| STOCKHOLDERS’ EQUITY AND EQUITY-BASED COMPENSATION | STOCKHOLDERS’ EQUITY AND EQUITY-BASED COMPENSATION Stockholders’ Equity Pursuant to the Amended and Restated Certificate of Incorporation, we are authorized to issue 1,525,000,000 shares, consisting of (i) 1,500,000,000 shares of Common Stock and (ii) 25,000,000 shares of preferred stock. Holders of Common Stock are entitled to one vote per share; provided, that by agreement (i) certain Incremental Term Lenders that are not “citizens of the United States” (as defined in 49 USC § 40102(a)(15)(C)) (collectively, the “Non-Citizen Investors”), may be afforded collective voting rights equal to 1% of all shares of Common Stock entitled to vote at a meeting of the Company’s stockholders; (ii) for so long as such Non-Citizen Investors collectively hold such shares of Common Stock, the shares of Common Stock held by CK Wheels in excess of 23.9% of all shares of Common stock entitled to vote at a meeting of the Company’s stockholders, will not have voting rights (subject to ratable adjustment if the Non-Citizen Investors cease to own (beneficially or of record) a certain number of shares of Common Stock); and (iii) any shares owned by Delta above 29.9% will be neutral shares with respect to voting rights, will be voted in proportion to all other votes cast (“for”, “against” or “abstain”) by stockholders other than Delta at a meeting of the Company’s stockholders. Equity-Based Compensation The Company’s outstanding equity-based compensation awards to its directors, executive officers, employees and other eligible personnel have been made pursuant to the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan, as amended and restated effective April 1, 2023 (as amended by the LTIP Amendment (as defined herein), the “Amended and Restated 2021 LTIP”), the Wheels Up Experience Inc. 2022 Inducement Grant Plan, dated June 30, 2022 (the “2022 Inducement Grant Plan”), the Wheels Up Experience Inc. Performance Award Agreement, dated as of November 30, 2023, granted to George Mattson (the “CEO Performance Award”), the Wheels Up Experience Inc. Performance Award Agreement, dated as of March 3, 2024, granted to Todd Smith, our former Chief Financial Officer (the “CFO Performance Award”), the Wheels Up Experience Inc. Performance Award Agreement, dated as of May 20, 2024, granted to David Harvey (the “CCO Performance Award” and, collectively with the CEO Performance Award and CFO Performance Award, the “Executive Performance Awards”), nine equity-based compensation plans that were approved by the board of directors of WUP (collectively, the “WUP Management Incentive Plan”) prior to the business combination consummated on July 13, 2021 (the “Business Combination Closing Date”) between WUP and Aspirational Consumer Lifestyle Corp. (“Aspirational”), a blank check company (the “Business Combination’), and the Wheels Up Partners Holdings LLC Option Plan (the “WUP Option Plan”), which was approved by the board of directors of WUP prior to the Business Combination. Additional details about these equity-based compensation arrangements are below. WUP Management Incentive Plan In March 2014, the WUP Management Incentive Plan was established, which provided for the issuance of WUP profits interests, restricted or unrestricted, to employees, consultants and other qualified persons. Following the consummation of the Business Combination, no new grants can be made under the WUP Management Incentive Plan. As of September 30, 2024, an aggregate of 3.1 million WUP profits interests have been authorized and issued under the WUP Management Incentive Plan. Vested WUP profits interests are eligible to be exchanged into shares of Common Stock before July 13, 2031. Amounts of WUP profits interests reported in the tables below represent the maximum number of WUP profits interests outstanding or that could be realized upon vesting and immediately exchanged for the maximum number of shares of Common Stock. The actual number of shares of Common Stock received upon exchange of such WUP profits interests will depend on the trading price per share of Common Stock at the time of such exchange. The following table summarizes the WUP profits interests activity under the WUP Management Incentive Plan as of September 30, 2024: Number of WUP Weighted-Average Grant (in thousands) Outstanding WUP profits interests as of January 1, 2024 2,881 $ 4.16 Granted — — Exchanged — — Expired/forfeited — — Outstanding WUP profits interests as of September 30, 2024 2,881 $ 4.16 The weighted-average remaining contractual term as of September 30, 2024, for WUP profits interests outstanding was approximately 6.8 years. All WUP profits interests were vested as of December 31, 2023. WUP Option Plan In December 2016, the WUP Option Plan was established, which provided for the issuance of stock options to purchase WUP common interests at an exercise price based on the fair market value of the interests on the date of grant. Generally, WUP stock options granted vest over a four-year service period and expire on the ten aggregate under the WUP Option Plan was 1.8 million. Each outstanding WUP stock option is exercisable for one share of Common Stock. The following table summarizes the activity under the WUP Option Plan as of September 30, 2024: Number of WUP Weighted- Weighted-Average Grant (in thousands) Outstanding WUP stock options as of January 1, 2024 1,129 $ 75.45 $ 12.64 Granted — — — Exercised — — — Forfeited (256) 79.89 16.95 Expired — — — Outstanding WUP stock options as of September 30, 2024 873 $ 74.15 $ 11.37 Exercisable WUP stock options as of September 30, 2024 873 $ 74.15 $ 11.37 The aggregate intrinsic value as of September 30, 2024, for WUP stock options that were outstanding and exercisable was nil . The weighted-average remaining contractual term as of September 30, 2024, for WUP stock options that were outstanding and exercisable was approximately 4.5 years. All WUP stock options were vested as of December 31, 2023. Amended and Restated 2021 LTIP & 2022 Inducement Grant Plan In connection with the Business Combination, the Wheels Up Board of Directors (the “Board”) and stockholders of Wheels Up adopted the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan (the “Original 2021 LTIP”), for employees, consultants and other qualified persons. Following approval by the Board, (i) at the 2023 annual meeting of the Company’s stockholders, the Company’s stockholders approved the Amended and Restated 2021 LTIP to increase the aggregate number of shares of Common Stock available for awards made thereunder by 2,415,000 shares and amend certain other plan provisions, and (ii) at the 2024 annual meeting of the Company’s stockholders (the “2024 Annual Meeting”), the Company’s stockholders approved Amendment No. 1 to the Amended and Restated 2021 LTIP (the “LTIP Amendment”), to increase the aggregate number of shares of Common Stock available for awards made under the Amended and Restated 2021 LTIP by 25,000,000 shares and extend the termination date of such plan to April 15, 2034. The Amended and Restated 2021 LTIP provides for the grant of incentive options, nonstatutory options, restricted stock, restricted stock units (“RSUs”), including performance-based RSUs (“PSUs”), rights, other stock-based awards, performance awards, cash awards or any combination of the foregoing. As of September 30, 2024, an aggregate of 30.1 million shares were authorized for issuance under the Amended and Restated 2021 LTIP. On June 30, 2022, the Board adopted the 2022 Inducement Grant Plan to be used for a one-time employment inducement grant, pursuant to NYSE Rule 303A.08, for our former Chief Financial Officer, in connection with his appointment as Chief Financial Officer. The maximum number of awards that could be granted under the 2022 Inducement Grant Plan were 205,128 shares of Common Stock, which were all granted in the form of RSUs to our former Chief Financial Officer on July 1, 2022. RSU awards granted under the 2022 Inducement Grant Plan contained generally the same terms as other awards granted under the Original 2021 LTIP during the fiscal year ended December 31, 2022. Due to such similarities, the RSUs granted under the 2022 Inducement Grant Plan are consolidated in the discussion of RSUs below. Upon the departure of our former Chief Financial Officer from the Company on September 6, 2024, the 2022 Inducement Grant Plan terminated and all unvested RSUs thereunder were forfeited. Restricted Stock Units RSUs granted under the Amended and Restated 2021 LTIP generally vest at intervals up to a four-year service period, subject to the grantee’s continued service to the Company through the applicable vesting date. The following table summarizes the activity under the Amended and Restated 2021 LTIP and 2022 Inducement Grant Plan related to RSUs as of September 30, 2024: Number of RSUs (1) Weighted-Average Grant (in thousands) Non-vested RSUs as of January 1, 2024 1,848 $ 9.35 Granted 5,384 2.81 Vested (1,087) 8.5 Forfeited (1,133) 5.57 Non-vested RSUs as of September 30, 2024 5,012 $ 3.36 (1) The number of non-vested RSUs as of January 1, 2024, the number of forfeited RSUs and the related weighted-average grant date fair values include 68,376 RSUs granted under the 2022 Inducement Grant Plan in July 2022, which were forfeited on September 6, 2024. The total unrecognized compensation cost related to non-vested RSUs was $13.4 million as of September 30, 2024 and is expected to be recognized over a weighted-average period of 2.7 years. Performance-Based Restricted Stock Units Under the terms of the PSUs granted to certain employees under the Amended and Restated 2021 LTIP, upon the achievement of certain pre-determined performance objectives, each PSU may settle into shares of our Common Stock. The PSUs will vest, if at all, upon the actual achievement of the related performance objectives, subject to specified change of control exceptions and the grantee’s continued service to the Company through the applicable vesting date. The following table summarizes the activity under the Amended and Restated 2021 LTIP related to PSUs as of September 30, 2024: Number of PSUs Weighted-Average Grant (in thousands) Non-vested PSUs as of January 1, 2024 18 $ 2.89 Granted 482 3.07 Vested — — Forfeited (113) 3.03 Non-vested PSUs as of September 30, 2024 387 $ 3.05 Compensation expense associated with PSUs is recognized over the vesting period of the awards that are ultimately expected to vest when the achievement of the related performance objectives becomes probable. As of September 30, 2024, the achievement of the performance objectives associated with certain non-vested PSUs was deemed not probable of being achieved and no expense has been recognized associated with those awards. The total unrecognized compensation cost related to non-vested PSUs deemed probable of being achieved was $1.2 million as of September 30, 2024 and is expected to be recognized over a weighted-average period of 2.2 years. Wheels Up Stock Options Wheels Up stock options granted under the Amended and Restated 2021 LTIP vest quarterly over a three-year service period and expire on the tenth anniversary of the grant date. The following table summarizes the activity under the Amended and Restated 2021 LTIP related to Wheels Up stock options as of September 30, 2024: Number of Wheels Up Weighted- Weighted-Average Grant (in thousands) Outstanding Wheels Up stock options as of January 1, 2024 77 $ 100.00 $ 47.52 Granted — — — Exercised — — — Forfeited — — — Expired — — — Outstanding Wheels Up stock options as of September 30, 2024 77 $ 100.00 $ 47.52 Exercisable Wheels Up stock options as of September 30, 2024 77 $ 100.00 $ 47.52 The aggregate intrinsic value as of September 30, 2024, for Wheels Up stock options that were outstanding and exercisable was nil . The weighted-average remaining contractual term as of September 30, 2024, for Wheels Up stock options that were outstanding and exercisable was approximately 3.1 years. Executive Performance Awards The Compensation Committee of the Board approved the CEO Performance Award granted to George Mattson, the Company’s Chief Executive Officer, CFO Performance Award granted to Todd Smith, our former Chief Financial Officer, and CCO Performance Award granted to David Harvey, the Company’s Chief Commercial Officer, on November 30, 2023, March 3, 2024 and May 20, 2024, respectively. Except as set forth in Section III.A of the Amended and Restated 2021 LTIP, the Executive Performance Awards incorporate the terms of the Amended and Restated 2021 LTIP, as it may be amended from time-to-time. Each Executive Performance Award is intended to constitute a standalone equity incentive plan and any shares of Common Stock issued under such awards will not be issued under, or count against the number of shares of Common Stock reserved pursuant to, any of the Company’s other equity-based compensation plans or awards. Upon the departure of our former Chief Financial Officer from the Company on September 6, 2024, the CFO Performance Award was effectively terminated and any right to receive shares of Common Stock or cash payments thereunder in the future was forfeited. No shares of Common Stock had been issued or cash payments made to our former Chief Financial Officer under the CFO Performance Award through such date. In addition, all compensation expense associated with the CFO Performance Award was reversed during the three months ended September 30, 2024. The issuance of any shares under the Executive Performance Awards upon vesting is contingent upon receipt of the approval of each award by the Company’s stockholders. At the 2024 Annual Meeting, the Company’s stockholders approved the CEO Performance Award and the potential issuance of up to 73.0 million shares of Common Stock thereunder, subject to the satisfaction of the applicable performance- and service-based vesting conditions under such award, if at all. The Company currently intends to obtain approval of the CCO Performance Award by the Company’s stockholders at a future meeting of the Company’s stockholders or by written consent of the Company’s stockholders. If on any Determination Date (as defined below) there is not a sufficient amount of shares authorized by the Company's stockholders to deliver the number of shares due under the Executive Performance Awards or any such Executive Performance Award has not been approved by the Company’s stockholders, then upon vesting, if at all, any amounts payable under any such Executive Performance Award will not be paid in the form of the issuance of new shares of Common Stock and instead will be payable in cash. The Executive Performance Awards are one-time performance awards granted to our Chief Executive Officer and Chief Commercial Officer in lieu of future annual equity compensation grants and are intended to provide each of them with the opportunity to share in the long-term growth of the value of the Company. The Executive Performance Awards consist of a contingent right to receive a number of newly issued shares of Common Stock upon: (i) repayment of the Company’s borrowings under the $390.0 million Term Loan, if at all; and (ii) satisfaction of service-based vesting conditions, which provide that 25% of each Executive Performance Award will be eligible to vest on each of September 20, 2024, 2025, 2026 and 2027, so long as such officer remains employed with the Company as of such dates. A “Repayment Event” includes certain refinancings of the Term Loan on or before September 20, 2028, the scheduled maturity date of the Term Loan. Subject to the satisfaction of the applicable performance- and service-based vesting conditions described above, the number of shares of Common Stock that may vest and be issued under any Executive Performance Award will first be determined on December 31st of the year in which a Repayment Event occurs, and then on December 31st of each subsequent year (each such date, a “Determination Date”) until December 31, 2028 (the “Final Determination Date”). At any Determination Date following a Repayment Event, the number of shares of Common Stock issuable under any Executive Performance Award in connection with such Determination Date, if any, will be determined using the then applicable percentage associated with the service-based vesting condition (the “Service Vested Percentage”). The number of shares of Common Stock subject to vesting and issuance, if any, under any Executive Performance Award on each Determination Date following a Repayment Event is based on a formula that aligns the number of shares of Common Stock issuable under such Executive Performance Award with the repayment or refinancing of the Term Loan and Revolving Credit Facility, the then applicable dollar value of the shares of Common Stock issued to the Lenders under the Investor Rights Agreement and the volume weighted average price per share of Common Stock during the 60 trading day period prior to the applicable Determination Date. The number of shares of Common Stock, if any, issuable under the Executive Performance Awards will vary depending on, among other things: (i) the occurrence and timing of a Repayment Event; (ii) the Lenders’ Total Investor Return (as defined in the Executive Performance Awards) as a multiple of the aggregate principal amount of the Term Loan and any borrowings under the Revolving Credit Facility as of the applicable Determination Date, if any; and (iii) the Service Vested Percentage as of the applicable Determination Date. There can be no assurance that the performance- and service-based vesting conditions under the Executive Performance Awards will be satisfied or that the foregoing variables will result in the vesting and issuance of any shares of Common Stock or cash payments pursuant to the Executive Performance Awards. As of September 30, 2024, the performance-based vesting conditions for the outstanding and unvested Executive Performance Awards were not met and no shares had vested. As of September 30, 2024, the achievement of the related performance objective was deemed probable of being achieved on September 20, 2028, the scheduled maturity date of the Term Loan. The grant-date fair value of the CCO Performance Award as of May 20, 2024, using a Monte Carlo simulation model, was $43.9 million. The derived service periods for Executive Performance Awards, which began on the respective grant dates, were: (i) for the CEO Performance Award, 5.2 years; and (ii) for the CCO Performance Award, 4.7 years. The total unrecognized compensation cost related to the outstanding and unvested Executive Performance Awards was $164.4 million as of September 30, 2024 and is expected to be recognized over 4.3 years. As of September 30, 2024, the carrying amount of the CEO Performance Award was classified as equity in the condensed consolidated balance sheet under Additional paid-in capital; however, since we have not obtained authorization from the Company’s stockholders for the issuance of any shares of Common Stock to satisfy settlement of the CCO Performance Award, the carrying amount of such award has been classified as mezzanine equity in the condensed consolidated balance sheet under Contingent performance awards. Fair Value Estimates We estimated fair value to measure compensation cost of the Executive Performance Awards on the date of grant using techniques that are considered to be consistent with the objective of measuring fair value. In selecting the appropriate technique, management considered, among other factors, the nature of the instrument, the market risks that it embodies, and the expected means of settlement. Estimating fair values of the Executive Performance Awards requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external factors. In addition, option-pricing models are highly volatile and sensitive to changes. The following table summarizes the significant assumptions used to estimate the fair value on the date of grant for the outstanding and unvested Executive Performance Awards: 2024 (1) 2023 (2) Expected term (in years) 4.7 5.2 Volatility 70% 60 % Risk-free rate 4.4% 4.3 % Expected dividend rate 0% 0 % (1) Assumptions used in the Monte Carlo simulation related to the CCO Performance Award, which was granted on May 20, 2024. (2) Assumptions used in the Monte Carlo simulation related to the CEO Performance Award, which was granted on November 30, 2023. Equity-Based Compensation Expense Compensation expense for WUP profits interests recognized in the condensed consolidated statements of operations was nil for each of the three months ended September 30, 2024 and 2023, and nil and $0.1 million for the nine months ended September 30, 2024 and 2023, respectively. Compensation expense for WUP stock options under the WUP Option Plan and Wheels Up stock options under the Amended and Restated 2021 LTIP recognized in the condensed consolidated statements of operations was nil and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, and nil and $1.1 million for the nine months ended September 30, 2024 and 2023, respectively. Compensation expense for RSUs and PSUs recognized in the condensed consolidated statements of operations was $1.7 million and $3.3 million for the three months ended September 30, 2024 and 2023, respectively, and $8.0 million and $15.2 million for the nine months ended September 30, 2024 and 2023, respectively. Compensation expense for the Executive Performance Awards recognized in the condensed consolidated statements of operations was $6.3 million and nil for the three months ended September 30, 2024 and 2023, respectively, and $25.4 million and nil for the nine months ended September 30, 2024 and 2023, respectively. The following table summarizes equity-based compensation expense recognized by condensed consolidated statement of operations line item (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Cost of revenue $ 535 $ 826 $ 2,097 $ 3,097 Technology and development 245 620 881 1,777 Sales and marketing 161 440 428 1,781 General and administrative 6,944 1,622 29,958 14,995 Total equity-based compensation expense $ 7,885 $ 3,508 $ 33,364 $ 21,650 Earnout Shares As part of the Business Combination, existing holders of WUP equity, including certain holders of WUP profits interests and restricted interests under the WUP Management Incentive Plan, but excluding holders of WUP stock options, have the right to receive up to 0.9 million additional shares of Common Stock (the “Earnout Shares”) that will vest, if at all, upon the achievement of separate market conditions. One-third of the Earnout Shares will meet the market conditions when the closing Common Stock price is greater than or equal to $125.00 for any 20 trading days within a period of 30 consecutive trading days on or before July 13, 2026. An additional one-third will vest when the Common Stock is greater than or equal to $150.00 over the same measurement period. The final one-third will vest when the Common Stock is greater than or equal to $175.00 over the same measurement period. Earnout Shares are attributable to vested WUP profits interests and restricted interests as of the date each of the Earnout Share market conditions are met. No Earnout Shares have been issued as of September 30, 2024. The grant-date fair value of the Earnout Shares attributable to the holders of WUP profits interests and restricted interests, using a Monte Carlo simulation model, was $57.9 million. The derived service period began on the Business Combination Closing Date and had a weighted-average period of 1.7 years. Based on the Common Stock trading price, the market conditions were not met, and no Earnout Shares vested or were issuable as of September 30, 2024. Compensation expense for Earnout Shares recognized in the condensed consolidated statements of operations was nil for each of the three months ended September 30, 2024 and 2023, and nil and $1.4 million for the nine months ended September 30, 2024 and 2023, respectively. Treasury Stock As of September 30, 2024, we had 439,451 shares of treasury stock. The increase in treasury stock during the nine months ended September 30, 2024 reflects shares of Common Stock withheld to settle employee taxes due upon the vesting of RSUs. During the nine months ended September 30, 2024, we did not cancel or reissue any shares of Common Stock held as treasury stock. |
