ESOP participant is in a different position, because the Internal Revenue Code gives them a right to make the company buy their shares back at fair market value.

Exhibit 39. What the put option does, and what it does not

Discounts in the range of five to ten percent are customary for ESOP shares, against the range just described for private minority interests without a put. We concluded 8.0 percent, toward the upper end of the customary range. The reason is Section 23. The put is a promise by the company, and its value depends on the company having the cash to honour it. A company carrying acquisition debt, mandatory facility capital, and a growing repurchase obligation against cyclical earnings is a company whose put is worth less than the put of a company with no debt. An appraiser cannot remove the marketability discount on the theory that repurchases are fully funded and at the same time ignore the cost of funding them.

The five year installment distribution policy pulls the same way. It spreads the call on the company's cash, which is prudent, and it lengthens the wait for the participant, which is a real cost to the person holding the share.

Exhibit 40. Effect on value

22. The Repurchase Obligation

Every share the plan allocates is a share the company will one day have to buy back at fair market value. The obligation is contractual, it is cumulative, and it does not appear on the balance sheet on the day of the transaction. It is the single largest item a formation valuation can leave out and still look complete.

Exhibit 41. Plan and participant assumptions

Exhibit 42. Projected repurchase obligation at fair market value Cash required is net of the installment schedule. Balances put back in years seven through ten are still being paid out after year ten, which is why the two totals differ.

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The obligation starts at nothing, because no participant has separated and no share has vested. It reaches $180,277 by plan year five and $1,360,283 by plan year ten, and it keeps rising after that as the release schedule

completes and the retirement wave arrives. The company will be paying it out of the same cash flow that services the acquisition debt.

23. The Three Way Liquidity Claim

This is the section that should decide the transaction. An aviation service business inside a leveraged employee stock ownership plan has to do three things with one stream of cyclical cash: service the acquisition debt, fund the facility capital its operations require, and buy back the shares of everyone who leaves. The three compete, and a downcycle brings them into direct conflict.

Exhibit 44. The structure proposed, and the structure at fair market value

Two conventions are worth stating before the schedule. First, after closing the company will be a one hundred percent employee owned S corporation and will pay no federal income tax, so the cash available is measured before federal tax and after a state provision of 2.5 percent. Second, projection year 8 carries $1,450,000 of facility capital, because that is the year after the ground lease expires and the company will be paying to re provide premises whatever form that takes.

Exhibit 45. The three claims at the proposed price of $19,500,000 Illustrative figures for a sample engagement.

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At the proposed price the company clears its covenant in 3 of ten years and falls below it in 7. In projection year one, before a single share has been repurchased, coverage is 0.96 against a covenant of 1.20. The structure is not tight. It does not work.

At fair market value the same structure clears the covenant in all ten years. The thinnest coverage is 1.50 in projection year 4, and it is worth knowing why that year rather than year 8 when the facility capital lands. Year 4 is the year the seller note's three year interest only period ends and debt service steps up by $294,909. The facility capital year is carried more easily because by then the senior loan is most of the way amortized.

Section 24 asks what happens when the projection does not hold.

24. Simulating the Downcycle

Business aviation maintenance is cyclical. Deferred inspections, parked aircraft, and customers stretching payables all arrive together, and they arrive without notice. A projection that holds for ten years is not a forecast, it is an assumption, and the trustee is entitled to know what happens when the assumption fails.

Exhibit 47. Simulation specification

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Exhibit 49. Simulation results

At the proposed price the company breaches its senior covenant in 98.7 percent of paths. There is no reading of that number under which the price is prudent.

At fair market value the covenant holds in 76.1 percent of paths, which is a normal risk profile for a leveraged transaction. The second line is the one to read carefully. In 50.7 percent of paths the company's cash does not cover debt service, facility capital, and the repurchase obligation together. It will not default in those paths, because the repurchase obligation can be deferred within the plan's distribution rules in a way a loan payment cannot. What happens instead is that participants wait, which is the cost falling on the people the plan exists to benefit.

Exhibit 50. A structure the same price can carry

25. Opinion of Fair Market Value

Based on the analysis in Sections 11 through 21, and subject to the assumptions and limiting conditions in Section 3, our opinion of the fair market value of one hundred percent of the common stock of Cardington Aviation Services, Inc. as of June 30, 2026 is:

Exhibit 51. The conclusion tested against every metric in this report

26. The Maximum Price the Company Can Support

Fair market value answers what the stock is worth. It does not answer whether the company can carry the debt required to buy it. Those are different questions and a prudent trustee asks both.

We solved for the highest price at which the company clears its senior covenant in every projected year and still funds the repurchase obligation out of the same cash. The answer is $12,783,691, or $12,700,000 rounded.

Exhibit 52. The two constraints

On this transaction the price constraint binds. That will not always be so. Where the structure is more leveraged, the seller note shorter, or the company more cyclical, the feasibility ceiling falls below fair market value and the trustee may not pay fair market value either. It is worth doing the arithmetic in both directions every time, because the order in which the two constraints bind is not predictable from the size of the company.

Two cautions about the figure. It is computed on the projection in Section 14, and Section 24 shows that the projection fails in a meaningful share of simulated paths. And it is computed on the structure proposed. Exhibit 50 shows a structure at the same price that carries materially less risk, which means the feasibility ceiling is a function of the financing terms as much as of the company.

27. Reconciling the Proposed Price to the Opinion

The sellers' financial advisor concluded to a value that supports the price in the term sheet. We conclude to $12,200,000. The difference is $7,300,000, and this section accounts for all of it.

Each line below is a re run of the same model with one assumption replaced. The order is disclosed because a sequential attribution of this kind is order dependent: the amount attributed to any single change depends on which changes have already been made. We ran the four operating assumptions through 6 orderings. The largest movement of any single item across those orderings was $90,107, so the ranking below is stable even though the individual figures are not exact.

Exhibit 53. From the sellers' conclusion to the opinion Illustrative figures for a sample engagement.

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The four largest differences, in order, are capital expenditure restated from 1.80 percent of revenue to 2.35 percent at $1,311,704; transferability haircut of 19.5 percent on the intangible component at $1,165,801; control premium of 7 percent removed at $1,091,466; marketability discount of 8.0 percent at $1,061,230. Not one of them is a disagreement about the quality of this company or the ability of the people who run it. Every one is a disagreement about method.

28. The Warrants

The term sheet grants the sellers warrants for 18 percent of the fully diluted equity in exchange for a reduction in the seller note rate. That trade should be priced rather than assumed, and it should be priced from the plan's side.

Exhibit 55. What the warrants take

Struck at fair market value the warrants take 18.0 percent of everything the participants build over ten years, which is what a warrant for 18 percent of the equity is designed to do. Struck at the proposed price they take much less, because the proposed price is so far above value that the company has to grow into it before the warrants are worth anything. That is not a defence of the proposed price. It is an illustration of how far above value it sits.

The withdrawn Department of Labor proposal would have excluded any transaction with seller warrants from its safe harbor, and its stated concern was excessive dilution of the plan. We are not aware of authority holding that warrants are unlawful. We are aware that a trustee that grants them should be able to say what they cost the participants and what the plan received in exchange. Section 30 states what we recommend.

29. Fairness of the Transaction to the Plan

The published process standard requires the valuation analysis to address whether the transaction is fair to the plan from a financial point of view, whether it is fair to the plan relative to all the other parties, and whether the financing terms are market based, commercially reasonable, and in the plan's best interests. We address each.

Exhibit 56. Fairness, item by item

30. What We Recommend to the Trustee

Exhibit 57. Recommendations, in the order we would take them

What we could not resolve

Four items in this engagement could not be resolved and each is disclosed rather than assumed away. Certificate continuity through a change of stockholder ownership is a matter of administrative judgment and we obtained no legal opinion. The two manufacturer consents were not obtained. No environmental assessment was performed. And the company's largest customer declined an interview, so the durability of 18.4 percent of revenue rests on management's account rather than on the customer's. Any of the four could

move the conclusion, and the first and the fourth could move it materially.

31. Process Documentation Against the Published Standard

The process agreement the Department of Labor published in 2014 binds only its signatories, and the Department has said so. It is nonetheless the most detailed public statement of what a prudent process looks like, and a trustee that can show its file against it is in a materially better position than one that cannot. This section records what this engagement did.

Exhibit 58. The engagement against the published process requirements

32. What the Annual Update Will Look Like

If the transaction proceeds, the plan will need an independent valuation every year for as long as it holds the stock. The annual update is a different engagement from this one and it is worth saying now what it is and what it is not.

Exhibit 59. Formation against annual update

Two things about this company will make its updates harder than most. The ground lease shortens by a year every year, so the terminal value falls even if the business improves, and by the fifth update the trustee will be

valuing a company with two years of tenure at its principal facility. And the repurchase obligation crosses the debt service line somewhere around plan year eight on the projection in Section 22, which is the point at which participants start competing with lenders for the same cash. Both are foreseeable today, and an appraiser that has not thought about them at formation will be surprised by them at the fifth update.

33. Certification

We certify that, to the best of our knowledge and belief:

1. The statements of fact in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our impartial and unbiased professional analyses, opinions, and conclusions.
3. We have no present or prospective interest in the company or its securities and no personal interest with respect to the parties involved.
4. We have no relationship with either selling shareholder, with the company, or with any party structuring or financing the transaction.
5. We have performed no services regarding the subject company within the three year period immediately preceding acceptance of this assignment.
6. We have no bias with respect to the company or to the parties involved.
7. Our engagement was not contingent upon developing or reporting predetermined results.
8. Our compensation is not contingent upon the development or reporting of a predetermined value, the amount of the value opinion, the attainment of a stipulated result, the closing of the transaction, or the occurrence of a subsequent event directly related to the intended use of this assignment.
9. We made a personal inspection of both facilities and of the equipment.
10. No one provided significant assistance to the persons signing this certification.

Signature omitted. This is a sample report and is not certified.

Dr. Carter, DBA, CFA, FRM, CAIA, CIPM · Valuation Takes Flight LLC

34. About Valuation Takes Flight

Valuation Takes Flight LLC is an aeronautical valuation advisory firm. We value aircraft hangars, fixed base operations, repair stations, charter and management companies, flight schools, and the airport leaseholds they sit on, and we do it nationwide. The practice is remote first, with site work performed wherever the engagement calls for it.

What we do

Business valuations for employee stock ownership plan formations and annual updates. Adequate consideration and fairness opinions for trustees. Market value and market rent opinions on hangars and FBO facilities. Ground lease and reversion analysis. Partner and shareholder buyout valuations. Estate and gift valuations of aviation holding entities. Property tax appeal support. Litigation support and expert testimony. Portfolio level review for lenders and institutional owners.

Who leads the work

Dr. Carter, DBA, CFA, FRM, CAIA, CIPM, is the founder and principal. He is the author of Valuing Aircraft Hangars: A Textbook for Real Estate Appraisers and serves as Assistant Professor at an aeronautical university in Daytona Beach, Florida. His research covers hangar valuation method, ground lease economics, capitalization rate determination for aviation leaseholds, and the valuation of aviation service businesses, including published work on adequate consideration in aviation employee stock ownership plans. Before founding the firm he worked in institutional investment analysis, performance measurement under the Global Investment Performance Standards, and risk modeling for private assets.

Why the competency question matters here

An aviation ESOP valuation sits at the intersection of two specialties that rarely reside in the same practitioner. One is business valuation, with its command of income methods, guideline analysis, and the plan specific adjustments. The other is aviation real property and regulatory analysis: what a ground lease reversion does to a terminal value, what a repair station certificate is and is not, and what a sponsor's consent right does to the meaning of control. A trustee should ask any candidate how it satisfies both, and should accept a documented collaboration between two firms as readily as a single practitioner. What it should not accept is silence on the question.

How we scope an engagement

Every proposal states the scope, the intended use and users, the deliverable, and the delivery date before work begins. Fees are fixed and are never contingent on the value reported or on a transaction closing. Where an intended use requires a credential we do not hold, we say so at the proposal stage and structure the engagement accordingly.

Valuation Takes Flight LLC · valuationtakesflight.com · Valuationtakesflight@outlook.com · 314-277-6572

35. Addendum: Terms Used in This Report

36. Addendum: Index of Exhibits