DEF 14A: flyExclusive Seeks Stockholder Approval for Share Issuance and Director Elections at Upcoming Annual Meeting

flyExclusive is holding its annual stockholder meeting on December 2, 2024, to vote on proposals including share issuance approvals and the election of directors.

Summary

• flyExclusive, Inc. will hold its Annual Meeting of Stockholders virtually on December 2, 2024, at 10:00 a.m. Eastern Time.
• Stockholders of record as of October 11, 2024, are entitled to vote.
• The meeting will address three proposals: approval of Class A common stock issuance related to warrant exercises and preferred stock conversion, election of seven directors, and ratification of Elliott Davis as the independent registered public accounting firm for the fiscal year ending December 31, 2024.
• The Board recommends voting FOR all three proposals.
• The company is seeking approval for the issuance of shares exceeding 20% of the Class A common stock outstanding on March 4, 2024, related to warrants held by EnTrust Emerald and EG Sponsor LLC, and the conversion of Series B convertible preferred stock.
• Without stockholder approval, the company may be limited in its ability to issue all shares issuable upon exercise of the August 2024 Warrants or full conversion of the Series B Preferred Stock.
• The company's Class A common stock is traded on the NYSE American, and the issuance is subject to NYSE rules.
• The company is also seeking to elect Gary Fegel, Michael S. Fox, Frank B. Holding Jr., Gregg S. Hymowitz, Peter B. Hopper, Thomas James Segrave Jr. and Thomas James Segrave, Sr. as directors to serve until the 2025 annual meeting.
• The company is also seeking to ratify the appointment of Elliott Davis as the company's independent registered public accounting firm for the fiscal year ending December 31, 2024.

Sentiment

Score: 7

Explanation: The document is primarily informational and procedural, with a neutral tone. The proposals are standard for a public company, and the Board's recommendations are clear. However, the need for shareholder approval for share issuance suggests potential dilution, which tempers the overall sentiment.

Positives

• The Board of Directors is actively involved in risk oversight and corporate governance.
• The company has established Audit and Risk, Compensation, and Nominating and Corporate Governance Committees.
• The company has a Code of Ethics and Conflict of Interest Policy, an Anti-Hedging Policy, and a Compensation Recovery Policy.
• The company is committed to fostering an environment of diversity and inclusion on its Board of Directors.

Negatives

• The company is seeking approval for the issuance of shares exceeding 20% of the Class A common stock outstanding on March 4, 2024, related to warrants held by EnTrust Emerald and EG Sponsor LLC, and the conversion of Series B convertible preferred stock, which could dilute existing shareholders.
• Without stockholder approval, the company may be limited in its ability to issue all shares issuable upon exercise of the August 2024 Warrants or full conversion of the Series B Preferred Stock.
• The company is relying on exemptions as a controlled company, meaning it does not have a majority of independent directors, a compensation committee consisting entirely of independent directors, or a nominating/corporate governance committee composed entirely of independent directors.

Risks

• Failure to obtain stockholder approval for the share issuance could limit the company's ability to raise capital and execute its growth strategy.
• The company's reliance on exemptions as a controlled company could lead to potential conflicts of interest and reduced accountability.
• The Tax Receivable Agreement could require the company to make payments that exceed its actual tax savings.
• The company's related party transactions could raise concerns about fairness and transparency.

Future Outlook

The company is seeking stockholder approval to issue additional shares of Class A common stock, which would allow it to fully exercise warrants and convert preferred stock, supporting its growth strategy.

Industry Context

The company's actions are in line with standard corporate governance practices for publicly traded companies, including seeking stockholder approval for significant share issuances and electing directors annually.

Comparison to Industry Standards

• Seeking shareholder approval for share issuances exceeding 20% is a standard practice under NYSE American rules, aligning with corporate governance norms.
• The composition of the board and its committees, while not fully independent due to the controlled company exemption, reflects an effort to balance insider knowledge with external oversight, a common approach in similar situations.
• The related party transactions, while extensive, are subject to review and approval by the Audit and Risk Committee, a practice intended to ensure fairness and transparency, similar to procedures at other companies with significant related party dealings.

Related Party Transactions

• LGM purchased a total of $2,027,000 in fuel from subsidiaries of LGMV at an average cost of $3.58 per gallon.
• LGM leases its headquarters and two aircraft hangars (Hangar 1 and Hangar 2) from Kinston Jet Center, LLC, a wholly-owned subsidiary of LGMV, pursuant to a lease between the parties dated January 1, 2021. In 2023, LGM paid Kinston Jet Center, LLC $720,000 pursuant to this lease, with $8.3 million in rent remaining as of January 1, 2023.
• LGM leases an aircraft hangar (Hangar 3) from Kinston Jet Center, LLC, a wholly-owned subsidiary of LGMV, pursuant to a lease between the parties dated February 23, 2023. In 2023, LGM paid Kinston Jet Center, LLC $205,000 pursuant to this lease, with $13.2 million in rent remaining as of January 1, 2024.
• LGM leases an aircraft hangar (Hangar 4) from Kinston Jet Center, LLC, a wholly-owned subsidiary of LGMV, pursuant to a lease between the parties dated May 1, 2022. In 2023, LGM paid Kinston Jet Center, LLC $540,000 pursuant to this lease, with $19.3 million in rent remaining as of January 1, 2024.
• LGM leases a house from Kinston Jet House, LLC, a wholly-owned subsidiary of LGMV, pursuant to a lease between the parties dated September 1, 2018. In 2023, LGM paid Kinston Jet House, LLC $30,000 pursuant to this lease, with $0 in rent remaining as of January 1, 2024.
• LGM leases an aircraft from Juliette Lima Bravo, LLC, of which Laura Harvey Ball (Thomas Segrave, Jr.'s mother) owns approximately 33%. In 2023, LGM paid Juliette Lima Bravo, LLC $441,300 pursuant to this lease, with $35,000 in rent remaining as of January 1, 2024.
• LGM Auto, LLC, a wholly-owned subsidiary of LGMV, leases multiple automobiles to flyExclusive. In 2023, flyExclusive paid LGM Auto, LLC an aggregate of $173,838 pursuant to such leases.
• Peter Hopper, a director of flyExclusive, Inc., owns 50% of the outstanding equity of DH Aviation, LLC, an entity that, until September 25, 2023, owned a 50% interest in N401JS, an aircraft leased to flyExclusive. In 2023, the total aircraft lease payments made from flyExclusive to DH Aviation, LLC equaled $199,375 (which Mr. Hopper elected to receive in the form of flight hour credits). Mr. Hopper also entered into a side letter with flyExclusive in concurrence with the execution of the aforementioned plane lease. Pursuant to such side letter, Mr. Hopper was granted flight hour credits totaling $55,000 in 2023. LGM repurchased the 50% interest from Mr. Hopper on September 25, 2023 for $1,650,000.
• Peter Hopper, a director of flyExclusive, Inc., owns 50% of the outstanding equity of PHBL, LLC, an entity that leases an aircraft to flyExclusive. In 2023, the total lease payments made from flyExclusive to PHBL, LLC equaled $414,996. The original term of the lease expired on May 31, 2023 and continues on a quarter-to-quarter basis until terminated by either party with at least a 90 days notice.
• The Company is a guarantor to a term note, dated January 29, 2021, between Sea Jay, LLC and a financial institution where the initial principal balance is in the amount of $11,900,000. Sea Jay, LLC is wholly owned by LGMV.
• The Company is a guarantor to two term notes, dated February 25, 2022 and November 17, 2023, between Kinston Jet Center, LLC and a financial institution where the initial principal balances are in the amounts of $5,280,000 and $1,800,000, respectively.
• On September 28, 2023, flyExclusive sold 5 trainer aircraft to Crystal Coast Training, LLC, a wholly owned subsidiary of LGMV, for a total purchase price of $2,481,840. FlyExclusive rents the aircraft from Kinston Jet Center, LLC & Crystal Coast Training, LLC as on an hourly basis. In 2023, FlyExclusive paid these entities a total of $67,000 for the use of these aircraft.
• In December 2023, the Company entered into a Senior Secured Note covering borrowings of an aggregate principal amount of $15.9 million. Gregg S. Hymowitz, a member of our Board of Directors, serves as the Founder and Chief Executive Officer of EnTrust of Global Partners LLC (EnTrust Global), which is an affiliate of the Noteholder and may be deemed to be the beneficial owner of approximately 21.6% of the Company's outstanding Class A common stock.
• In January 2024, the Company entered into an additional Senior Secured Note covering borrowings of an aggregate principal amount of up to approximately $25.8 million, up to $25.0 million of which is to finance the purchase or refinancing of aircraft relating to the Company's fractional ownership program. Gregg S. Hymowitz, a member of our Board of Directors, serves as the Founder and Chief Executive Officer EnTrust Global, which is an affiliate of the Noteholder and may be deemed to be the beneficial owner of approximately 21.6% of the Company's outstanding Class A common stock.
• On March 4, 2024 the Company entered into a Securities Purchase Agreement (the Stock Purchase Agreement) with EnTrust Emerald (Cayman) LP, a Cayman Islands limited partnership (the Preferred Purchaser), pursuant to which the Company agreed to issue and sell to the Preferred Purchaser 25,000 shares of Series A Non-Convertible Redeemable Preferred Stock, par value $0.0001 per share (the Series A Preferred Stock), at a purchase price of $1,000 per share and a warrant (the March 2024 Warrant) to purchase shares of the Company's Class A common stock. Gregg S. Hymowitz, a member of the Company's Board of Directors, to which position he was designated by an affiliate of the Preferred Purchaser, serves as the Founder and Chief Executive Officer of EnTrust Global, which is an affiliate of the Preferred Purchaser and may be deemed to be the beneficial owner of approximately 21.6% of the Company's outstanding Common Stock.
• On August 8, 2024 the Company entered into a Securities Purchase Agreement (the Series B Stock Purchase Agreement) with EnTrust Emerald (Cayman) LP, a Cayman Islands limited partnership (EnTrust), and the EGA Sponsor (collectively with EnTrust, the Series B Preferred Purchasers) (related parties of the Company through its affiliation with the EGA Sponsor), pursuant to which the Company agreed to issue and sell to the Series B Preferred Purchasers an aggregate of 25,510 shares of Series B Preferred Stock and the August 2024 Warrants to purchase up to 5,000,000 shares of the Company's Class A common stock. Gregg S. Hymowitz, a member of the Company's Board of Directors, to which position he was designated by an affiliate of the Purchaser, serves as the Founder and Chief Executive Officer of EnTrust Global Partners LLC (EnTrust Global), which is an affiliate of the Series A Preferred Purchaser and may be deemed to be the beneficial owner of approximately 21.6% of the Company's outstanding Common Stock.

Stakeholder Impact

• Approval of the share issuance could dilute existing shareholders' ownership.
• Election of directors will determine the leadership and strategic direction of the company.
• Ratification of the independent auditor ensures the integrity of the company's financial reporting.
• The company's corporate governance practices impact the accountability and transparency of its operations.
• The company's compensation policies affect the motivation and retention of its executive officers.

Next Steps

• Stockholders should review the proxy materials and vote on the proposals.
• The company will hold the Annual Meeting on December 2, 2024, and announce the voting results.

Key Dates

Keywords

proxy statement, annual meeting, stockholders, directors, share issuance, warrants, preferred stock, corporate governance, executive compensation, related party transactions, Elliott Davis, EnTrust Emerald, EG Sponsor LLC, NYSE American