8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities and Exchange Act of 1934

Date of report (Date of earliest event reported): June 5, 2019

PHI, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Louisiana	0-9827	72-0395707
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

2001 SE Evangeline Thruway, Lafayette, Louisiana	70508
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (337) 235-2452

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Voting Common Stock	N/A	None
Non-Voting Common Stock	N/A	None

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

As previously disclosed, on March 14, 2019, PHI, Inc. (the “Company”) and its principal U.S. subsidiaries (together with the Company, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code.

On June 5, 2019, the Company entered into a settlement plan term sheet (the “Term Sheet”) with the Official Committee of Unsecured Creditors (the “UCC”) and certain key stakeholders (the “Parties”) that resolves all pending UCC objections and motions, subject to satisfaction of certain conditions contained within the Term Sheet and the Bankruptcy Court’s approval of the Debtors’ Plan of Reorganization and related Disclosure Statement (the “Plan” and “Disclosure Statement,” respectively). A copy of the Term Sheet is filed as Exhibit 99.1 to this Current Report on Form 8-K.

(b) Among other things, the Term Sheet provides that, contingent upon the effectiveness of the Plan and Disclosure Statement, Mr. Al A. Gonsoulin, who currently serves as the Company’s Chief Executive Officer and Chairman of the Company’s board of directors (the “Board”), will retire from all positions held with the Company and its subsidiaries, including as a member of the Board (the “Gonsoulin Retirement”), effective upon the date of the Company’s emergence from the Chapter 11 Cases (the “Emergence Date”). The Term Sheet further provides that Mr. Lance F. Bospflug, who currently serves as President, Chief Operating Officer and a director of the Company, will be appointed to succeed Mr. Gonsoulin as Chief Executive Officer of the Company on the Emergence Date and will continue to serve as a member of the Board (the “Bospflug Appointment”). The Gonsoulin Retirement and Bospflug Appointment are subject to Plan confirmation and approval by the Bankruptcy Court, and the Company’s emergence from the Chapter 11 Cases.

(e) As contemplated by the Term Sheet, the Parties agreed upon the final terms of a key employee incentive plan in which three of the Company’s named executive officers (Lance F. Bospflug, Trudy P. McConnaughhay, and James Hinch, the “Executives”) will participate (the “KEIP”). By separate order on June 5, 2019, the Bankruptcy Court approved the KEIP, which became effective immediately, having been previously approved by the Board subject to Bankruptcy Court approval.

As described in greater detail in the KEIP, participants have an opportunity to earn two different types of incentive payments under the KEIP: (1) a fee earned upon the consummation of a restructuring transaction (as defined in the KEIP, a “Restructuring Transaction”), with the amount of any payout scaled based on the Company’s degree of achievement against specific net operating cash flow targets and (2) a fee earned upon the sale of one or both of the Company’s two main divisions (as defined in the KEIP, a “Sale Transaction”), with the amount of any payout scaled based on the total consideration received, in each case, subject to an increase or decrease by 20% based on the Company’s safety performance. In the event that a Sale Transaction occurs in conjunction with a Restructuring Transaction, each KEIP participant will earn only one payment equal to the greater of the two. Participation in the KEIP is in lieu of all existing 2019 bonus and severance programs. In order to receive any KEIP payment, the KEIP participant must execute a general release of claims in favor of the Company, including a release of the claim that the restructuring transaction constitutes a “Change of Control” as defined under the PHI, Inc. Change of Control Plan, which was adopted by the Company on September 20, 2018.

With respect to the fee that may be earned upon a Restructuring Transaction, if the Company’s actual net operating cash flow meets target performance, each Executive will earn a fee equal to the following percentage of his or her base salary: Mr. Bospflug, 300%; Mrs. McConnaughhay, 150%; and Mr. Hinch, 150%. The maximum that a participant may earn, based on performance at or above a stretch level, is 125% of his or her target bonus. If “below threshold” performance is not met, no Restructuring Transaction fee will be earned. At performance in between two levels, payouts will be scaled accordingly. There is a cap on the amount that may be earned and paid immediately upon a Restructuring Transaction, with any additional upside (up to the maximum of 125% of target opportunity) contingent upon the Company’s performance against the KEIP metrics through December 31, 2019. In addition, the amounts paid under the KEIP upon the Restructuring Transaction may be subject to clawback if the participant’s employment terminates prior to April 1, 2020.

With respect to the fee that may be earned upon a Sale Transaction, KEIP participants are eligible to earn a percentage of the total consideration received (as defined in the KEIP, the “Total Consideration”), depending on the amount of Total Consideration received in the event of a Sale Transaction involving one or both of the Company’s two main divisions that occurs prior to December 31, 2019. If Total Consideration received equals or exceeds $500 million, a portion of the Total Consideration will be designated as a Sale Transaction fee to be shared by KEIP participants. As

described in greater detail in the KEIP, the amount of any Sale Transaction fee increases incrementally as the amount of Total Consideration increases, up to a maximum of 1.50% of any Total Consideration received in excess of $700 million. For any Sale Transaction in which Total Consideration is less than $500 million, no Sale Transaction fee would be earned but the net operating cash flow targets applicable to incentive payments earned for Restructuring Transactions will be adjusted on a pro forma basis. Each Executive would be eligible to receive the following percentage of any Sale Transaction Fee: Mr. Bospflug, 40%; Mrs. McConnaughhay, 10%; and Mr. Hinch, 10%. In the event that multiple Sale Transactions occur, KEIP participants will receive the applicable fee upon the consummation of each transaction.

The foregoing description of the KEIP does not purport to be complete and is qualified in its entirety by the full text of the KEIP, which is filed as Exhibit 10.1 to, and is incorporated by reference into, this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

10.1	PHI, Inc. – Amended Key Employee Incentive Plan
99.1	Settlement Plan Term Sheet, dated June 5, 2019

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.

	PHI, Inc.
Date: June 11, 2019	By:	/s/ Trudy P. McConnaughhay
		Trudy P. McConnaughhay
		Chief Financial Officer and Secretary

EX-10.1

Exhibit 10.1

PHI, INC.

Amended Key Employee Incentive Plan

Overview

PHI, Inc. and certain of its affiliated entities (collectively, the “Company”) has implemented an Amended Key Employee Incentive Plan (the “KEIP”) for certain critical executive employees. The implementation of the KEIP is subject to a final order entered by the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) in the Company’s pending bankruptcy cases under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). The KEIP will be in lieu of all existing 2019 bonus and severance programs for employees under the KEIP. In the event that the Bankruptcy Court does not enter a final order approving the KEIP, nothing herein shall prohibit any KEIP Participant (as defined below) from receiving payments under any pre-existing bonus or severance programs, subject to the relevant provisions of the Bankruptcy Code regarding allowance and priority. Any final determination of payments owing under the KEIP shall be made by the Compensation Committee of the Board of Directors, with the Bankruptcy Court maintaining jurisdiction in the event there is a dispute regarding the terms of the KEIP, either before, upon, or after any payment under the KEIP. The following employees will be eligible to receive payments under the KEIP:

• Lance Bospflug (President and Chief Operating Officer)

• Trudy McConnaughhay (Chief Financial Officer, Treasurer and Secretary)

• James Hinch (Chief Administrative Officer)

• Marcos Vivas (Corporate Controller)

• Dave Stepanek (President, Domestic Oil & Gas)

• David Motzkin (President, PHI Air Medical)

• Keith Mullett (President, International Oil & Gas)¹

All employees referenced herein shall be considered “KEIP Participants.” For a KEIP Participant to receive any payments set forth in the KEIP, he or she must be an employee of the Company as of the consummation of the respective transactions set forth herein. In addition, he or she must execute (without revocation within any statutorily-authorized revocation period) a general release of known and unknown claims in favor of the Company and its affiliated persons and entities in a form satisfactory to the Company, including that a “Change in Control” as defined in the Change in Control Plan, adopted by the Company on September 20, 2018, has occurred. Notwithstanding anything to the contrary herein, if the KEIP Participant is terminated without cause within sixty (60) days prior to the date that any payment is due under the KEIP, the KEIP Participant shall be entitled to receive any payment that would have become due under the KEIP had the KEIP Participant been employed through such sixty (60) day period. For the purposes of the foregoing sentence, “cause” shall be defined as the occurrence of: (A) gross neglect, gross malfeasance or gross insubordination in performing the KEIP Participant’s duties; (B) the KEIP Participant’s conviction of a felony, excluding convictions associated with traffic

¹  Mr. Mullett is employed by HNZ New Zealand Limited and, accordingly, any amounts payable hereunder will be paid by HNZ New Zealand Limited.

violations; (C) an egregious act of dishonesty (including, without limitation, theft or embezzlement) or a malicious action by the KEIP Participant toward the Company’s customers or employees that is materially detrimental to the business or reputation of the Company; or (D) intentional reckless conduct that is materially detrimental to the business or reputation of the Company (provided that any occurrence of cause shall be deemed to constitute cause only after a good faith finding by the board of directors of the Company, or a duly constituted committee thereof, and the failure to remedy such cause to the board’s or the committee’s reasonable satisfaction within 30 days after delivery of written notice to the KEIP Participant of such finding).

Payments under the KEIP are to be paid in all cash; provided, however, that solely at each KEIP Participant’s option and discretion, upon written notice to be provided no later than two weeks prior to the proposed effective date of the Debtors’ plan of reorganization, a portion of the KEIP payment may be converted from cash to new equity in the Reorganized Debtors at plan value, consistent with past practices.

In the event that a KEIP Participant is no longer employed by the Company on the date that a payment is due under the KEIP, the amount attributable to that KEIP Participant shall, at the discretion of the Compensation Committee of the Board of Directors, either be distributed to other key employees or retained by the Company.

KEIP Thresholds

A. Restructuring Transaction

Upon the occurrence of a Restructuring Transaction that is consummated no later than twelve (12) months following the effective date of the KEIP, the KEIP Participants shall be entitled to receive the below amounts (the “Restructuring Transaction Fee”), as more fully described on Schedule 1 hereto. The amount of the Restructuring Transaction Fee earned and payable to the KEIP Participants shall be based upon the KEIP Participant’s annual base salary, the applicable multiplier below, and the Financial Performance Metric (as defined below). If the Company fails to achieve the “Below Threshold” Financial Performance Metric (as defined below), no Restructuring Transaction Fee shall be earned or paid to any of the KEIP Participants. Below are the Restructuring Transaction Fee payments expressed as a percentage of annual base salary, at the “Target” under the Financial Performance Metric.

• Lance Bospflug - 300%

• Trudy McConnaughhay - 150%

• James Hinch - 150%

• Dave Stepanek - 150%

• David Motzkin - 150%

• Keith Mullett - 150%

• Marcos Vivas - 150%

2

For the purposes of the preceding paragraph, a Restructuring Transaction means any transaction or series of transactions that constitute a recapitalization of all or substantially all of the Company’s debt securities and/or other indebtedness, obligations or liabilities, including accrued and/or accreted interest thereon, which such recapitalization or restructuring is effected pursuant to an exchange transaction, tender offer, a plan of reorganization or liquidation under the Bankruptcy Code, a solicitation of consents, waivers, acceptances or authorizations, any change of control transaction, any refinancing, exchange, conversion to equity, cancellation, forgiveness, retirement, and/or a modification or amendment to the terms, conditions, or covenants (including, without limitation, the principal balance, accrued or accreted interest, payment term, other debt service requirement and/or financial or operating covenant) of any agreements or instruments governing any of the equity and/or debt securities and/or other indebtedness or any combination of the foregoing transactions.

The Restructuring Transaction Fees shall be earned based upon the Company’s actual Net Operating Cash Flow (the “Financial Performance Metric”), as compared to the projected Net Operating Cash Flow forecast pursuant to the March 22, 2019 weekly cash flow forecast provided to Delaware Trust and Blue Torch LP during the Bankruptcy Cases (as such forecast is subsequently modified or amended, the “Budget”), for the period measured from the Petition Date until the consummation of the Restructuring Transaction, and then again for the period measured from the Petition Date until December 31, 2019.

“Net Operating Cash Flow” is calculated as total receipts less total operating disbursements. For purposes of calculating the foregoing, amounts attributable to restructuring-related professional fees shall not be included in the calculation of Net Operating Cash Flow. In calculating Net Operating Cash Flow, any discounts on accounts receivables must be consistent with the Company’s ordinary course early-payment discount practice, and any accounts payables will be paid consistent with contractual terms (or, if no contractual terms exist, consistent with past practices). Further, any proceeds received from sales of assets either in the United States or abroad shall be included in calculating Net Operating Cash Flow as long as such sales are for reasonable market value.

The performance level (“Below Threshold, “Threshold,” “Target,” and “Stretch”) achieved for the Financial Performance Metric dictates the amount of any Restructuring Transaction Fee awards to be paid to the KEIP Participants. If the Company fails to achieve the “Below Threshold” Financial Performance Metric, no Transaction Fee will be earned or paid to any of the KEIP Participants. The Financial Performance Metric is as follows:

	Below Threshold	Threshold	Target	Stretch
Net Operating Cash Flow	75% of Net Operating Cash Flow based on Budget	85% of Net Operating Cash Flow based on Budget	100% of Net Operating Cash Flow based on Budget	³115% of Net Operating Cash Flow based on Budget
Financial Opportunity	50% of Target Bonus	75% of Target Bonus	100% of Target Bonus	125% of Target Bonus

Performance between levels will be interpolated in a linear fashion. For example, for achievement of 80% of Net Operating Cash Flow, the Restructuring Transaction Fee would be 62.5% of “Target” bonus; 92.5% of Net Operating Cash Flow, the Restructuring Transaction Fee

3

would be 87.5% of “Target” bonus; and for achievement of 105% of Net Operating Cash Flow, the Restructuring Transaction Fee would be 108.33% of “Target” bonus. In addition, to the extent that the Company obtains proceeds in connection with the release of any letters of credit or bank guarantees including, without limitation, the receivable owing from Saudi Red Crescent (the “Bank Receivables”), two percent (2%) of net proceeds of such Bank Receivables shall be included for purposes of calculating Net Operating Cash Flow, but such inclusion shall be limited toward achievement of the next performance level. By way of example, (a) in the event that the Company achieves Net Operating Cash Flow of greater than 75% of Budget and less than 85% of Budget, any such proceeds of Bank Receivables may be included in the calculation of Net Operating Cash Flow to achieve up to the “Threshold” bonus (plus any safety bonus, if earned); (b) in the event that the Company achieves Net Operating Cash Flow of greater than 85% of Budget and less than 100% of Budget, any such proceeds of Bank Receivables may be included in the calculation of Net Operating Cash Flow to achieve up to the “Target” bonus (plus any safety bonus, if earned); and (c) in the event that the Company achieves Net Operating Cash Flow of greater than 100% of Budget and less than 115% of Budget, any such proceeds of Bank Receivables may be included in the calculation of Net Operating Cash Flow to achieve up to the “Stretch” bonus (plus any safety bonus, if earned). To clarify, no proceeds of Bank Receivables shall be included in calculating Net Operating Cash Flow if Net Operating Cash flow is less than 75% of Net Operating Cash Flow based on Budget.

Upon the consummation of a Restructuring Transaction, the maximum aggregate (i.e., for all Debtor KEIP Participants) payout in cash, if earned, will be equal to the sum of: (i) Threshold bonus, equal to $3,182,567), (ii) 50% of the incremental difference between the Threshold bonus and the Target bonus, equal to $530,428, and (iii) 20% Safety Bonus Payment (as defined below), on a pro-rated basis based on timing from January 1, 2019 through consummation of the Restructuring Transaction.

On December 31, 2019, the Company’s overall performance will again be measured based on the KEIP metrics as outlined herein, with the Company to pay the incremental difference up to the maximum amount contemplated by the KEIP to each KEIP Participant in cash at the time payments are made consistent with past practices under the Company’s 2019 annual incentive plan (the “Annual Incentive Plan”)).

Subject to the following paragraph, all cash payments made upon the consummation of a Restructuring Transaction shall be accrued, earned, payable and not subject to clawback:

If any KEIP Participant is no longer employed by the Company (or the reorganized Company) on the later of (i) when the Company pays amounts due at the time the Annual Incentive Plan payments are made consistent with past practices, or (ii) April 1, 2020, there is a full clawback from such KEIP Participant of (A) 50% of the incremental difference between the Threshold bonus and the Target bonus, in an aggregate amount for all KEIP Participants not greater than $530,428, to the extent actually paid; and (B) the pro-rated Safety Bonus Payment (as defined below), to the extent actually paid; provided, however, that if the KEIP Participant is terminated without cause or otherwise “constructively terminated” (as defined below), there is no clawback.

4

“Constructive Termination” shall mean if the Company terminates the employment relationship because (A) the Company requires the employee to relocate more than 50 miles from employee’s current work location; (B) there was a material diminution in the nature or scope of the employee’s responsibilities, duties, authority, and position, taken as a whole, without taking into account the occasional necessity of employee to complete tasks outside the customary scope of employee’s primary responsibilities and duties, provided, however, that the consummation of a Restructuring Transaction shall not be deemed to result in a material diminution as set forth in this subsection (B); or (C) there was a material decrease in the employee’s annual compensation to which the employee does not consent; provided, however, that the employee acknowledges and agrees that the circumstances described shall not constitute Constructive Termination unless the employee first provides the Company with written notice of the perceived Constructive Termination within ten (10) business days of the occurrence of any such event, the Company fails to cure the perceived issue within five (5) business days of receiving such notice from the Company, and the employee resigns within thirty (30) days of the Company’s failure to cure the perceived issue.

B. Sale Transaction

Upon the consummation of a Sale Transaction (as defined below) involving the Company’s Oil & Gas division (the “Oil & Gas Division”) and Air Medical division (the “Air Medical Division” and together the Oil & Gas Division, the “Divisions”), the KEIP Participants shall be entitled to receive an amount (the “Sale Transaction Fee”) based upon the Total Consideration (as defined below) received in connection with such sale(s). Upon the consummation of a Sale Transaction of the Divisions of (i) at least $500 million and less than $600 million, the KEIP Participants shall be entitled to receive, in the aggregate, 0.75% of the Total Consideration received from the sale of the Divisions; plus (ii) to the extent Total Consideration received is at least $600 million and less than $650 million, the KEIP Participants shall be entitled to receive an additional 1.0% of the incremental Total Consideration in excess of $600 million; plus (iii) to the extent Total Consideration received is at least $650 million and less than $700 million, the KEIP Participants shall be entitled to receive an additional 1.25% of the incremental Total Consideration in excess of $650 million; plus to the extent Total Consideration received is in excess of $700 million, the KEIP Participants shall be entitled to receive an additional 1.5% of incremental Total Consideration in excess of $700 million. Upon the consummation of a Sale Transaction of less than $500 million, the KEIP Participants shall not receive a Sale Transaction Fee. In the event that multiple transactions occur relating to the sale of the Divisions, the KEIP Participants shall be paid the applicable Sale Transaction Fee upon the consummation of each such transaction. In the event of the sale of any division, but such sale provides Total Consideration less than $500 million, the Financial Performance Metric shall be adjusted on a pro forma basis, for measurement purposes, effective at the time of the divestiture, and all KEIP Participants (including those that are terminated as a result of the sale), shall be eligible to receive a Restructuring Transaction Fee based upon the adjusted budget and other metrics relating to a Restructuring Transaction described above). The Sale Transaction Fee for the consummation of a Sale Transaction shall be distributed within five (5) business days following the consummation of the Sale Transaction.

• Lance Bospflug - 40%

5

• Dave Stepanek - 12%

• David Motzkin - 12%

• Trudy McConnaughhay - 10%

• James Hinch - 10%

• Keith Mullett - 8%

• Marcos Vivas - 8%

For the purposes of the preceding paragraphs, Total Consideration means,

(A) in the case of the sale, exchange or purchase of the Company’s equity securities, the total consideration paid for such securities (including amounts paid to holders of options, warrants and convertible securities), plus the principal amount of all indebtedness for borrowed money (including, without limitation, any capital lease obligations) which remains outstanding as of the consummation of such sale, exchange or purchase, and

(B) in the case of a sale, disposition or licensing by the Company of assets, the total gross consideration, in cash or in credit bid pursuant to section 363(k) of the Bankruptcy Code, paid for such assets plus assumed or reinstated liabilities.

For the purposes of the preceding paragraphs, a Sale Transaction means any transaction or series of related transactions that that close prior to December 31, 2019 and constitute the disposition to one or more third parties (including, without limitation, any person, group of persons, partnership, corporation or other entity, and also including, among others, any of the existing owners or shareholders, employees, or creditors of the Company and/or the affiliates of each) in one or a series of related transactions of (a) substantially all equity interests held and/or (b) all or substantially all of the assets or operations the Company or any joint venture or partnership or other entity formed by it, in either case, including, without limitation, through a sale or exchange of capital stock, options or assets with or without a purchase option, a merger, consolidation or other business combination, an exchange or tender offer, or any similar transaction, including, without limitation, any sale transaction under sections 363, 1129 or any other provision of the Bankruptcy Code.

The KEIP Participants may be entitled to receive payment under the KEIP for multiple Sale Transactions; provided, however, that in the event that a Sale Transaction occurs in conjunction with a Restructuring Transaction, the KEIP Participant shall only be entitled to receive one payment equal to the greater of the KEIP payment attributable to such Sale Transaction (the “Sale Transaction Fee”) or the Restructuring Transaction Fee for the entire transaction. For the avoidance of doubt, a Sale Transaction that occurs following the effective date of a chapter 11 plan shall not give rise to any payments under the KEIP, unless such Sale Transaction would result in payments greater than amounts payable under the KEIP as calculated through the date of the Sale Transaction. In such circumstance, KEIP Participants shall be entitled to the greater of the KEIP payment attributable to such Sale Transaction or the previously paid Restructuring Transaction Fee.

6

C. Safety Component

Upon the occurrence of either a Restructuring Transaction or Sale Transaction, an additional increase or reduction shall be applied to the Restructuring Transaction Fee or Sale Transaction Fee based upon the number of “Aircraft Accidents” pursuant to 49 CFR §830.2, attributable to the Company (the “Safety Component”). The Safety Component shall be determined based on whether, in their business judgment, the board of directors of the Company concludes that the “Aircraft Accident” was in the control of the Company or its employees (a “Flight Accident”). Any objections to such determination shall be presented to and resolved by the Bankruptcy Court. An additional amount of 20% of the Restructuring Transaction Fee or Sale Transaction Fee (the “Safety Bonus Payment”) shall be considered an enhancement payment earned upon the consummation of the Restructuring Transaction or Sale Transaction with the Company having zero Flight Accidents, as measured from the time of implementation of the KEIP until consummation of the Restructuring Transaction or Sale Transaction. In the event that the number of Flight Accidents is 1, no Safety Bonus Payment shall be payable. In the event that the number of Flight Accidents is greater than 1, the Restructuring Transaction Fee or Sale Transaction Fee (as applicable) shall be decreased by 20%.

7

SCHEDULE 1

$USD					Key Employee Incentive Plan (KEIP)(1)(2)
					Below Threshold(3)						Threshold(4)						Target(5)						Stretch(6)
KEIP Participant	Title	Target			Threshold		Safety(7)		Total		Threshold		Safety(7)		Total		Target		Safety(7)		Total		Stretch		Safety(7)		Total
Lance Bospflug	President and COO		300	%	$	975,000	$	195,000	$	1,170,000	$	1,462,500	$	292,500	$	1,755,000	$	1,950,000	$	390,000	$	2,340,000	$	2,437,500	$	487,500	$	2,925,000
Trudy McConnaughhay	CFO, Treasurer, Secretary		150	%		231,711		46,342		278,053		347,567		69,513		417,080		463,422		92,684		556,106		579,278		115,856		695,133
James Hinch	Chief Administrative Officer		150	%		225,000		45,000		270,000		337,500		67,500		405,000		450,000		90,000		540,000		562,500		112,500		675,000
Marcos Vivas	Corporate Controller		150	%		187,500		37,500		225,000		281,250		56,250		337,500		375,000		75,000		450,000		468,750		93,750		562,500
Dave Stepanek	President Domestic Oil & Gas		150	%		240,000		48,000		288,000		360,000		72,000		432,000		480,000		96,000		576,000		600,000		120,000		720,000
*Keith Mullett	President International Oil & Gas		150	%		206,250		41,250		247,500		309,375		61,875		371,250		412,500		82,500		495,000		515,625		103,125		618,750
David Motzkin	President PHI Air Medical		150	%		262,500		52,500		315,000		393,750		78,750		472,500		525,000		105,000		630,000		656,250		131,250		787,500
	Total				$	2,327,961	$	465,592	$	2,793,553	$	3,491,942	$	698,388	$	4,190,330	$	4,655,922	$	931,184	$	5,587,106	$	5,819,903	$	1,163,981	$	6,983,883
*Less: Keith Mullett (Non-Debtor)			150	%	$	206,250	$	41,250	$	247,500	$	309,375	$	61,875	$	371,250	$	412,500	$	82,500	$	495,000	$	515,625	$	103,125	$	618,750
	*Total - Debtors Only				$	2,121,711	$	424,342	$	2,546,053	$	3,182,567	$	636,513	$	3,819,080	$	4,243,422	$	848,684	$	5,092,106	$	5,304,278	$	1,060,856	$	6,365,133

If a Sale Transaction⁽⁸⁾ is consummated no later than 12 months following KEIP effective date, each KEIP Participant shall be entitled to receive a Sale Transaction Fee⁽⁹⁾, as calculated below.

Sale Transaction Amount	Aggregate Sale Transaction Fee(9) for KEIP Participants	KEIP Participant	% of Aggregate	Illustrative Sale Transaction Amount
				$450,000,000		$500,000,000		$550,000,000		$600,000,000		$650,000,000		$700,000,000		$750,000,000
<$500M	No Sale Transaction Fee	Lance Bospflug	40%	$	—	$	1,500,000	$	1,650,000	$	1,800,000	$	2,000,000	$	2,250,000	$	2,550,000
$500M - $600M	0.75% of Total Consideration(8)	Trudy McConnaughhay	10%		—		375,000		412,500		450,000		500,000		562,500		637,500
$600M - $650M	1.0% of incremental Total Consideration(8) in excess of $600M	James Hinch	10%		—		375,000		412,500		450,000		500,000		562,500		637,500
$650M - $700M	1.25% of incremental Total Consideration(8) in excess of $650M	Marcos Vivas	8%		—		300,000		330,000		360,000		400,000		450,000		510,000
>$700M	1.5% of incremental Total Consideration(8) in excess of $700M	Dave Stepanek	12%		—		450,000		495,000		540,000		600,000		675,000		765,000
		*Keith Mullett	8%		—		300,000		330,000		360,000		400,000		450,000		510,000
		David Motzkin	12%		—		450,000		495,000		540,000		600,000		675,000		765,000
		Total Sale Transaction Fee(9)		$	—	$	3,750,000	$	4,125,000	$	4,500,000	$	5,000,000	$	5,625,000	$	6,375,000
		*Total - Debtors Only (Exclude Keith Mullett)		$	—	$	3,450,000	$	3,795,000	$	4,140,000	$	4,600,000	$	5,175,000	$	5,865,000

Notes:

⁽¹⁾  Receipt of KEIP Payment requires waiver of 2019 bonus and severance plan (including CoC plan)

⁽²⁾ Must emerge within 12 months of filing Chapter 11 for any payments to be paid under KEIP

⁽³⁾  Below Threshold Payment = 50% of Target Payment (75% of Net Operating Cash Flow based on budget)

⁽⁴⁾  Threshold Payment = 75% of Target Payment (85% of Net Operating Cash Flow based on budget)

⁽⁵⁾  Target Payment = 100% of Target Payment (100% of Net Operating Cash Flow based on budget)

⁽⁶⁾  Stretch Payment = 125% of Target Payment (115% of Net Operating Cash Flow based on budget)

⁽⁷⁾  Safety = +20% for zero flight accidents / 0% for one flight accident / -20% for more than one flight accident

⁽⁸⁾  As defined in the Debtors’ Motion for Order Approving Key Employee Incentive Plan and Authorizing Payments Thereunder

⁽⁹⁾  Sale Transaction Fee is subject to adjustment based upon safety metric.

EX-99.1

Exhibit 99.1

EXECUTION VERSION

IN RE PHI, INC., ET AL.

SETTLEMENT PLAN TERM SHEET

THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCE OR REJECTION OF A CHAPTER 11 PLAN OF REORGANIZATION PURSUANT TO THE BANKRUPTCY CODE. ANY SUCH OFFER OR SOLICITATION WILL BE MADE ONLY IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS AND PROVISIONS OF THE BANKRUPTCY CODE.

SUMMARY OF PRINCIPAL TERMS

This plan term sheet (the “Term Sheet”) sets forth the principal terms of a consensual restructuring (the “Transaction”) agreed to among the Consenting Mediation Parties¹ with respect to the existing debt and other obligations of PHI, Inc.(“PHI”), and its affiliated companies that are debtors under chapter 11 of the Bankruptcy Code (collectively with PHI, the “Debtors”). The Term Sheet embodies the compromise of several contested matters described herein. The Transaction will be effected pursuant to a chapter 11 plan of reorganization (as may be amended, supplemented, or modified consistent with this Term Sheet, the “Consensual Plan”) to be proposed in the Debtors’ chapter 11 cases pending in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) in lieu of the existing First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code filed May 17, 2019 [Docket No. 495] (the “Existing Plan”).²

CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN

The below summarizes the treatment to be received on or as soon as practicable after the effective date of the Consensual Plan (the “Plan Effective Date”) by holders of claims against, and interests in, the Debtors pursuant to the Consensual Plan.

Administrative Claims Priority Tax Claims, and Other Priority Claims	Same as Existing Plan. Allowed Administrative Claims, Priority Tax Claims, and Other Priority Claims will be satisfied in full, in cash, or otherwise receive treatment consistent with the provisions of section 1129(a)(9) of the Bankruptcy Code.
Other Secured Claims	Same as Existing Plan. Allowed Other Secured Claims will be unimpaired.
Thirty Two Claim	The Thirty Two Claim shall be an allowed secured claim in the amount of $132,250,000, which amount includes any and all accrued interest, fees (including, without limitation, professional fees), and/or expenses, in each case whether or not already paid in connection with any order of the Bankruptcy Court (the “Allowed Thirty Two Claim”).

¹  The Consenting Mediation Parties consist of the following: the Debtors, the Official Committee of Unsecured Creditors of PHI, Inc. et al (acting in such capacity, the “Official Committee”), Thirty Two, LLC, and Delaware Trust Company, solely in its capacity as indenture trustee for the Debtors’ unsecured 5.25% senior notes.

²  Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Existing Plan.

EXECUTION VERSION

	On the Plan Effective Date, the holder of the Thirty Two Claim will receive cash in the amount of the Allowed Thirty Two Claim in full satisfaction of the Thirty Two Claim.
Blue Torch Claim	The Blue Torch Claim, to the extent allowed, shall be refinanced or reinstated, and if not either refinanced or reinstated, then treated in a manner consistent with the Bankruptcy Code as agreed by the Debtors and the Official Committee.
GUC Claims	To ensure that the Consensual Plan meets the requirements of section 1129 of the Bankruptcy Code, the Debtors and the Official Committee shall jointly determine the appropriate classification for the Unsecured Notes Claims, Aircraft Lessor Claims, and General Unsecured Claims (collectively, the “GUC Claims”). Allowed GUC Claims shall receive their Pro Rata share of the New Common Stock Distribution (which will represent 100% of the New Common Stock subject to dilution only for (i) any rights offering, if any, and (ii) the MIP (as defined herein)).
Convenience Class	The Consensual Plan will include a convenience class for holders of GUC Claims as reasonably determined by the Debtors and the Official Committee.
Subordinated Clams	Same as Existing Plan. Subordinated Claims will not receive any distribution.
Existing PHI Interests	Same as Existing Plan. Existing PHI Interests will not receive any distribution.
General Comment Regarding Treatment	Each holder of an allowed claim or allowed interest, as applicable, shall receive under the Consensual Plan the treatment described herein in final satisfaction, settlement, release, and discharge of and in exchange for such holder’s allowed claim or allowed interest.

2

EXECUTION VERSION

OTHER KEY TERMS OF THE PLAN

Conditions Precedent to Effectiveness	As a condition to the Plan Effective Date (among others):
	•  There shall be (i) not more than $225 million of funded debt on the reorganized Debtors’ consolidated balance sheet, on terms reasonably acceptable to the Debtors and the Official Committee, inclusive of any reinstated debt (the “Effective Date Funded Debt”) and (ii) at least $75 million of unrestricted cash on the reorganized Debtors’ consolidated balance sheet projected as of the Plan Effective Date (after taking into account the Effective Date Funded Debt), which projected amount shall be reasonably determined in good faith by the Debtors’ Chief Restructuring Officer in his sole discretion fifteen (15) calendar days prior to the date scheduled for the confirmation hearing on the Consensual Plan (the “Minimum Cash”). To the extent the Debtors collect or, in the opinion of the Chief Restructuring Officer, are expected to collect, within 30 days following the Plan Effective Date, past-due accounts receivables and/or letters of credit associated therewith are released, which in either case result in additional unrestricted cash on the balance sheet (but after the Chief Restructuring Officer’s good faith projection as described above), then such amounts shall be included in the calculation of Minimum Cash.
	•  The Debtors shall use their best efforts to procure $225 million of Effective Date Funded Debt as promptly as practicable after entry into this Term Sheet. By no later than July 3, 2019 (or as otherwise extended under this paragraph, the “Financing Deadline”), the Debtors shall have received proposals for financing. The Financing Deadline may be extended through July 12, 2019 upon written notice by either the Debtors or the Official Committee in their respective sole discretion. Upon the mutual consent of the Debtors and the Official Committee, which consent shall not be unreasonably withheld, delayed, or conditioned by either party, the Financing Deadline may be extended through July 26, 2019. On the Financing Deadline, the Debtors’ Chief Restructuring Officer shall make a good-faith determination, which shall be binding on both parties, on whether any financing proposal (i) has a reasonably high likelihood to close on or before the Effective Date, and (ii) shall be sufficient to fund the payment of the Allowed Thirty Two Claim on the Effective Date.
	•  The Allowed Thirty Two Claim shall receive payment in full, in cash, in the amount of the Allowed Thirty Two Claim in full satisfaction of the Allowed Thirty Two Claim as set forth herein.
	•  The Consensual Plan will contain the mutual releases described herein.

3

EXECUTION VERSION

Minimum Cash Backstop Commitment Subject to entry of a backstop commitment agreement that is reasonably acceptable to the Debtors, the Commitment Parties, and the Official Committee (the “BCA”), which the parties agree to work in good faith to promptly negotiate and finalize on or before June 17, 2019 (the “Commitment Deadline”), certain unsecured creditors (any such creditors, the “Commitment Parties”) shall provide binding commitments for $75 million (the “Backstop Commitment”). Proceeds of the Backstop Commitment shall be applied only as follows: (i) first, to ensure satisfaction of the Minimum Cash threshold; and (ii) second, to satisfy the payment of the Allowed Thirty Two Claim if the Effective Date Funded Debt is insufficient to satisfy the payment of the Allowed Thirty Two Claim. The Debtors shall take all steps reasonably necessary to facilitate the provision of information to any unsecured creditors that would be Commitment Parties, including by entering into commercially reasonable non-disclosure agreements with such creditors substantially in the form negotiated between the Debtors and the ad hoc group of bondholders prior to the Petition Date (with a cleanse date of June 17, 2019) and promptly providing such restricted creditors with customary diligence materials. Parties interested in becoming a Commitment Party pursuant to the BCA shall contact Jon Walters at PJT Partners, Inc. Instructions and contact information shall be provided in a manner jointly determined by the Debtors and the Official Committee, including on the Official Committee’s website at https://www.donlinrecano.com/Clients/phi/Index.

4

EXECUTION VERSION

Commitment of the Parties	The Debtors agree to propose and use commercially reasonable efforts to pursue and consummate the Consensual Plan, and will not modify, supplement, or amend the Consensual Plan in a manner inconsistent with this Term Sheet (absent the consent of all other Consenting Mediation Parties), provided that this Term Sheet remains in effect.
	The other Consenting Mediation Parties3 agree to support the Consensual Plan and, if applicable, vote all claims they hold against the Debtors, or as to which they have voting authority, to accept the Consensual Plan by the deadlines set forth in the Disclosure Statement; provided that the Consensual Plan has not (without such Consenting Mediation Party’s consent) been amended, modified, or supplemented in a manner inconsistent with this Term Sheet and provided that this Term Sheet remains in effect; provided, further, that any such votes shall be immediately and automatically without further action of any Consenting Mediation Party revoked and deemed to be votes to reject in the event that the Consensual Plan has been amended, modified, or supplemented in a manner inconsistent with this Term Sheet (absent the consent of all other Consenting Mediation Parties) or this Term Sheet is no longer in effect.
	The Official Committee agrees to submit a letter in support of the Consensual Plan (to be included in the solicitation packages); provided that the Consensual Plan has not been amended, modified, or supplemented in a manner inconsistent with this Term Sheet (absent the consent of all other Consenting Mediation Parties) and provided that this Term Sheet remains in effect.
Indenture Trustee Fees	The Consensual Plan will provide customary provisions addressing the payment in cash on the Plan Effective Date of all reasonable and documented fees and expenses of Delaware Trust Company, in its capacity as the indenture trustee for the 5.25% Senior Notes.

OTHER TERMS OF THE TRANSACTION

Corporate Governance	The terms and conditions of the new corporate governance documents of the reorganized Debtors (including the bylaws and certificates of incorporation or similar documents, among other governance documents), including with respect to the jurisdiction of the reorganized Debtors, shall be in form and substance reasonably acceptable to the Debtors and the Official Committee.
Structuring	The Transaction shall be structured in a manner determined by the Official Committee to achieve a tax efficient structure for the reorganized Debtors.

³  Other than Sikorsky in its individual capacity.

5

EXECUTION VERSION

Board of Directors	The initial directors of the New Board shall consist of seven (7) directors as set forth below:
	•  Six (6) of the directors shall be selected by the Official Committee, provided, that two (2) of the six (6) directors shall be (i) independent directors with requisite industry experience, and (ii) selected by the Official Committee in consultation with Lance Bospflug, who shall have a veto right with respect to one (1) of such two (2) directors; and
	•  One (1) director shall be Lance Bospflug, who shall be named the reorganized Debtors’ chief executive officer upon the Effective Date.
Management Incentive Plan	Up to 10% of the New Common Stock shall be reserved for a management incentive plan (the “MIP”), with the form, terms, allocation, and vesting to be determined by the New Board; provided, that the Debtors shall promptly retain Harvey L. Benenson from Lyons, Benenson & Company, Inc. to assist the Official Committee in determining an initial percentage of the MIP (and no other terms and conditions), which will be identified in the plan supplement and will be allocated by the New Board within sixty (60) days following the Plan Effective Date.
Employment Agreement Discussions	The parties have agreed to modifications to the key employee incentive plan (the “KEIP”), which documentation shall be finalized on or before the date on which this Term Sheet is executed. The New Board and each KEIP participant will agree to negotiate an employment agreement within 60 days following the Plan Effective Date, taking into consideration the recommendations of Harvey Benenson with respect to market practices. If the parties are unable to reach an agreement, either party can terminate the employment relationship at the end of the 60 day period, and in that case, the applicable KEIP participant will receive 100% of their annual base salary as severance; provided, that the Debtors shall not change the base salary of any KEIP participant in effect as of March 28, 2019 without prior written consent from the Official Committee (which shall not be unreasonably withheld). The applicable KEIP participants will also receive that severance amount if the reorganized Debtors terminate his or her employment without cause prior to the execution of such employment agreements, but will not get any severance if he or she quits or is fired for cause. There will be a limited good reason concept relating to any reduction in base pay or relocation. The severance payment shall be subject to the execution of an effective release agreement and the employee agreeing not to compete with the reorganized Debtors for 90 days following termination, as well as a non-solicit (with respect to customers, vendors, lessors, and employees of the Debtors’ and their non-Debtor affiliates) for one year and non-disparagement and standard confidentiality.

6

EXECUTION VERSION

Releases & Exculpation	The Consensual Plan and Confirmation Order will contain customary mutual releases and exculpation provisions, including, without limitation, releases (to the fullest extent permitted by law) of all of the Debtors’ officers, directors, employees and advisors, as well as mutual releases by and among the Debtors, the Official Committee, Thirty Two, LLC, and Mr. Gonsoulin (as defined below). In addition, each member of the Committee (other than Delaware Trust, in its capacity as indenture trustee) shall agree not to exercise its right to “opt-out” of the third party releases set forth in the Consensual Plan; provided, that any such agreement to be bound and not to “opt-out” shall be immediately and automatically without further action of any Consenting Mediation Party revoked and changed to be “opt-out” in the event that the Consensual Plan has been amended, modified, or supplemented in a manner inconsistent with this Term Sheet (absent the consent of all other Consenting Mediation Parties) or this Term Sheet is no longer in effect.
	For the avoidance of doubt and without limitation, as part of the mutual releases to be included in the Consensual Plan,
	•  Mr. Al A. Gonsoulin (“Mr. Gonsoulin”), Thirty Two, LLC, and each of their respective members and/or affiliates shall release, in any and all of their capacities as it relates to the Debtors or the non-Debtor affiliates, including, without limitation, as employee, director, officer, creditor, and/or stockholder, all claims, rights, and entitlements under contract, law, equity, or otherwise, they may have against the Debtors, the non-Debtor affiliates, reorganized Debtors, Official Committee, and any of such parties’ respective members and/or affiliates in their capacities as such (and such parties’ respective directors, officers, and employees).
	•  The Official Committee, the Debtors, the non-Debtor affiliates and reorganized Debtors and their respective members and/or affiliates shall release all claims, rights, and entitlements under contract, law, equity, or otherwise, they may have against Mr. Gonsoulin or Thirty Two, LLC and any and all affiliates thereof, in any and all of his and their capacities as it relates to the Debtors, the non-Debtor affiliates, the reorganized Debtors and the Official Committee including, without limitation, as employee, director, officer, creditor, and/or stockholder (and such parties’ respective directors, officers, and employees).
Cash Collateral Order	The final order approving the use of cash collateral (the “Final Cash Collateral Order”) shall be modified in a manner (i) consistent with this Term Sheet, including, without limitation, with respect to any (a) interest, fees (including, without, limitation, professional fees) or expenses asserted by Thirty Two, LLC (which interest, fees (including, without limitation, professional fees), or expenses, whether or not already paid in connection with any order of the Bankruptcy Court, are included as part of the Allowed Thirty Two Claim) and (b) releases for Thirty Two, LLC or Mr. Gonsoulin or any affiliates thereof (which releases, for the avoidance of doubt, shall only be included in the Consensual Plan as set forth herein), and (ii) otherwise reasonably acceptable to the Official Committee, the Debtors and Thirty Two, LLC.
	The Official Committee’s Challenge Period under the Final Cash Collateral Order shall automatically toll for the period during which this Term Sheet is in effect through the date that this Term Sheet or the Transaction is terminated, which tolling shall survive any termination of this Term Sheet.

7

EXECUTION VERSION

Exclusivity	The Debtors’ exclusive periods under section 1121 of the Bankruptcy Code shall automatically toll for the period during which this Term Sheet is in effect through the date that this Term Sheet or the Transaction is terminated, which tolling shall survive any termination of this Term Sheet.
Definitive Documents and Consent Rights	All definitive documents and related pleadings (including the Consensual Plan, disclosure statement, confirmation order, and plan supplement documents) shall be consistent with this Term Sheet and otherwise in form and substance reasonably acceptable to the Debtors and the Official Committee. The Official Committee shall have consent rights with respect to any conditions precedent related to the confirmation and consummation of the Consensual Plan (including, without limitation any waivers or modifications thereof, any supplement, modification, or amendment to the Consensual Plan, and any withdrawal of the Consensual Plan other than through the exercise of a fiduciary out (as required by applicable law)).
Unexpired Leases and Executory Contract	The Debtors will determine which Unexpired Leases and Executory contracts to reject, assume, or assume as modified, with consent of the Official Committee (which such consent is not to be unreasonably withheld).
Governing Law	Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code) or unless otherwise specifically stated (including with respect to Texas Rule of Civil Procedure 11), the laws of the State of New York, without giving effect to the principles of conflict of laws that would require or permit the application of the law of another jurisdiction, shall govern the rights, obligations, construction, and implementation of the Consensual Plan, any agreements, documents, instruments, or contracts executed or entered into in connection with the Plan (except as otherwise set forth in those agreements, in which case the governing law of such agreement shall control). Any disputes relating to this Term Sheet (including whether a breach has occurred or whether this Term Sheet, and the obligations hereunder, shall be terminated) shall be first presented and noticed to the mediator, Judge Jones, in writing (with copies provided to all the Consenting Mediation Parties), and, if not resolved within twenty (20) days of such notice, or if Judge Jones declines to determine the issue, such dispute shall be decided by the Bankruptcy Court; provided, however, if such dispute is submitted to Judge Jones, then the Debtors’ exclusive periods shall be extended by the number of days from such submission through the date that Judge Jones resolves or otherwise terminates his involvement in the resolution of such dispute.

8

EXECUTION VERSION

OTHER SETTLEMENT PROVISIONS

Outside Closing Date	The Consenting Mediation Parties agree that, unless otherwise waived in writing by each of the Consenting Mediation Parties, failure to close the Transaction by September 30, 2019 (which can be extended by mutual agreement and shall be automatically extended to the extent the Plan Effective Date has not occurred solely as result of a delay in obtaining necessary governmental approvals) shall result in immediate termination of the Transaction and this Term Sheet. Notwithstanding the foregoing, the Consenting Mediation Parties intend to work cooperatively toward the following dates:
	Milestone	Date
	File Amended Disclosure Statement and Consensual Plan	June 12, 2019
	Backstop Commitment Deadline	June 17, 2019
	Disclosure Statement Hearing	June 18, 2019
	Financing Deadline	July 3, 2019
	Potential Extended Financing Deadline	July 12, 2019
	Targeted Balloting Deadline	July 19, 2019
	Consensual Plan Supplement Deadline	July 23, 2019
	Confirmation Hearing on Consensual Plan	July 30, 2019
	Consensual Plan Effective Date	August 31, 2019
Mr. Gonsoulin Cooperation	Mr. Gonsoulin (i) shall support the Transaction, act in good faith, and take any action reasonably requested by the Debtors and the Official Committee to effectuate the Transaction in a timely manner and (ii) shall not (a) object to, delay, impede, or take any other action to interfere with, delay, or postpone acceptance, consummation, or implementation of the Consensual Plan, (b) propose, file, support, or vote for any restructuring for the Debtors other than the Consensual Plan, (c) take any action to encourage any other person or entity to take any action, directly or indirectly, that would reasonably be expected to, breach or be inconsistent with this Term Sheet, or (d) take any other action, directly or indirectly, that would reasonably be expected to interfere with the acceptance, consummation, or implementation of the Transaction or the Consensual Plan. Mr. Gonsoulin shall enter into a three year (or such shorter time to the extent required by applicable law) non-solicit (with respect to customers, vendors, lessors, and employees of the Debtors and their non-Debtor affiliates) and non-disparagement agreement with the Debtors and/or reorganized Debtors, as applicable (the “Non-Solicit and Non-Disparagement Agreement”) on customary, industry standard, terms reasonably acceptable to Mr. Gonsoulin, the Official Committee, and the Debtors or the Reorganized Debtors, as applicable.
Mr. Gonsoulin Retirement	As of the Plan Effective Date, Mr. Gonsoulin shall retire as the chief executive officer and chairman of the board. If requested by the New Board or the reorganized Debtors’ Chief Executive Officer, Mr. Gonsoulin agrees to respond to reasonable inquiries and otherwise reasonably assist the reorganized Debtors on a limited basis. Mr. Gonsoulin may use his current office, located in Sugar Land, Texas, through December 31, 2019 and may use his existing assistant as reasonably necessary; provided, that, any such use of his current office and existing assistant is consistent with this Term Sheet and the Non-Solicit and Non-Disparagement Agreement. The Debtors or the reorganized Debtors, as applicable, will pay for the cost of maintaining Mr. Gonsoulin’s current company-provided medical coverage for Mr. Gonsoulin and his spouse through December 31, 2019. No other payments or distributions are required to be made to Mr. Gonsoulin or any other party in connection with Mr. Gonsoulin’s retirement.

9

EXECUTION VERSION

Houlihan Lokey Fees

Within five (5) business days following the filing of this Term Sheet with the Bankruptcy Court, the Official Committee shall file a motion to abate its appeal of the order approving Houlihan Lokey’s retention (the “Houlihan Order”) (holding all deadlines in stasis) until the Plan Effective Date of the Consensual Plan. On the Plan Effective Date, the Official Committee will dismiss with prejudice its appeal of the Houlihan Order. Provided (i) the Consensual Plan goes effective, (ii) the Official Committee, its members (other than Delaware Trust, in its capacity as indenture trustee), and any Commitment Parties (other than Thirty Two LLC, if applicable) support Houlihan Lokey’s final fee application and payment of its Recapitalization Fee thereunder, and (iii) Delaware Trust, in its capacity as indenture trustee, does not object to Houlihan Lokey’s final fee application and payment of its Recapitalization Fee thereunder, then (iv) Houlihan Lokey will waive any right it has to increase its Recapitalization Transaction Fee by 15% as set forth in the Houlihan Lokey Engagement Agreement. The Official Committee has requested that Houlihan Lokey not serve as the Debtors’ agent in procuring a Financing Transaction under the Houlihan Lokey Engagement Agreement (including, without limitation, any Effective Date Funded Debt or Rights Offering) and Houlihan Lokey has agreed not to procure such Financing Transaction and to a carve out from its exclusive agency under paragraph 2 of the Houlihan Lokey Engagement Agreement to relieve the Debtors of such exclusivity obligation with respect to a Financing Transaction. Consequently, Houlihan Lokey shall not receive a Financing Transaction Fee; provided, however, if for any reason the Debtors and the Official Committee jointly request in writing that Houlihan Lokey assist with respect to any such Financing Transaction, and clearly indicate in such writing that they jointly intend for Houlihan Lokey to earn a Financing Transaction Fee, Houlihan Lokey shall be compensated as set forth in the Houlihan Lokey Engagement Agreement or as otherwise agreed to among the Debtors, Houlihan Lokey, and the Official Committee.

Hearing Dates

The following matter, currently scheduled to be heard on June 5, 2019, shall be continued to June 18, 2019, whereby the Debtors shall seek approval of an agreed-upon amended Disclosure Statement for solicitation of the Consensual Plan: •  Motion of the Debtors for Entry of an Order (I) Approving Disclosure Statement, (II) Determining Dates, Procedures, and Forms Applicable to Solicitation Procedures, (III) Establishing Vote Tabulation Procedures, (IV) Approving Rights Offering Procedures and Related Form, (V) Approving New Equity Cash-Out Procedures and Related Form, (VI) Approving New Equity Cash-Out Procedures and Related Form, and (VII) Establishing Objection Deadline and Scheduling Plan Confirmation Hearing [Docket. No. 506]

10

EXECUTION VERSION

	The following matters, currently scheduled to be heard on June 5, 2019, shall be continued to the date of the confirmation hearing, and the related objection deadlines shall be tolled accordingly; provided that following confirmation of the Consensual Plan and prior to the Plan Effective Date, the below matters shall be withdrawn with prejudice by the Official Committee: •  Motion of the Official Committee of Unsecured Creditors for Leave, Standing and Authority to Prosecute Claims on Behalf of the Debtors’ Estates and for Related Relief [Docket No. 368] •  Motion of the Official Committee of Unsecured Creditors to Terminate the Debtors’ Exclusivity [Docket. No. 448]
Indenture Trustee	Following execution and delivery by the parties of this Term Sheet, the Indenture Trustee shall file a notice of withdrawal, without prejudice, its Joinder of Delaware Trust Company, as Indenture Trustee for the Senior Notes, to the Motion of the Official Committee of Unsecured Creditors to Terminate the Debtors’ Exclusivity [Docket No. 577], and shall reasonably cooperate with the Debtors to seek approval from chambers to remove such pleading from the docket.
Texas Rule of Civil Procedure 11	The terms herein are binding, and this agreement shall be enforceable pursuant to Texas Rule of Civil Procedure 11, and this Term Sheet shall be filed with the Bankruptcy Court.

11

EXECUTION VERSION

Agreed and Accepted on this 5th day of June, 2019, by:

PHI, Inc. on behalf of itself and its affiliated Debtors and Debtors in Possession		Thirty Two, LLC
By:	/s/ Lance F. Bospflug	By:	/s/ Al A. Gonsoulin
Name: Lance F. Bospflug		Name: Al A. Gonsoulin
Title:   President and COO		Title:   Member

The Official Committee of Unsecured Creditors of PHI, Inc. et al. by its Co-Chairs Delaware Trust Company		Houlihan Lokey Capital, Inc.
By:	/s/ Michelle Dreyer	By:	/s/ Matthew R. Niemann
Name: Michelle Dreyer		Name: Matthew R. Niemann
Title:   Co-Chair		Title:   Managing Director

-and- Q5-R5 Trading, Ltd.		Mr. Al A. Gonsoulin
By:	Q Global Capital Management, L.P., as Investment Manager	By:	/s/ Al A. Gonsoulin
By:	Q Global Advisors, LLC, its General Partner	Name: Al A. Gonsoulin
		Title:
By:	/s/ Scott McCarty
Name: Scott McCarty
Title:   Asst Secretary, Co-Chair of Committee