(1) | For purposes of this column, the number of shares of the class outstanding reflects the sum of (i) 119,883,256*
Less than 1% +
Director and Executive Officer (1)
For purposes of this column, the number of shares of the class outstanding for each person reflects the sum of: (i) 115,750,166 shares of our common stock that were outstanding as of the Record Date, and (ii) the number of RSUs held, if any, that are or will become vested within 60 days of the Record Date. (2)
Based on Amendment No. 1 to the Schedule 13G filed on August 12, 2022 by (i) MFN Partners, LP (the “Partnership”); (ii) MFN Partners GP, LLC (“MFN GP”), as the general partner of the Partnership; (iii) MFN Partners Management, LP (“MFN Management”), as the investment adviser to the Partnership; (iv) MFN Partners Management, LLC (“MFN LLC”), as the general partner of MFN Management; (v) Michael F. DeMichele, as a managing member of MFN GP and of MFN LLC; and (vi) Farhad Nanji, as a managing member of MFN GP and of MFN LLC (each, a “Reporting Person” and collectively, the “Reporting Persons”), which reported that, as of August 11, 2022, the Reporting Persons collectively owned 12,675,369 shares of our common stock with shared voting power and shared dispositive power. The address of the principal business office of each of the Partnership, MFN GP, MFN Management, MFN LLC and Messrs. DeMichele and Nanji is c/o MFN Partners Management, LP, 222 Berkeley Street, 13th Floor, Boston, MA 02116. (3)
Based on Amendment No. 4 to the Schedule 13G filed on January 30, 2023 by BlackRock, Inc., which reported that, as of December 31, 2022, BlackRock, Inc. beneficially owned 11,244,910 shares of our common stock, with sole voting power over 11,062,967 shares of our common stock and sole dispositive power over 11,244,910 shares of our common stock. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. (4)
Based on Amendment No. 8 to the Schedule 13G filed on February 9, 2023 by The Vanguard Group, which reported that, as of December 30, 2022, The Vanguard Group beneficially owned 10,751,543 shares of our common stock with shared voting power over 67,174 shares of our common stock, sole dispositive power over 10,512,719 | | | | 27 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
shares of our common stock and shared dispositive power over 238,824 shares of our common stock. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. (5)
Based on Amendment No. 10 to the Schedule 13G filed on February 14, 2023 by Orbis Investment Management Limited (“OIML”) and Orbis Investment Management (U.S.), L.P. (“OIMUS”), which reported that, as of December 31, 2022, OIML beneficially owned 9,851,344 shares of our common stock, and OIMUS beneficially owned 140,929 shares of our common stock. These entities have sole voting and sole dispositive power over such shares of our common stock. The address of the principal business office of OIML is Orbis House, 25 Front Street, Hamilton, Bermuda HM11. The address of the principal business office of OIMUS is 600 Montgomery Street, Suite 3800, San Francisco, CA 94111, USA. (6)
Consists of 920 directly held shares of our common stock and 4,040 RSUs that are or will become vested within 60 days of the Record Date. (7)
Consists of (i) 32,971 directly held shares of our common stock, (ii) 5,000 shares of our common stock held in an individual retirement account of Mr. Jesselson, (iii) 6,000 shares of our common stock owned by Mr. Jesselson’s spouse, (iv) 201,001 shares of our common stock beneficially owned by the Michael G. Jesselson 4/8/71 Trust and the Michael G. Jesselson 12/18/80 Trust, of which trusts Mr. Jesselson is the beneficiary, (v) 8,000 shares of our common stock beneficially owned by the JJJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (vi) 8,000 shares of our common stock beneficially owned by the RAJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (vii) 8,000 shares of our common stock beneficially owned by the SJJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (viii) 21,057 shares of our common stock beneficially owned by Michael G. Jesselson and Linda Jesselson, Trustees UID 6/30/93 FBO Maya Ariel Ruth Jesselson, and (ix) 15,888 RSUs that are or will become vested within 60 days of the Record Date. (8)
Consists of 920 directly held shares of our common stock and 4,040 RSUs that are or will become vested within 60 days of the Record Date. (9)
Consists of 387,416 directly held shares of our common stock and 1,300,701 shares of our common stock owned by JPE. Mr. Jacobs has indirect beneficial ownership of the shares of our common stock owned by JPE as a result of being its managing member. (10)
Mr. Anderson became CFO of the company on November 8, 2022. (11)
Mr. Tulsyan stepped down from his position as CFO of the company on November 7, 2022. His beneficial ownership information is based on the company’s records as of the Record Date. Mr. Tulsyan is not included in the group of current directors and executive officers. (12)
Includes 23,968 RSUs that are or will become vested within 60 days of the Record Date. Excludes Mr. Tulsyan’s holdings. | | | | 28 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
LETTER FROM THE COMPENSATION COMMITTEE Dear Fellow Stockholders, Thank you for your continued investment in XPO. The company has undergone an incredible transformation through two spin-off transactions over the last few years, and as we stand today, we are confident in how XPO is positioned as a world-class less-than-truckload (LTL) business and that the company is focused on executing on its growth strategy and delivering value to our stockholders. Compensation Committee Refreshment In conjunction with the GXO and RXO spin-offs in 2021 and 2022, respectively, the Compensation Committee (the “Committee”) was completely refreshed to provide a new perspective and drive alignment of the compensation program with XPO’s evolving business. Our Committee chair, Johnny C. Taylor Jr., and Allison Landry joined the Committee in August 2021, with Irene Moshouris joining in November 2022. As an entirely reconstituted Committee, we conducted a holistic review of XPO’s executive compensation program to ensure that it: ■
Is heavily performance-based to ensure alignment with long-term stockholder value creation and the company’s evolving business; ■
Continues to attract, motivate and retain top executive talent critical to lead XPO; and ■
Incorporates stockholder feedback regarding both the structure of the program and related disclosures. Robust Stockholder Engagement and Commitment to Responsiveness As a part of the holistic compensation review, following the 2022 Annual Meeting, XPO reached out to stockholders representing 66% of our common stock and engaged with stockholders holding 44% of our common stock. As Committee members, we participated in meetings with stockholders holding 31% of our common stock. The Committee takes the result of our say-on-pay vote seriously, and we were disappointed that at the last Annual Meeting, the proposal received 69% support. As such, as a part of our engagement initiative, we wanted to further understand the stockholder concerns that drove the say-on-pay vote in order to inform this year’s proxy disclosures as well as the design of our executive chairman’s, incoming CEO’s and incoming CFO’s compensation programs. Additionally, in preparation for the closing of the RXO spin-off, we wanted to seek stockholder feedback on how to address the outstanding, in-flight awards. Investors expressed an interest in an annual incentive that is purely based on operational metrics, as well as for the Committee to transition to an annual schedule of granting long-term incentives that have multi-year performance and vesting periods. The 2023 compensation program for our executive chairman, CEO and CFO, which is explained in detail in the CD&A, is fully responsive to this feedback. Additionally, during engagement, stockholders acknowledged the need to address the outstanding awards in conjunction with the GXO and RXO spin-offs. They expressed a preference for the converted awards to be equity-based awards, incorporate extended vesting periods, and contain double-trigger change-in-control provisions. The Committee understood the rationale for this guidance and followed it in converting the outstanding awards as a result of the completed spin-offs. We Ask For Your Support The feedback stockholders shared was critical to the evolution of the compensation program, and we thank you. As we continue working to advance XPO’s strategy on its next chapter, we remain committed to ongoing stockholder engagement to ensure our practices continue to reflect stockholder input. Your vote is very important to us. We strongly encourage you to read our Proxy Statement in its entirety and ask that you vote with our recommendations. On behalf of the entire Board of Directors, thank you for your investment, support, and continued feedback. Sincerely, Johnny C. Taylor, Jr., chair Allison Landry, member Irene Moshouris, member | | | | 29 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”) This CD&A describes XPO’s executive compensation programs and performance outcomes for 2022, as determined by the Committee for the following named executive officers (“NEOs”): | NEO | | | 2022 ROLES | | | Brad Jacobs | | | Chief Executive Officer from January 1, 2022 through October 31, 2022; Executive Chairman commencing November 1, 2022 | | | Mario Harik | | | Chief Information Officer, Chief Customer Officer, and President, North American LTL through October 31, 2022; Chief Executive Officer commencing November 1, 2022 | | | Carl Anderson | | | Chief Financial Officer commencing November 8, 2022 | | | Ravi Tulsyan | | | Chief Financial Officer from January 1, 2022 through November 7, 2022 | |
EXECUTIVE SUMMARY 2022 COMPANY PERFORMANCE HIGHLIGHTS In 2022, our NEOs led the company through several transformative initiatives outlined in the March 2022 strategic plan authorized by the Board. The company expects the execution of the plan to generate strong and sustainable long-term stockholder value creation, while continuing to generate notable in-year business achievements and maintaining a focus on disciplined deleveraging over time. Key 2022 accomplishments include: 1.
Completion of the sale of XPO’s North American intermodal operation in March 2022. The proceeds from the divestiture were used to redeem a portion of our senior notes due in 2025, bringing our net debt leverage ratio* down to 2.0x in the first quarter of 2022, from 2.7x in the fourth quarter of 2021 on a previously reported basis, prior to the RXO spin-off. 2.
Completion of the RXO spin-off on November 1, 2022, enabling XPO to focus its North America business exclusively on LTL — a goal that top XPO stockholders discussed extensively with management in recent years. 3.
Achievement of strong full-year 2022 financial results: i.
Company revenue of $7.7 billion, up 7% year-over-year. ii.
Adjusted diluted earnings per share* of $3.53, up 82% year-over-year. iii.
Free cash flow* of $391 million, up 11% year-over-year. 4.
In North American LTL, substantial financial and operational gains, and steady execution of growth initiatives: i.
LTL adjusted EBITDA of $1 billion, exceeding target. ii.
Yield improvement of 7% year-over-year, excluding fuel surcharges. iii.
Adjusted operating ratio improvement*, excluding gains on sales of real estate, of 40 basis points to 83.9% for the year. iv.
Damage frequency improvement of 66% in the fourth quarter, compared to the same period the prior year. v.
Manufactured more than 4,700 linehaul trailers in-house, expanding our production capacity and nearly doubling the 2021 output. vi.
Significant investments made in network expansion, opening new terminals in California, Georgia, Arkansas, Wisconsin and New Jersey, as well as new fleet maintenance shops in Florida, Ohio, Nevada and New York. Since announcing the network expansion plan in Q4 2021, added 369 net new doors throughout the network. vii.
Further enhanced our proprietary pricing platform, which is driven by advanced analytics of customer shipment data and automated data management, deepening the analysis at the customer level to optimize rates. 5.
The achievement of all-time-high employee engagement, as reflected in our annual employee survey in North American LTL: i.
The 2022 engagement survey drew a response rate of almost 80%, with close to 16,000 employees across both the wired and non-wired population providing feedback on 48 questions that asked for insights spanning a wide range of employee experiences. *
See Annex A for reconciliations of non-GAAP measures. | | | | 30 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
ii.
Results showed a 10-point increase in job satisfaction year-over-year, yielding the highest score in the company’s recorded history for LTL. iii.
Average engagement on XPO’s Workplace internal social platform increased 323% compared to 2021, and 687% since Mr. Harik began leading LTL in October 2021, compared to the prior 12 months. 6.
Continued external recognition in 2022 as a purpose-driven leader in both transportation and technology: i.
Newsweek named XPO one of “America’s Most Responsible Companies” for a second year. ii.
Forbes magazine named XPO one of “America’s Best Large Employers”. Overall, XPO ended the year in a strong position to capitalize on its positioning as one of the largest LTL providers in North America, with approximately 8% share of the $59 billion LTL industry in the U.S. (as measured at the end of 2022); 27,000 customers as of December 2022; low (2%) concentration risk from our largest customer; network coverage of 99% of US zip codes; in-house trailer production and driver training capabilities; and data-driven levers of profit growth embedded in our proprietary technology. We intend to continue making disciplined investments in our people and in high-ROIC components of our network, giving us a solid foundation to deliver on our long-term targets and create outsized value for our stockholders. COMPENSATION DISCUSSION AND ANALYSIS ROADMAP As a result of the transformation of XPO’s business profile and accompanying leadership changes in 2022, the Committee made several changes to XPO’s compensation program and outstanding executive awards considering stockholder feedback and relevance for XPO as a stand-alone, pure-play LTL business in North America. The below table provides an overview of each element of executive compensation discussed in the CD&A along with a summary that includes relevant references to respective CD&A sections which provide more detailed disclosure. | | | | | | | | 2023 COMPENSATION PROGRAM (discussed on page 36) | | | | ■
Following the completion of the GXO and RXO spin-offs over the course of two years and with the announcement of Mr. Harik as XPO’s new CEO as well as other management hires, the newly reconstituted Committee redesigned the compensation program for 2023 in order to be responsive to stockholder feedback and align with the new business priorities. ■
For 2023, and with the intention to maintain this structure going forward, contingent upon stockholder feedback, the Committee: •
Established a formulaic STI award for executives ▪
2023 Annual Incentive for executive chairman, CEO and CFO based on adjusted EBITDA •
Communicated intention to grant long-term incentive awards on an annual basis ▪
For executive chairman and CEO structured LTI to consist of 80% performance-based RSUs and 20% as time-based RSUs ▪
For CFO structured LTI to consist of 65% performance-based RSUs and 35% as time-based RSUs | | | 2022 COMPENSATION PROGRAM (discussed on page 42) | | | | ■
The Committee made a number of changes to compensation awards in 2022, reflecting modifications of prior awards from cash to equity and granting of awards in connection with the promotion of Mr. Harik to CEO. These include but not are not limited to: •
Replacement LTL PSUs in place of the 2022 cash tranche of the 2020 LTI award equity for 50% of Mr. Jacobs’ award and 100% of Mr. Harik’s which required completion of the RXO spin-off no later than December 31, 2022 and achievement of targets across two metrics. •
Regular LTL PSUs with a three-year vesting period and metrics aligned with path to LTL long-term targets. •
A relative TSR PSU granted to Mr. Harik and Mr. Anderson in connection with their appointments as CEO and CFO and based on rigorous relative TSR target to incentivize a strong focus on XPO’s growth in market position versus core competitors. •
A new hire RSU award for Mr. Harik in connection with his appointment as CEO. | |
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| | | | | | | | OUTSTANDING 2020 LTI AWARDS (discussed on page 48) | | | | ■
In February 2023, the Committee re-evaluated the structure of the remaining 2023 tranche of the 2020 LTI awards for both Mr. Jacobs and Mr. Harik. Based on stockholder feedback and the impact of the RXO spin-off on the company’s profile, the Committee decided to effectively cancel the original version of the award, denominated in cash, and replace it with new performance-based shares, with metrics that were realigned with post-spin-off strategic priorities. The target amounts and combined vesting/sales restriction schedules were preserved in the issuance of the replacement awards, however, the weighting of the two metrics were changed so that relative TSR of XPO vs. the S&P Transportation Select Index represents 75% of the award and the ESG scorecard represents 25%. The ESG scorecard was recalibrated to better align with our current business. The new performance measurement period begins on November 1, 2022 and ends on December 31, 2024. | | | OUTSTANDING 2018 & 2019 LTI AWARDS (discussed on page 50) | | | | ■
Prior to the RXO spin-off, Mr. Jacobs and Mr. Harik held two unvested performance-based stock awards. These PSUs included two separate performance hurdles within each award structure to achieve target payout, with a ‘hit-or-miss’ payout structure. The Committee evaluated market practice for how to properly handle the modification requirements for these awards and found that 72% of companies converted some or all of their outstanding executive PSUs into time-based RSUs vesting on their original schedules in conjunction with a spin-off. ■
Taking into account the extraordinary value creation created by Mr. Jacobs and Mr. Harik over the length of the PSU award, the difficulty in making a fair adjustment methodology following two successive spin-offs and the prevailing market practice, the Committee decided to convert the combined target shares in these two outstanding awards to a single time-based RSU award for each of Mr. Jacobs and Mr. Harik, effective as of the Record Date, (ii)RXO spin-off date. Taking into account stockholder feedback on how to address outstanding awards, the numberCommittee extended the vesting schedule of the 2018 award by two years to December 31, 2024, aligning with the original vesting schedule of the 2019 award and also applied a post-vesting sales restriction on the entire pool of shares of our common stock intoacross both awards, which expires on December 31, 2025. | |
STOCKHOLDER OUTREACH AND ENGAGEMENT Through collaboration by our investor relations team, management team and members of our Board, XPO has a robust year-round governance-focused stockholder engagement program. This program involves discussions about various matters of interest, such as our business and strategic priorities, financial and operating performance, corporate governance initiatives, executive compensation, ESG-related disclosures and practices, diversity and inclusion culture, human capital management and risk management. Feedback gathered from our stockholders throughout the year is regularly considered by the Board and management team, as the Board greatly values stockholder insights that help inform the decision-making processes and enhancements to XPO’s policies and disclosures. The Compensation Committee considers dialogue with existing stockholders to be especially critical in formulating our executive compensation philosophy and program. To that end, as a part of a holistic compensation review, following the 2022 Annual Meeting, XPO conducted a robust outreach and engagement program which members of the Compensation Committee participated in. Compensation Committee members participated in meetings with stockholders holding 31% of our common stock. A priority of the engagement initiative was to further understand the stockholder concerns that drove the 2022 say-on-pay vote in order to inform the design of Mr. Jacobs’, Mr. Harik’s and Mr. Anderson’s compensation program. | | | | 32 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Our robust engagement program included outreach to a broad range of our stockholders, with engagement statistics outlined below: RESPONSIVENESS TO 2022 SAY-ON-PAY VOTE The following chart summarizes: (i) the executive compensation feedback provided by our stockholders through our focused engagement, and (ii) the ways in which the Committee sought to address this feedback in its decisions on prospective executive pay design and disclosures. | | WHAT WE HEARD FROM STOCKHOLDERS | | | | RESPONSIVE ACTIONS | | | | | Modifications to Outstanding Awards | | | | | Equity Mix | | | | | | | | | ■
Stockholders generally expressed a preference for the outstanding shares2020 Cash LTI performance-based awards to incorporate an equity component, as opposed to being entirely cash-based. | | | | ■
Converted 100% of the target value of Mr. Jacobs and Mr. Harik’s final 2023 tranche of the 2020 Cash LTI performance-based awards into performance-based equity. | | | | | Metrics | | | | | | | | | ■
Some stockholders expressed a preference to remove the adjusted cash flow per share metric in the 2020 Cash LTI performance-based awards and, in choosing new operational or financial metrics for go-forward PSU awards, to exclude gains from sales of real estate in calculating the selected measures. ■
Most stockholders continued to support the inclusion of relative metrics, such as relative TSR, in LTI award structures. | | | | ■
Eliminated the adjusted cash flow per share metric from the final 2023 tranche of the 2020 Cash LTI performance-based awards and replaced it with a relative TSR metric to further align executive compensation with stockholder interests. ■
Operational and financial metrics used in our preferred stockPSU award constructs exclude the impact of gains from real estate sales. | | |
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| | WHAT WE HEARD FROM STOCKHOLDERS | | | | RESPONSIVE ACTIONS | | | | | Change-in-Control Provision | | | | | | | | | ■
Stockholders inquired about the Committee’s stance on moving away from a single-trigger change-in-control provision in the previously granted awards, and indicated a preference for double-trigger provisions. | | | | ■
Eliminated single-trigger change-in-control provisions from outstanding performance-based awards held by NEOs, including those converted following the relevant person, if any, were convertibleRXO spin-off; double-trigger provisions have now been applied to all outstanding awards. | | | | | Go-Forward Compensation Program Structure
| | | | | Formulaic Structure | | | | | | | | | ■
Stockholders expressed a preference for STI and LTI program structures to be less discretionary, more predictable and more formulaic. | | | | ■
Committed to a STI award that is purely formulaic •
2023 Annual Incentive for executive chairman, CEO and CFO based on adjusted EBITDA, with the Record Date, (iii) the numberapplication of sharesa linear bonus payout curve from 50% threshold for performance at 90% of our common stock, if any, which the relevant person could acquire on exercisetarget to 200% at maximum for 120% of options or warrants within 60 daystarget ■
Adopted a formulaic LTI program with multiyear vesting periods, to be granted annually; this further reinforces a reliable, predictable incentive structure and aligns pay with performance •
For executive chairman and CEO 80% of the Record Dateaward opportunity in the form of performance-based RSUs and (iv) the number of restricted stock units (“RSUs”), if any, held by the relevant person that are or will become vested within 60 days20% as time-based RSUs •
For CFO 65% of the Record Date.award opportunity in the form of performance-based RSUs and 35% as time-based RSUs | | |
(2) | Each share | CEO Promotion | | | | | | | | | ■
Stockholders overall asked for XPO to continue its robust disclosure of our Series A Preferred Stock that was outstandingthe CEO compensation package and sought to understand the structure of the Promotion PSU award granted to Mr. Harik in connection with his transition to the CEO position after the RXO spin-off. | | | | ■
As described further in this CD&A, Mr. Harik received a promotion award at his assumption to the CEO role to recognize his contributions to date and provide a competitive compensation package commensurate with the role. The Promotion PSU award is based entirely on achieving challenging relative TSR goals over a four-year cliff period, with target paying out if XPO’s performance is at the Record Date has an initial liquidation preference67th percentile relative to the S&P Midcap 400, and payout of $1,000 per share and150% of target if performance is convertible into approximately 143 sharesat the 83rd percentile ranking, with a chance to qualify for a modifier (up to a cap of our common stock at an effective conversion price200% total payout) if XPO’s TSR further outperforms select transportation peers. | | | | | CD&A Disclosure | | | | | | | | | ■
Stockholders requested more clear disclosure of $7.00 per share of our common stock. Our Series A Preferred Stock votes together as a single class with our common stock on anas-converted basis, exceptthe Committee’s considerations with respect to certain mattershow it structured LTIs awarded to top executives, the reasoning behind the metrics chosen, and the level of pay granted. ■
Stockholders requested more clarity around the Committee’s use of a 25% modifier in the STI formula and the use of an ESG Scorecard. | | | | ■
This CD&A discloses the Committee’s considerations around changes made to executive awards, which included reevaluating the pay program’s structure in the context of stockholder feedback, and its relevance for the current company after two successive spin-offs. ■
This CD&A includes a thorough description of the Committee’s go-forward approach to executive compensation, including the removal of discretionary components of the STI program, and a new construct for the annual LTI awards. ■
The Committee expanded its disclosure of the initiatives embedded in the ESG scorecard by providing a view of all 43 deliverables relevant to the determination of 2022 performance achievement | | |
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| | WHAT WE HEARD FROM STOCKHOLDERS | | | | RESPONSIVE ACTIONS | | | | | | | | | within the 2020 Cash LTI program, as well as the adjustments to the scorecard deemed necessary by the Committee in connection with the RXO spin-off for the final 2023 tranche of the award (now a part of a replacement PSU structure, remaining at a weighting of 25%). See Annex B entitled “ESG Scorecard — 2022 Deliverables and Achievements”. | | |
2023 GO-FORWARD APPROACH TO EXECUTIVE COMPENSATION In response to stockholder feedback, the Committee developed a new structure of compensation for our NEOs that includes an annual LTI grant, with the majority comprised of performance-based RSUs, and a purely formulaic STI. In establishing the new structure, the Committee sought to maintain its longstanding goals of: (i) ensuring that executive compensationis overwhelmingly tied to performance, (ii) creating incentives that have more rigorous achievement standards than the market norm for the industry, (iii) ensuring strong alignment to stockholder value creation and (iv) being responsive to stockholder feedback. We believe the features described below appropriately reflect these objectives. Elements of Executive Compensation | | | | | | Component | | | | Key Characteristics | | | | | 1 | | | | Base Salary | | | | ■
Fixed cash compensation corresponds to experience and job scope, and is aligned with market levels ■
No guaranteed annual increases; the Committee determines eligibility for an increase based on annual market assessment | | | | | 2 | | | | Short-Term Incentives (STI) for our Executive Chairman, CEO and CFO | | | | ■
Formulaically tied to performance against the company’s annual adjusted EBITDA target; paid out annually in the first quarter ■
Removed the modifier that impactpermitted adjustments to the rightsformulaic bonus outcome by up to +25%, based on the Committee’s review of holdersancillary financial and strategic factors ■
Payouts are determined based on a linear bonus payout curve with a 50% payout at 90% of target and a maximum 200% payout at 120% of target ■
The cut-in at 90% of target is more rigorous than standard market practice of 75% to 80% in the industry peer group | | | | | 3 | | | | Long-Term Incentives (LTI) for our Series Executive Chairman, CEO and CFO | | | | ■
Annual award opportunity for the CEO and executive chairman is 80% allocated to PSUs and 20% allocated to time-based RSUs ■
Annual award opportunity for the CFO is 65% allocated to PSUs and 35% to allocated RSUs ■
XPO’s LTI allocation of PSU mix is higher than industry peers (e.g., peer group CEO median is 61% based on 2021 compensation structures) ■
LTI target levels will be assessed annually by the Committee using market benchmarking analysis ■
PSUs emphasize high growth and high returns, with rigorous standards for threshold, target, and maximum payouts: •
Financial performance goals in the PSU framework are tied to the company’s multi-year outlook for the LTL business, as communicated to the investor community at the time of the RXO spin-off •
A Preferred Stock,relative TSR metric in the PSU framework ensures alignment with stockholder interests over the long term •
Awards are capped at 200% | | |
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At-Risk Compensation The Committee believes that most of the compensation for the executive chairman, CEO and CFO should be at risk and tied to a combination of long-term and short-term company performance, with a greater weighting on long-term performance. The following charts show the percentage of the 2023 target total annual compensation that is variable or at risk, versus fixed, with respect to the 2023 compensation structure developed for our NEOs included in this Proxy Statement — first for Mr. Harik as our go-forward CEO (effective November 1, 2022); and second, Mr. Jacobs in his role as executive chairman (effective November 1, 2022) together with Mr. Anderson as our newly appointed CFO (effective November 8, 2022, replacing Mr. Tulsyan, who became a senior advisor, finance on November 8, 2022 and exited the company on January 6, 2023). At-risk compensation includes both the target performance-based cash bonus and performance-based equity award. By contrast, the fixed component of pay is comprised of a combination of base salary and RSUs. LTI compensation excludes base salary and STIs, and includes RSUs plus at-risk compensation. The Committee may utilize a different mix of at-risk compensation for other executive officers depending on the unique circumstances of their roles and their hire or promotion, taking into account the Committee’s commitment to aligning executive pay with performance. 2023 Target Pay Levels for Current NEOs Mr. Jacobs and Mr. Harik each entered into employment agreements in connection with their transition to their new roles in August and September 2022, respectively; these agreements became effective upon the RXO spin-off on November 1, 2022. Mr. Anderson entered into an offer letter agreement (the “CFO Offer Letter”), a Confidential Information Protection Agreement (the “CIPA”), and a Change in Control and Severance Agreement (the “CFO Severance Agreement”) in connection with his hiring as CFO, effective November 8, 2022. These agreements (collectively, the “NEO Agreements”) outline the terms and conditions of employment with XPO, including all restrictive covenants that benefit the company, with provisions such as non-competition and non-solicitation of customers and employees, as well as the target compensation opportunity designated by the Committee for base salary, annual STIs, annual LTIs, and other separation benefits that the executives would qualify for under specified circumstances. The material terms of these agreements are described later in the section, Employment Agreements with NEOs. There are no multi-year guarantees established in the NEO Agreements. The Committee may adjust compensation levels from year to year based on its annual assessments of performance and market benchmarks. For 2023, the Committee determined that no changes to base salary or target variable compensation levels were warranted, given the recent assessments of competitive pay levels conducted in late 2022, as well as updated assessments conducted again in early 2023. In setting target pay opportunities for our executive chairman, CEO and CFO, the Committee takes into account stockholder feedback from our extensive engagement sessions and reviews annual market benchmarking analyses for both the established peer group (the “CD&A Peer Group”) as well as a broader multi-industry group of public companies in the revenue range of $5 billion | | | | 36 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
to $10 billion (XPO reported revenues for 2022 were $7.7 billion). These groups are described below under the heading Benchmarking Executive Compensation Levels. As discussed with our stockholders, the Committee’s practice is to position pay for certain executives, particularly for our CEO, within close range of the multi-industry market median (e.g., within 15% above median) and at the top quartile of the CD&A Peer Group, as long as the following conditions are met: ■
The “overage” of target pay relative to the CD&A Peer Group median is comprised entirely of performance-based pay; and ■
The hurdles to achieve the performance-based pay components are more rigorous than market standards. In alignment with its pay-for-performance philosophy, the Committee would consider adjustments to target pay levels (particularly for LTI compensation) or design constructs (e.g., raising performance targets in PSUs and STI) if the company demonstrates sustained or persistent underperformance on multiple critical financial or operational KPIs relative to internal targets or industry performance benchmarks. The Committee may also utilize a different approach to target pay for executive officers other than our executive chairman, CEO and CFO depending on the unique circumstances of their roles and their hire or promotion, taking into account the Committee’s commitment to aligning executive pay with performance. In the Committee’s review of 2023 go-forward compensation, Mr. Harik’s annual total target direct compensation was positioned at the 84th percentile of the CD&A Peer Group median and 12% above the multi-industry market median (with a sample size of 114 CEOs), based on disclosed 2021 compensation levels. Importantly, the entire overage against market median in Mr. Harik’s compensation is performance-based pay, tied to ambitious goals underlying the company’s publicly disclosed five-year business plan. That is, when reviewing “basic pay” elements (base salary, target bonus and time-based RSUs combined), Mr. Harik’s target compensation level is at the 51st percentile of the CD&A peer group CEOs. In order to achieve notable above-median pay, all of the performance goals included in the PSU program must be attained at the high growth levels established by the Committee in the design framework. As shown in the chart below, the percentage of at-risk compensation levels of our NEOs included in this Proxy Statement is notably higher relative to the 2023 peer group. Additional information regarding the benchmarking process is provided in the Benchmarking Executive Compensation Levels section below, including determination of executive chairman pay. The following table provides a synopsis of the 2023 annual target compensation components for our NEOs included in this Proxy Statement: | | | | | | | | ANNUAL CASH COMPENSATION | | | | ANNUAL LTI COMPENSATION | | | | NEO | | | | Base Salary | | | | Target Bonus (% of Base Salary) | | | | Target Bonus ($ Value) | | | | Total Target Annual Cash Compensation | | | | Target PSUs | | | | Target RSUs | | | | Total Target Annual Direct Compensation | | Brad Jacobs | | | | $600,000 | | | | 150% | | | | $900,000 | | | | $1,500,000 | | | | $4,000,000 | | | | $1,000,000 | | | | $6,500,000 | | Executive Chairman | | | | | | | | | | | | | | | | | | | | (80% of LTI) | | | | (20% of LTI) | | | | | | Mario Harik | | | | $850,000 | | | | 200% | | | | $1,700,000 | | | | $2,550,000 | | | | $6,000,000 | | | | $1,500,000 | | | | $10,050,000 | | Chief Executive Officer | | | | | | | | | | | | | | | | | | | | (80% of LTI) | | | | (20% of LTI) | | | | | | Carl Anderson | | | | $625,000 | | | | 100% | | | | $625,000 | | | | $1,250,000 | | | | $1,137,500 | | | | $612,500 | | | | $3,000,000 | | Chief Financial Officer | | | | | | | | | | | | | | | | | | | | (65% of LTI) | | | | (35% of LTI) | | | | | |
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2023 Formulaic Short-Term Incentive Program STIs, or annual cash bonuses, for our NEOs included in this Proxy Statement are paid from the same incentive plan as all other bonuses for eligible XPO corporate employees; however, payouts for such executive officers are evaluated based on a more rigorous payout curve, with a cut-in (or threshold performance) starting at 90% of the full-year adjusted EBITDA, versus 80% threshold performance for all other participants. In response to stockholder feedback to modify the STI program to be entirely formulaic, starting with the 2023 performance year, the Committee is eliminating the modifier that previously allowed for adjustment to formulaic bonuses by up to +25%, based on considerations of supplemental financial and operational measures and the NEO’s performance on strategic objectives. To determine whether any additional changes to the STI framework were necessary as a result of XPO’s transformation into a pure-play LTL business in North America following the RXO spin-off, beyond those suggested by our stockholders, in 2022, the Committee also commissioned its independent compensation consultant to conduct a comprehensive study of bonus incentive designs across the CD&A Peer Group and concluded that there were no additional call-outs that would trigger further changes. The year-over-year STI program changes and considerations are summarized below: | | Key Terms | | | | 2022 Incentive Plan | | | | 2023 Go-Forward Incentive Plan | | | | | Performance Metric | | | | ■
100% based on absolute adjusted EBITDA (inclusive of all company businesses) | | | | Maintain ■
XPO has typically viewed adjusted EBITDA as a mainstay goal for financial performance measurement in each of its reportable segments ■
All CD&A Peer Group companies use a profitability metric in their STI plans (with a median weighting of 50%) | | | | | Cut-in for Threshold Payout | | | | ■
90% cut-in to be eligible for bonus (with payout at 50% of target) | | | | Maintain ■
More rigorous than companies in the CD&A Peer Group, in which case our Series A Preferred Stock votes separately as a single class.the median cut-in is 80% for profitability metrics, with 50% of target payout | | |
(3) | Based on Amendment No. 3 | Linear Payout Curve | | | | ■
Final bonus payout for the NEOs aligns to the Schedule 13G filedcalculated corporate pool, once the 90% cut-in is met ■
Linear interpolation between attainment points, based on February 14, 2017the curve shown below ■
Maximum payout of 200% at 120% of target | | | | Maintain ■
The median performance range associated with a profitability metric is 80% of target at threshold and 120% of target at maximum ■
Most companies in the CD&A Peer Group cap payout at 200% of target | | | | | Supplemental Performance Indicators | | | | Modifier (up to +25% of accrued bonus) ■
Considers supplemental KPIs (e.g., revenue, free cash flow and annual TSR), as well as strategic initiatives and individual performance | | | | Eliminate ■
Stockholders prefer an entirely formulaic structure, with no adjustments considered without precise measurements for each individual modification proposed | | | | | STI Payout Curve for NEOs | | |
The Committee may utilize a different approach to STIs for executive officers other than our executive chairman, CEO and CFO depending on the unique circumstances of their roles and their hire or promotion, taking into account the Committee’s commitment to aligning executive pay with performance. 2023 Annual Long-Term Incentive Design In developing the go-forward annual LTI construct for our NEOs, the Committee relied primarily on the following five factors, with the overall goal of motivating our executives to perform at the highest standards of excellence and deliver strong results for our stockholders: | | | | 38 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
| | 1 | | | | Previous stockholder feedback centered on LTI structural design | | | | | 2 | | | | Evaluation of peer group incentive pay designs and practices, provided by Orbis Investment Management Limited (“OIML”), Orbis Investment Management (U.S.), LLC (“OIMUS”)the Committee’s independent advisor | | | | | 3 | | | | The Committee’s longstanding tradition of maintaining ambitious targets for relevant company metrics and Orbis Asset Management Limited (“OAML”), which reported that, asa higher proportion of December 31, 2016, OIML beneficially owned 20,368,113 shares, OIMUS beneficially owned 361,524 shares, and OAML beneficially owned 85,660 shares. The group has sole voting and sole dispositive power over such shares.LTI allocated to PSUs | | |
(4) | Consists of 9,642,857 shares of our common stock issuable upon the exercise of 9,642,857 warrants at an exercise price of $7.00 per share of common stock, and 9,642,857 shares of our common stock issuable upon conversion of 67,500 shares of our Series A Preferred Stock. Mr. Jacobs has indirect beneficial ownership of the shares of our common stock and our Series A Preferred Stock beneficially owned by Jacobs Private Equity, LLC (“JPE”) as a result of being its Managing Member. In addition, Mr. Jacobs beneficially owns 126,461 shares of our common stock held directly following the vesting of equity incentive awards and 250,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date. See footnote (17) below. |
(5) | Based4 | | | | XPO’s strategic priorities post-spin-off, with specific focus on Amendment No. 3 to Schedule 13G filed on February 13, 2017 by Coral Blue Investment Pte. Ltd. and GIC Private Limited, which reported that, as of December 31, 2016, Coral Blue Investment Pte. Ltd. beneficially owned 8,153,946 shares of common stock and shares voting and dispositive power over such shares of common stock with GIC Private Limited. |
(6) | Based on Amendment No. 1aligning to the Schedule 13G filed on February 10, 2017 by The Vanguard Group, which reported that,company’s five-year outlook for the LTL business, as of December 31, 2016, The Vanguard Group beneficially owned 7,825,426 sharesconveyed to investors in October 2022 | | | | | 5 | | | | Alignment with sole voting power over 111,942 shares, shared voting power over 10,838 shares, sole dispositive power over 7,708,046 shares and shared dispositive power over 117,380 shares.stockholders’ interests | | |
(7) | Based on Amendment No. 2 to the Schedule 13G filed on February 14, 2017, filed by Spruce House Investment Management LLC, Spruce House Capital LLC, The Spruce House Partnership LP, Zachary Sternberg, and Benjamin Stein, which reported that, as of December 31, 2016, Spruce House Investment Management LLC beneficially owned 7,750,000 shares, Spruce House Capital LLC beneficially owned 7,750,000 shares, The Spruce House Partnership LP beneficially owned 7,750,000 shares, Zachary Sternberg beneficially owned 7,795,000 shares and Benjamin Stein beneficially owned 7,797,055 shares. Spruce House Investment Management LLC, Spruce House Capital LLC, The Spruce House Partnership LP, Zachary Sternberg and Benjamin Stein have shared voting and dispositive power over 7,750,000 shares of common stock. Zachary Sternberg has sole voting and dispositive power over 45,000 shares. Benjamin Stein has sole voting and dispositive power over 47,055 shares. |
(8) | Includes 6,686 RSUs that are or will become vested within 60 days of the Record Date. |
(9) | Includes: (i) 192,086 shares of our common stock beneficially owned by The Louis DeJoy Family Partnership, LLC, of which Mr. DeJoy is the managing member, (ii) 484,340 shares of our common stock owned by the Louis DeJoy and Aldona Z. Wos Family Foundation, of which Mr. DeJoy is the president, and (iii) 3,970 RSUs that are or will become vested within 60 days of the Record Date. |
(10) | Ms. DeSalva was appointed as director of the Company on September 19, 2017. These RSUs will become vested within 60 days of the Record Date. |
(11) | Includes: (i) 12,000 shares of our common stock beneficially owned by the SJJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (ii) 12,000 shares of our common stock beneficially owned by the RAJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (iii) 12,000 shares of our common stock beneficially owned by the JJJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (iv) 10,000 shares of our common stock beneficially owned by the Michael G. Jesselson and Linda Jesselson 6/30/93 Trust, of which Mr. Jesselson is a trustee, (v) 10,000 shares of our common stock owned by Mr. Jesselson’s spouse, (vi) 103,572 shares of our common stock issuable upon the exercise of 103,572 warrants at an exercise price of $7.00 per share of our common stock, which warrants are beneficially owned by the Michael G. Jesselson 12/18/80 Trust and the Michael G. Jesselson 4/8/71 Trust, of which trusts Mr. Jesselson is the beneficiary, (vii) 21,322 shares of our common stock issuable upon the exercise of 21,322 warrants at an exercise price of $7.00 per share of our common stock, which warrants are beneficially owned by the Michael G. Jesselson and Linda Jesselson, Trustees UID 6/30/93 FBO Maya Ariel Ruth Jesselson, of which Mr. Jesselson is the beneficiary, (viii) 103,570 shares of our common stock issuable upon conversion of 725 shares of our Series A Preferred Stock, which shares of our Series A Preferred Stock are beneficially owned by the Michael G. Jesselson 12/18/80 Trust and the Michael G. Jesselson 4/8/71 Trust, of which trusts Mr. Jesselson is the beneficiary, (ix) 24,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date, and (x) 3,970 RSUs that are or will become vested within 60 days of the Record Date. |
(12) | See clause (viii) of footnote (11). |
(13) | Includes: (i) 42,857 shares of our common stock issuable upon the exercise of 42,857 warrants at an exercise price of $7.00 per share of our common stock, (ii) 42,857 shares of our common stock issuable upon conversion of 300 shares of our Series A Preferred Stock, (iii) 24,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable on within 60 days of the Record Date, and (iv) 14,728 RSUs that are or will become vested within 60 days of the Record Date. |
(14) | Includes: (i) 1,375 shares of our common stock beneficially owned by the Brett A. Athans Declaration of Trust, of which Dr. Papastavrou is the trustee, (ii) 92,857 shares of our common stock issuable upon the exercise of 92,857 warrants at an exercise price of $7.00 per share of our common stock, which warrants are beneficially owned by Springer Wealth Management LLC, of which Dr. Papastavrou is the owner of 100% of the equity securities, (iii) 92,857 shares of our common stock issuable upon conversion of 650 shares of our Series A Preferred Stock, which shares of Series A Preferred Stock are beneficially owned by Springer Wealth Management LLC, of which Dr. Papastavrou is the owner of 100% of the equity securities, (iv) 24,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date, and (v) 19,728 RSUs that are or will become vested within 60 days of the Record Date. |
(15) | See clause (iii) of footnote (14). |
(16) | Includes: (i) 8,500 shares of our common stock issuable upon the exercise of 8,500 warrants at an exercise price of $7.00 per share of common stock, (ii) 24,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date, and (iii) 19,728 RSUs that are or will become vested within 60 days of the Record Date. |
(17) | Mr. Jacobs has indirect beneficial ownership of the shares of our common stock and our Series A Preferred Stock beneficially owned by JPE as a result of being its Managing Member. See footnote (4). Also includes 126,461 shares of our common stock held directly by Mr. Jacobs following the vesting of equity incentive awards and 250,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date. |
(18) | Includes: (i) 10,000 shares of common stock issuable upon the exercise of 10,000 warrants at an exercise price of $7.00 per share of common stock, and (ii) 25,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date. |
(19) | Includes 50,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date. |
(20) | Mr. Devens resigned as Chief Legal Officer of the Company effective February 15, 2017. Pursuant to Mr. Devens’ employment agreement these shares remain subject tolock-up provisions until September 2, 2018. |
(21) | Includes: (i) 12,750 shares of our common stock issuable upon the exercise of 12,750 warrants at an exercise price of $7.00 per share of common stock, and (ii) 48,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date. |
(22) | Includes: (i) 9,934,715 shares of our common stock issuable upon the exercise of 9,954,715 warrants at an exercise price of $7.00 per share of our common stock, (ii) 9,882,142 shares of our common stock issuable upon conversion of 69,175 shares of our preferred stock, (iii) 604,000 shares of our common stock issuable upon the exercise of options that are or will become exercisable within 60 days of the Record Date, and (iv) 69,620 RSUs that are or will become vested within 60 days of the Record Date. |
STOCKHOLDER PROPOSALS
Stockholder proposalsFeedback Our stockholders provided insights about their general preferences for LTI and PSU designs during our productive engagement sessions over the last several years. These insights aligned largely with the factors noted above, including that LTI (and/or any portion of LTI awarded in the PSUs), should: i.
Be awarded in a more predictable cadence (e.g., annually), rather than periodically as “one-off” grants; ii.
Have a tiered pay-for-performance scale versus a binary “hit or miss” goal structure; iii.
Include a relative performance or market-based metric; iv.
Be settled primarily in stock rather than in cash; v.
Have a double-trigger change-in-control provision, rather than a single-trigger provision; vi.
Remove absolute adjusted cash flow per share as a core award metric; vii.
Exclude gains from real estate sales in all operational metrics that may be considered in future award designs; and viii.
Align tightly with the five-year targets for the North American LTL business but use shorter performance measurement intervals. The Committee thoroughly incorporated their feedback. The new annual structure for performance-based awards, as illustrated in the table at the end of this section, features the core elements of the award framework. Key responsive actions taken by the Committee include: i.
Annual LTI award targets, including the significant proportion dedicated to performance-based, at-risk stock compensation versus time-based RSUs, have been established for each of our ongoing NEOs, and both the 2023 RSUs and 2023 PSUs have three-year vesting schedules (ratable for RSUs and cliff for PSUs). ii.
The new PSU construct now incorporates a scaled payout structure. iii.
The Committee maintained a relative TSR metric in the award design (as introduced in past PSU award grants) with a 40% weighting to underscore the Board’s and our NEOs’ commitment to deliver meaningful upside to XPO’s stock price over the long-term. iv.
LTI will be eligibleissued entirely in stock-based compensation and the last remaining tranche of the 2020 Cash LTI grant has now been fully converted to stock-based compensation, as of February 2023. v.
All outstanding equity awards held by NEOs have now been modified to include a double-trigger change-in-control provision, either through modifications made to outstanding PSU awards at the time of the RXO spin-off, or through the process of converting the final outstanding 2020 Cash LTI award to performance-based equity in February 2023 for considerationour active NEOs. vi.
The new PSU award construct does not include an absolute adjusted cash flow per share target, which was commonly used in past awards. Moreover, in the process of converting the final outstanding 2020 Cash LTI tranche, the Committee eliminated entirely both the absolute and relative goals related to adjusted cash flow per share. vii.
The Committee, with input from the management team, selected core three-year financial and operational metrics for inclusion in the annual award structure that align to the company’s five-year financial and operational KPI outlook for the North American LTL business, as disclosed to investors in conjunction with the RXO spin-off. viii.
The calculations of the three-year performance targets are predicated on the financial models and operating assumptions used to formulate the five-year LTL plan. In addition to the relative TSR metric with a 40% weighting, as noted in point (iii) above, the two complementary financial and operational metrics in the award program are: | | | | 39 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
■
LTL adjusted EBITDA compound annual growth rate (CAGR) (40% weighting): A target of 8% adjusted EBITDA CAGR for the three-year cliff performance period, starting with full-year 2022 and ending with full-year 2025. The LTL long-term target specifies 11% to 13% adjusted EBITDA CAGR by December 31, 2027 (from a 2021 baseline). With the 2023 performance year facing a challenging macroeconomic environment, 8% CAGR by the end of year three will require significantly stronger performance in 2024 and 2025 to be attained. ■
LTL adjusted operating ratio improvement (20% Weighting): A target of 300 basis points of improvement over the three-year cliff performance period, starting with full-year 2022 and ending with full-year 2025. The LTL long-term target specifies an improvement of 600 basis points by December 31, 2027 (from a 2021 baseline). The 2025 target considers the current challenging economic environment and (similar to the adjusted EBITDA metric), the possibility of a muted 2023 performance. In summary, the new PSU framework, which represents the majority of the LTI to be issued annually to our NEOs included in this Proxy Statement, includes: | | Weighting | | | | Performance Metrics | | | | Performance Target and Measurement Period | | | | Payout Scale (Straight-line interpolation between values) | | | | | 40% | | | | LTL Adjusted EBITDA Growth | | | | CAGR of 8% (FY 2023 — FY 2025) | | | | % of Target | | | | % PSU Earned | | | | 90% | | | | 50% | | | | 100% | | | | 100% | | | | 120% | | | | 200% | | | | | 20% | | | | LTL Adjusted Operating Ratio Improvement | | | | 300 bps (FY 2023 — FY 2025) | | | | Achievement Level | | | | % PSU Earned | | | | 200 bps | | | | 50% | | | | 300 bps | | | | 100% | | | | 400 bps | | | | 200% | | | | | 40% | | | | Relative TSR: XPO vs. S&P Transportation Select Index | | | | Three-year XPO TSR relative to three-year TSR of companies in the index (3/6/2023 -3/6/2026) | | | | Percentile vs. Index | | | | % PSU Earned | | | | < 40th | | | | 0% | | | | 40th | | | | 25% | | | | 50th | | | | 65% | | | | 60th | | | | 100% | | | | 75th | | | | 200% | | | | | Additional Key Features | | | | | ■
Vesting schedule: Cliff vesting date of March 6, 2026, contingent upon achievement of the performance hurdles and continued XPO employment through the vesting date. | | | | | ■
Post-vesting sales restriction: A one-year lock-up on the sale or transfer of shares post-vesting will apply to ensure continued long-term alignment with stockholder interests. | | |
Annual Time-Based RSUs In order to support the continued retention of our exceptional executive team, time-based restricted stock units also are granted annually to our NEOs, based on an allocation of 20% of total LTI for Mr. Jacobs and Mr. Harik and 35% of total LTI for Mr. Anderson. For the 2023 grant, vesting will occur in three equal installments on March 15 of 2024, 2025 and 2026. As with all other awards, a double-trigger change-in-control provision has been applied in response to stockholder preference to move away from the single-trigger provision that had been applied historically to LTI grants. BENCHMARKING EXECUTIVE COMPENSATION LEVELS In order to attract and retain high-performing talent, the Committee references prevailing pay rates when establishing target compensation opportunities as discussed above. To do this, the Committee uses a variety of sources that represent views of executive pay levels across both the broader market as well as the defined CD&A Peer Group. The Committee prefers to evaluate a range of information regarding market pay practices, as: (i) XPO has a longstanding history of sourcing executives from a diversity of industries outside of transportation and logistics industry segments, and (ii) the gamut of pure-play public transportation carriers of a size similar to XPO is extremely limited; the ultimate peer group is a mix of companies that extend beyond the actual business profile of XPO to adjacent industries, and may not be the most appropriate comparison in all cases. | | | | 40 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
At the beginning of 2022, following the spin-off of GXO, and prior to the spin-off of RXO, the Committee conducted a detailed review of the peer group to determine if any changes were needed. The detailed review included an assessment of revenues, market capitalization, industry representation, Transportation Index companies, and relevant high-performing organizations. As a result of the review, the Committee concluded that no changes to the peer group from last year was needed given: ■
Comparability of the peer group to XPO in terms of operating characteristics, revenues, and market capitalization. XPO’s revenues at the start of 2022 ranked at the 61st percentile relative to the peer group. ■
Limited compensation variability in the potential peer group versus the current peer group at the median. These companies were used to review and establish target compensation for our NEOs for 2022, including Mr. Harik’s compensation upon his promotion to CEO. To establish the pay of our executive chairman, a more extensive comparative analysis was conducted, given the limited information available for executive chairman positions among the peer group. This is described further below, under the heading Executive Chairman Pay Approach. Beyond setting compensation levels, the peer group also serves as the foundation for relative business performance assessments, incentive plan design, equity utilization, and determination of policies and practices (e.g., perquisites, stock ownership guidelines, etc.). Peer Group for Non-Chairman Executive Pay prior to RXO spin-off: | | PEERS | | | | | C.H. Robinson Worldwide, Inc. | | | | | CSX Corporation | | | | | Expeditors International of Washington, Inc. | | | | | FedEx Corporation | | | | | J.B. Hunt Transport Services, Inc. | | | | | Knight-Swift Transportation | | | | | Norfolk Southern Corporation | | | | | Ryder System, Inc. | | | | | Union Pacific Corporation | | | | | United Parcel Service, Inc. | | | | | Yellow Corporation(1) | | |
(1)
Yellow Corp. (YELL) was formerly YRC Worldwide (YRCW) At the start of 2023, following the RXO spin-off, another detailed review of the peer group was conducted to reflect XPO’s go-forward projected revenues. Based on this evaluation, the Committee established a new Peer Group consisting of 19 companies, with XPO’s 2022 revenue of $7.7 billion ranking at the 44th percentile. The change resulted in the removal of two peers — United Parcel Service, Inc. and FedEx Corporation — from the prior year’s peer group, due to their size of revenues relative to XPO, and the addition of ten new peers, including: | | ADDITIONAL PEERS | | | | | ArcBest Corporation | | | | | Avis Budget Group, Inc. | | | | | Hertz Global Holdings, Inc. | | | | | Hub Group, Inc. | | | | | Landstar System, Inc. | | | | | Matson, Inc. | | | | | Old Dominion Freight Line, Inc. | | | | | Schneider National, Inc. | | | | | TFI International Inc. | | | | | Werner Enterprises, Inc. | | |
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Executive Chairman Pay Approach In order to provide a more comprehensive understanding of executive chairman pay levels for which data is limited, the Committee’s independent compensation consultant analyzed 43 companies in the S&P 500 for which an executive chairman was in role for one full year or more, as of the end of 2021. Using this analysis, the Committee took a five-pronged approach in framing its considerations and making its final determinations on Mr. Jacobs’ ultimate pay level at target. | | # | | | | CONSIDERATION | | | | MARKET ANALYSIS | | | | COMMITTEE’S OUTCOME | | | | | 1 | | | | The ratio of executive chairman (EC) annual total compensation to previous pay in the CEO position | | | | This ratio was 50% at the median of the data set | | | | At target as CEO, Mr. Jacobs’ annual total compensation was $13 million*. This was reduced to $6.5 million, yielding the same 50% CEO-to-EC ratio as market median | | | | | 2 | | | | The ratio of EC total compensation to the new CEO’s total compensation | | | | This yielded a range of 50% to 70% across the full data set, and 70% to 90% in cases where the EC had a longer, multi-year tenure | | | | Mr. Jacobs’ $6.5 million target compensation is 65% of Mr. Harik’s $10.05 million target compensation — below the typical range of a longer-serving EC, and in the middle of the range across the full data set | | | | | 3 | | | | The absolute total direct compensation of all ECs in the 43-company data set | | | | $7 million at the group median | | | | $6.5 million annual target compensation for Mr. Jacobs | | | | | 4 | | | | The absolute total compensation of Mr. Jacobs and Mr. Harik combined, at target value, relative to the full data set | | | | The data set yielded a total in the market of $15.5 million to $17.8 million for combined EC/CEO pay, when reviewing the 50th to 75th percentile range | | | | Mr. Jacobs’ and Mr. Harik’s combined total compensation is $16.55 million, falling within the market range (within 7% of the median) | | | | | 5 | | | | Pay mix of LTI and at-risk compensation relative to the full data set | | | | 57% of the EC’s total compensation at the median is issued in the form of LTI compensation and, in many cases, this is not performance-based | | | | Of the $6.5 million in total direct compensation for Mr. Jacobs, $5 million, or 77%, is in the form of LTI, with 80% of that being performance-based stock units. In addition, another $900,000 is provided in the STI tied to a formulaic performance program | | |
*
LTI portion consists of the 2022 tranche of the Cash LTI award granted in 2020 EXECUTIVE COMPENSATION OUTCOMES FOR 2022 Annual Cash Compensation Annual base salary provides a fixed form of pay that is an important component of offering competitive pay to top-tier executives, and corresponds to an executive’s experience and job scope, and is balanced against variable performance-based STIs. Each year, the Committee reviews base salaries and annual STI targets, typically expressed as a percentage of base salary, and may make periodic adjustments in response to changes in job scope, prevailing market levels (as evaluated in our extensive benchmarking analyses), or other factors. In 2022, the Committee approved changes to the base salaries and STI targets for Mr. Jacobs and Mr. Harik in connection with their respective role changes and in accordance with the terms of their employment agreements, as shown in the table below. Mr. Tulsyan’s salary and bonus target remained the same and Mr. Anderson’s compensation as a newly hired CFO was determined in alignment with market benchmarks, as described in the Benchmarking Executive Compensation Levels section above. In effect, Mr. Harik received a total cash compensation increase of 127% for the final two months of 2022 and going forward for 2023, as he was promoted to CEO, yielding a blended total cash compensation for the year as shown in the NEO STI Payouts for 2022 section below. Mr. Jacobs’ compensation was decreased by 50%, as he transitioned to executive chairman effective November 1, 2022. | | | | 42 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Summary of Changes to Annual Cash Compensation in 2022 | | | | | | | | | | | | | | | | | January 1 – October 31 | | | | November 1 – December 31 | | |
| Name | | | | | | | | | | STI Target | | | | | | | | | | | | | | | | STI Target | | | | | | | | | | Salary | | | % of Salary | | | $ Amount | | | Target Cash Compensation | | | | Salary | | | % of Salary | | | $ Amount | | | Target Cash Compensation | | | | Brad Jacobs* | | | | | $ | 1,000,000 | | | | | | 200% | | | | | $ | 2,000,000 | | | | | $ | 3,000,000 | | | | | | $ | 600,000 | | | | | | 200% | | | | | $ | 1,200,000 | | | | | $ | 1,800,000 | | | | | Mario Harik | | | | | $ | 500,000 | | | | | | 125% | | | | | $ | 625,000 | | | | | $ | 1,125,000 | | | | | | $ | 850,000 | | | | | | 200% | | | | | $ | 1,700,000 | | | | | $ | 2,550,000 | | | | | Ravi Tulsyan | | | | | $ | 500,000 | | | | | | 100% | | | | | $ | 500,000 | | | | | $ | 1,000,000 | | | | | | $ | 500,000 | | | | | | 100% | | | | | $ | 500,000 | | | | | $ | 1,000,000 | | | | | Carl Anderson | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | $ | 625,000 | | | | | | 100% | | | | | $ | 625,000 | | | | | $ | 1,250,000 | | | |
*
For 2023, Mr. Jacobs’ bonus target is 150%. For the final two months of 2022, the STI percentage applied to Mr.Jacobs remained at 200%, in accordance with the terms of his employment agreement NEO STI Payouts for 2022 The annual corporate incentive plan applicable to our NEOs and all other bonus-eligible corporate employees is weighted 100% on achieving the company’s adjusted EBITDA target for the year — a central KPI within the industry and a strong focal point with our investors. Adjusted EBITDA for 2022 was measured inclusive of the RXO businesses through the third quarter of 2022. Each NEO is eligible for an STI payout if annual adjusted EBITDA is at least 90% of the full-year target. The maximum annual STI payout opportunity is capped at 200% of target, in accordance with the linear payout curve delineated below. For the 2022 plan year, the Committee had the flexibility to adjust individual NEO payouts upward (up to +25%) or downward (to zero) relative to the formulaic outcome on adjusted EBITDA performance, using a plan modifier. The modifier would be applied based on the Committee’s qualitative assessment of ancillary financial or strategic factors (e.g., absolute and relative performance on revenue, free cash flow, corporate or business unit KPIs, TSR metrics, operational improvement initiatives, etc.). However, despite strong performance on other financial metrics and strategic factors reviewed, the Committee elected not to adjust the formulaic outcome based on EBITDA performance. As noted under the heading 2023 Formulaic Short-Term Incentive Program, the Committee has eliminated the modifier from the STI program going forward and, for 2022, approved formulaic funding based on actual adjusted EBITDA performance. The Committee further determined that consideration of other factors was not warranted, given that the LTIs already captured performance on other measures important to our stockholders, particularly LTL operating ratio improvement, total stockholder return and successful completion of the RXO spin-off. In terms of actual performance, the company’s adjusted EBITDA exceeded target for 2022 by approximately 8% — representing $1.340 billion versus the target of $1.243 billion — as calculated including the operations that would become RXO through the third quarter. Based on the linear payout curve within the incentive plan, this yielded a payout of 140%. The table below shows the 2022 STI outcomes based on the incentive plan formula and the Committee’s determinations. The payouts reflect blended rates of pay for Mr. Jacobs and Mr. Harik, as their roles transitioned with the RXO spin-off on November 1, 2022, and the new hire status of Mr. Anderson, who joined the company effective November 8, 2022 and received a proration of approximately 15% of the annual incentive amount. On January 23, 2023, the company entered into a separation agreement and general release with Mr. Tulsyan in connection with his termination as senior advisor, finance effective January 6, 2023. See the “Potential Payments Upon Termination or Change in Control” table for further details of the separation payments made to Mr. Tulsyan in connection with his termination, which includes a payment reflecting his 2022 bonus. | | | | | | | | | | | | | | | | | | | | | | | | Target | | | | Formulaic Bonus Payout | | | | Committee Assessment | | | | | |
| Name | | | | Salary | | | | STI Target % | | | | Payout Curve Achievement | | | | STI Based on EBITDA Achievement | | | | % Modifier Applied to EBITDA Funded Bonus | | | | Bonus Adjusted following Committee Assessment | | | | 2022 Salary + Final Bonus Payout | | | | Brad Jacobs* | | | | | $ | 929,561 | | | | | | | 200% | | | | | | $ | 1,859,121 | | | | | | | 140% | | | | | | $ | 2,602,769 | | | | | Committee did not exercise the plan modifier available in 2022, yielding a purely formulaic outcome; plan modifier removed for 2023 | | | | | $ | 3,532,329 | | | | | Mario Harik | | | | | $ | 557,857 | | | | | | | 138% | | | | | | $ | 768,096 | | | | | | | 140% | | | | | | $ | 1,075,334 | | | | | | $ | 1,633,192 | | | | | Carl Anderson | | | | | $ | 93,750 | | | | | | | 100% | | | | | | $ | 93,750 | | | | | | | 140% | | | | | | $ | 131,250 | | | | | | $ | 225,000 | | | |
*
The STI percentage applied to Mr. Jacobs remained at 200% during the final two months of the year, in accordance with the terms of his employment agreement | | | | 43 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Long-Term Incentives XPO’s incentive compensation is weighted heavily toward LTIs that are tied to ambitious goals for key operational and financial indicators. The Committee’s pay-for-performance philosophy is also focused on rewarding our NEOs for performance that creates substantial, long-term value for our stockholders. Awards are designed to tie closely to the company’s strategic operating plans, as communicated broadly to our investor community, to ensure alignment with expectations set publicly. The Committee’s goal is to ensure our executives remain laser focused on executing to exceptional operational standards, are incentivized to win against industry competition and drive long-term stockholder value creation. In light of the transformational changes that were executed by the leadership team throughout 2022, we granted targeted awards to our NEOs as described in the table below entitled “NEO Stock Awards Granted in 2022”. Mr. Jacobs received no incremental new awards for 2022. In response to feedback from our stockholders indicating a preference for performance-based awards in the form of stock, the Committee converted 50% of Mr. Jacobs’ 2022 tranche of the 2020 Cash LTI award, valued at $5 million, to Replacement LTL PSUs, consistent in format to those awarded to Mr. Harik (replacing 100% of Mr. Harik’s 2022 Cash LTI tranche). As our newly appointed CFO, Mr. Anderson received new hire sign-on awards in 2022 totaling a grant value of $1 million, with 50% awarded in performance-based stock dependent upon significant XPO TSR outperformance against both a broader market index and select transportation peers, and 50% in time-based RSUs that cliff-vest in November 2024. Mr. Anderson’s TSR performance-based stock is consistent in format to Mr. Harik’s Promotion PSUs (the “Relative TSR PSUs”, as shown below). In connection with the RXO spin-off, the Committee also approved modifications to outstanding performance-based awards for Mr. Jacobs and Mr. Harik, as described comprehensively in the section entitled Modifications to Pre-Spin Outstanding Performance-Based Awards in connection with RXO spin-off. In all cases — both in the granting of new awards and the modification of outstanding unvested awards — the Committee approved double-trigger change-in-control provisions from the single-trigger provisions utilized in past awards, in response to a preference indicated by some of our stockholders. The tables below provide: (i) descriptions of awards granted to our NEOs as LTIs in 2022; and (ii) for awards with certified goal achievements in 2022, the amounts granted along with their values as of December 31, 2022, and the final attainments, where relevant. | | | | 44 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
NEO Stock Awards Granted in 2022 | | AWARD GRANTED | | | | DESCRIPTION | | | | THE COMMITTEE’S RATIONALE | | | | | REPLACEMENT LTL PSUs Recipients: Mr. Jacobs Mr. Harik | | | | ■
Grant Date: March 7, 2022 ■
Vesting Schedule: Cliff vest on December 31, 2023 (aligned with the performance period of the 2022 Cash LTI tranche it replaced) ■
Performance Metrics: ■
Gating Factor: Completion of the RXO spin-off no later than December 31, 2022 ■
50% weighted on 2022 LTL adjusted EBITDA ■
50% weighted on 2022 LTL adjusted operating ratio improvement versus prior year ■
Details provided in the “LTL Performance-Based Stock Units (LTL PSUs)”table below ■
Performance Certified? Yes ■
52% Earned Payout(subject to continued time vesting through vest date) | | | | ■
Replaced 2022 cash tranche included in the 2020 Cash LTI award, in response to stockholder feedback in 2021 indicating a preference for stock-based compensation ■
Aligned metrics with path to LTL long-term targets conveyed to investors in 2022 ■
The binary nature of the gating factor ensures a focus on successfully completing the spin-off transaction to position XPO for significant stockholder value creation through expected higher trading multiples over time | | | | | REGULAR LTL PSUs Recipients: Mr. Harik Mr. Tulsyan | | | | ■
Grant Date: March 7, 2022 ■
Vest Schedule: Cliff vest on March 7, 2025 ■
Performance Metrics: ■
Gating Factor: Completion of the RXO spin-off no later than December 31, 2022 ■
50% weighted on 2022 LTL adjusted EBITDA ■
50% weighted on 2022 LTL adjusted operating ratio improvement versus prior year ■
Details provided in the “LTL Performance-Based Stock Units (LTL PSUs)” table below ■
Performance Certified? Yes ■
52% Earned Payout(subject to continued time vesting through vest date) ■
Details of the pro-rata vesting of equity awards held by Mr. Tulsyan in connection with his termination are included in the “Potential Payments Upon Termination or Change of Control” table below. | | | | ■
Aligned metrics with path to LTL long-term targets conveyed to investors in 2022. ■
The binary nature of the gating factor ensures a focus on successfully completing the spin-off transaction to position XPO for significant stockholder value creation through expected higher trading multiples over time Applicable only to Mr. Harik: ■
Granted to Mr. Harik in recognition of his promotion to LTL acting president (appointed in October 2021) Applicable only to Mr. Tulsyan: ■
Granted to Mr. Tulsyan as part of his annual CFO total compensation structure, bringing total direct compensation to $4 million ■
100% of LTI for Mr. Tulsyan was granted in PSUs, compared to an average 50% for at-risk, performance-based LTIs for CFOs in the CD&A Peer Group | | |
| | | | 45 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
| | AWARD GRANTED | | | | DESCRIPTION | | | | THE COMMITTEE’S RATIONALE | | | | | RELATIVE TSR PSUs Recipients: Mr. Harik Mr. Anderson | | | | ■
Grant Date: ■
Mr. Harik — August 5, 2022 ■
Mr. Anderson — November 8, 2022 ■
Vest Schedule: Cliff vest on fourth anniversary of grant date ■
Performance Metrics: ■
100% relative TSR with two-step calculation process: (i) a baseline measuring XPO’s four-year TSR performance against that of companies within the S&P Midcap 400 Index, and (ii) a multiplier based on XPO’s TSR performance against that of select weighted transportation peers ■
Details provided in the “Relative TSR Performance-Based Stock Units” table below Applicable only to Mr. Harik: ■
Gating Factor: Completion of the RXO spin-off no later than March 31, 2023 ■
Post-Vest Sales Restriction: Lock-up on the sale or transfer of shares for one year after settlement of shares, except in the event of a change in control or death ■
Performance Certified? No (performance is still outstanding) | | | | ■
Aligned with stockholder interest for high growth of XPO’s stock price over the long-term; no payout below a 67th percentile ranking against the broader market index, and maximum 200% payout requires a percentile ranking of 83 against the broader index, as well as meaningful outperformance of select transportation peers Applicable only to Mr. Harik: ■
Granted in connection with Mr. Harik’s promotion to CEO ■
The Committee felt it was appropriate to recognize this milestone career accomplishment of Mr. Harik while applying rigor to the award design to incentivize a strong focus on XPO’s growth in market position versus core competitors ■
The binary nature of the gating factor ensures a focus on successfully completing the spin-off transaction to position XPO for significant stockholder value creation through expected higher trading multiples over time Applicable only to Mr. Anderson: ■
Provided as part of new hire sign-on award in the CFO offer package (50% of total sign-on award), in line with standard market practice for C-suite level roles | | | | | NEW HIRE SIGN-ON RSU Recipient: Mr. Anderson | | | | ■
Grant Date: November 8, 2022 ■
Vest Schedule: Cliff vest on November 8, 2024 ■
Performance Certified? No (time-based only) | | | | ■
Provided as part of new hire sign-on award in the CFO offer package (50% of total sign-on award), in line with standard market practice for C-suite level roles | | | | | RXO SPIN-OFF INCENTIVE Recipient: Mr. Tulsyan | | | | ■
Grant Date: March 7, 2022 ■
Vest Schedule: Cliff vest on March 7, 2025 ■
Gating Factor: Completion of the RXO spin-off no later than December 31, 2022 ■
Time-based vesting after gating factor is achieved ■
Performance Certified? Yes ■
100% Earned Payout ■
Details of the pro-rata vesting of equity awards held by Mr. Tulsyan in connection with his termination are included in the “Potential Payments Upon Termination or Change of Control” table below.” | | | | ■
Granted to incentivize successful execution of the RXO spin-off, recognizing Mr. Tulsyan’s critical role in leading the complex strategic process over the course of eight months and delivering on stockholder requests to simplify the company’s business portfolio | | |
*
Settled in the full earned amount after termination date of January 6, 2023, pursuant to the terms of the applicable award agreement | | | | 46 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
LTL Performance-Based Stock Units (LTL PSUs) The construct below applies to the replacement awards granted to Mr. Jacobs and Mr. Harik, the additional award issued to Mr. Harik in connection with his promotion to acting president of LTL and the LTI compensation provided to Mr. Tulsyan as part of his total annual direct compensation, as noted above in the “NEO Stock Awards Granted in 2022” tables. | | Weighting | | | | Performance Metrics | | | | 2022 Target | | | | Payout Scale (Straight-line interpolation between values) | | | | | Gating Factor to Qualify: Completion of the RXO Spin-Off no later than December 31, 2022 | | | | | 50% | | | | LTL Adjusted EBITDA | | | | $1 billion | | | | LTL Adjusted EBITDA | | | | % PSU Earned | | | | < $1 billion | | | | 0% | | | | $1 billion | | | | 100% | | | | $966 million | | | | 200% | | | | | 50% | | | | LTL Adjusted Operating Ratio Improvement | | | | 100 bps improvement vs. 2021 (as measured on December 31, 2022) | | | | Basis Point Improvement | | | | % PSU Earned | | | | < 100 bps | | | | 0% | | | | 100 bps | | | | 100% | | | | 200 bps | | | | 200% | | |
Relative TSR Performance-Based Stock Units The below framework pertains to the Relative TSR PSUs granted to Mr. Harik (Promotion PSU) and to Mr. Anderson (New Hire Sign-On PSU), as noted above in the “NEO Stock Awards Granted in 2022” tables. | | Relative TSR Performance Measures | | | | Payout Scale (Straight-line interpolation between values) | | | | | STEP 1: Baseline | | | | XPO TSR performance vs. TSR of all companies within the S&P Midcap 400 Index | | | | Percentile Position vs. Index Companies | | | | % PSU Earned | | | | < 67th | | | | 0% | | | | 67th | | | | 100% | | | | 83rd | | | | 200% | | | | | STEP 2: Multiplier | | | | XPO TSR performance vs. combined ODFL TSR (weighted 66.7)% and SAIA TSR (weighted 33.3)% | | | | Annualized Basis Points Outperformance vs. Peers | | | | % of Baseline Achieved | | | | ≤ 200 bps | | | | 100% | | | | ≥ 500 bps | | | | 133% | | |
2022 Performance-Based LTI Outcomes — LTL Performance Stock Units As described in the Long-Term Incentives section, the LTL PSUs included two performance goals related to the LTL business (each weighted 50%) which were provided as guidance to investors at the beginning of 2022, as well as a gating factor to quality for the award — the completion of the RXO spin-off no later than December 31, 2022. The table below illustrates these goals, which were specific to performance year 2022, with a tail of time-based vesting required, beyond these performance achievements, to fully vest in the respective award. The Committee was, therefore, able to certify achievement of the performance goals underlying this award at the beginning of 2023, while the time-based vesting element remains outstanding, contingent on continued employment. | | | | 47 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
The table below shows the outcomes the Committee certified for the LTL PSUs with respect of performance year 2022: | | Weighting | | | | Performance Metrics | | | | 2022 Target | | | | 2022 Actual(1) | | | | Payout % | | | | Payout Scale (Straight-line interpolation between values) | | | | | Gating Factor to Qualify – Achieved: Completion of the RXO Spin-Off no later than December 31, 2022 | | | | | 50% | | | | LTL Adjusted EBITDA(1) | | | | $1 billion | | | | $1.002 billion | | | | 104% | | | | Adjusted EBITDA | | | | % PSU Earned | | | | < $1 billion | | | | 0% | | | | $1 billion | | | | 100% | | | | $966 million | | | | 200% | | | | | 50% | | | | LTL Adjusted Operating Ratio Improvement(2) | | | | 100 basis- point improvement vs. 2021 | | | | 38 bps | | | | 0% | | | | Basis Point Improvement | | | | % PSU Earned | | | | < 100 bps | | | | 0% | | | | 100 bps | | | | 100% | | | | 200 bps | | | | 200% | | | | | Blended Payout %: 52% | | | | | (1)
Performance metrics have been calculated in accordance with applicable award agreements | | | | | Payout values (using XPO’s stock price as of December 31, 2022) for Mr. Jacobs, Mr. Harik and Mr. Tulsyan are detailed in the Long-Term Incentives section above, and are subject to continued time-based vesting | | |
2022 Performance-Based LTI Outcomes — 2020 Cash LTI In the course of responding to our stockholders’ preference to issue share-based performance awards instead of cash awards, the Committee converted 50% of Mr. Jacobs’ 2022 tranche of the 2020 Cash LTI ($5 million) to LTL PSUs in March 2022 (as then-CEO), while converting 100% of Mr. Harik’s 2022 tranche ($2.25 million) to the same PSUs; Mr. Tulsyan was not a recipient of the 2020 Cash LTI grant. As a result, for the 2022 performance period, the Committee’s certification of performance outcomes on the cash-based award was relevant only for Mr. Jacobs (for the 50% of his 2022 tranche that remained cash-settled). The components of the 2020 Cash LTI program, along with ultimate 2022 achievement levels for each of the three metrics incorporated in the plan, are provided below. Each goal exceeded target, yielding a blended payout value for Mr. Jacobs of $8.83 million, or approximately 177% of total target value (subject to continued time-based vesting conditions through early 2024). | | Weighting | | | | Performance Metrics | | | | 2022 Target | | | | 2022 Actual(1) | | | | Payout % | | | | Payout Scale (2022 Tranche) | | | | | 50% | | | | XPO Absolute Adjusted Cash Flow Per Share | | | | $5.35 | | | | $6.19 | | | | 178% | | | | Achievement Level | | | | % Earned | | | | < $5.35 | | | | 0% | | | | $5.35 | | | | 100% | | | | $5.89 | | | | 150% | | | | ≥ $6.42 | | | | 200% | | | | | 25% | | | | Relative Cumulative Growth in Adjusted Cash Flow Per Share vs. 2020 (Compared to 15- Peer Comparator Group) | | | | 55th Percentile Rank | | | | Ranked 3rd out of 16 (~85th percentile) | | | | 200% | | | | XPO Percentile Rank | | | | % Earned | | | | < 55th | | | | 0% | | | | 55th | | | | 100% | | | | 65th | | | | 150% | | | | ≥ 75th | | | | 200% | | | | | 25% | | | | ESG Scorecard (43 initiatives for 2022, each equally weighted at 2.3 points) | | | | 80 – 85 points out of 100 | | | | Final Score of 86.2 (Details provided in Annex B) | | | | 150% | | | | Scorecard Grade (Scale of 1-100) | | | | % Earned | | | | < 80 points | | | | 0% | | | | ≥ 80 points and < 85 points | | | | 100% | | | | ≥ 85 points and < 90 points | | | | 150% | | | | ≥ 90 points | | | | 200% | | | | | Blended Payout %: Approximately 177% | | |
(1)
Performance metrics have been calculated in accordance with applicable award agreements | | | | 48 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
2022 Performance-Based LTI Outcomes — ESG Scorecard Highlights ESG Scorecard Overview Our ESG scorecard is designed to provide a progressive means of evaluating the management of ESG initiatives and incentivizing long-term, successive ESG achievements. The ESG scorecard metrics are a combination of annual and multi-year goals that span the total performance cycle of the award (performance years 2020, 2021, 2022 and 2023), with many metrics building to full achievement at the end of the four-year period. The Committee uses the scorecard to objectively assess performance, and the company uses it to monitor ESG progress. Development of the ESG Scorecard In 2020, the company commissioned a management consultant to conduct a gap analysis relative to our core peer group, so that we could better understand the optimal ESG tracking methods and disclosures of related KPIs and align more closely to market trends. In addition, we cross-referenced the gap analysis against the material issues designated at the corporate and business unit levels in our Sustainability Report materiality matrix, to narrow our focus to critical and highly relevant KPIs. Using these material matters as a guide, our operational and functional leaders formed focus groups to identify the most relevant business initiatives and existing measurements that could form a basis for measurable ESG improvements over four years. The Committee agreed with the inputs from management and incorporated these recommendations into the scorecard. All targets were determined in July 2020, projecting forward for all four annual periods. Spin-off Related Goal Recalibrations The ESG scorecard was recalibrated to appropriately tailor the metrics and objectives to operational changes associated with the GXO spin-off in August 2021 and required further modification due to the RXO spin-off in 2022, as described below, under the heading Modification of the ESG Component in the Replacement PSU Award. The selected initiatives are more than 85% quantitative, with the remainder subject to predetermined hurdles or binary milestones. Our ESG scorecard is organized into six categories, with an average of approximately 41 initiatives per year over the total span of the award. There were 43 initiatives in 2022, as described comprehensively in Annex B. Each initiative is weighted equally within the year, adding up to a total of 100 maximum points (2.3 points for each initiative with respect to 2022). For the goals that pertained to the operations that were spun off as RXO in 2022, the Committee captured the year-to-date (Quarter 1 through Quarter 3) performance measurements for the purpose of certifying the attainment of those respective goals. Summary of ESG Scorecard Deliverables and Results for 2022 To address stockholders’ requests for greater disclosure of the scorecard targets and achievements, the chart in Annex B entitled “ESG Scorecard — 2022 Deliverables and Achievements” provides details of every deliverable included in the 2022 performance year tranche of the 2020 Cash LTI award. The ESG scorecard comprised 25% of the total compensation opportunity related to the 2020 Cash LTI award and, for 2022, was only applicable to Mr. Jacobs’ $5 million cash target related to the 2022 award tranche. 2022 ESG Score of 86.2% Of the 43 initiatives for the 2022 performance year, 37 were achieved. Six were not achieved, resulting in a deduction of 13.8 points overall from a maximum score of 100, yielding a final score of 86.2. Based on the associated payout table shown below, this results in a 150% payout against the 25% portion of the 2020 Cash LTI award allocated to the ESG scorecard. | | | | 49 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
MODIFICATIONS TO OUTSTANDING PERFORMANCE-BASED AWARDS IN CONNECTION WITH RXO SPIN-OFF In November 2022, the Committee modified outstanding PSU awards from 2018 and 2019. Additionally, in February 2023, the Committee approved modifications to the remaining tranche of the 2020 Cash LTI award, taking into account both stockholder feedback and the need to modify the ESG scorecard goals (which constituted 25% of the outstanding award) by removing goals related to business operations that spun off as RXO. These modifications impacted Mr. Jacobs and Mr. Harik only, as other NEOs do not hold the 2020 Cash LTI award. Modification of the Outstanding 2018 and 2019 PSUs Prior to the RXO spin-off, Mr. Jacobs and Mr. Harik held the following unvested PSUs. These PSUs had no sliding scale payout and were binary “hit or miss” awards, with a requirement to meet two separate performance hurdles within each award structure in order to achieve target payout; there was no payout potential above 100%, and no threshold level of pay for below-target achievement: | | | | | | PSU GRANT | | | | GRANT DATE | | | | ORIGINAL CLIFF VEST DATE | | | | # UNITS OUTSTANDING | | | | PERFORMANCE METRICS | | | | | 1 | | | | 2018 PSU | | | | August 16, 2018 | | | | December 31, 2022 | | | | ■
Mr. Jacobs: 393,346 ■
Mr. Harik: 38,124 | | | | ■
Achievement of both $9.25 adjusted cash flow per share and $114.08 stock price by December 31, 2022 | | | | | 2 | | | | 2019 PSU | | | | June 5, 2019 | | | | December 31, 2024 | | | | ■
Mr. Jacobs: 781,149 ■
Mr. Harik: 183,799 | | | | ■
Achievement of both compounded annual growth of at least 19% in adjusted EPS and relative TSR outperformance of at least 310 percentage points against the S&P Transportation Select Industry by December 31, 2022 | | |
In their deliberations on how to properly address the modification requirements for these awards, the Committee evaluated market practice in recent spin-off transactions, while also considering whether a fair adjustment methodology could be applied after two successive spin-offs (GXO in August 2021 and RXO in November 2022). The XPO profile was altered significantly by these transactions, from a company with $16 billion of revenue, $1.4 billion of adjusted EBITDA and over 100,000 employees in 2020, to one with $7.7 billion of revenue, approximately $1 billion of adjusted EBITDA and approximately 38,000 employees as of December 31, 2022. The Committee reviewed market analysis of approximately 30 spin-off transactions occurring since January 1, 2015, with sufficient spin-off equity treatment disclosure, meeting the following criteria: (i) SpinCo revenue of at least $1 billion; and (ii) a SpinCo to RemainCo revenue ratio greater than or equal to 20%. The findings of this review indicated that approximately 72% of companies (including both SpinCo and RemainCo entities) converted some or all of their outstanding executive PSUs into time-based RSUs vesting on their original schedule. Companies that opted for continued performance treatment typically had performance goals that were either: (i) entirely based on relative TSR and thus required no new or modified goals; or (ii) performance based on a multi-year average of individual one-year periods, which are more easily adapted than an interrupted multi-year cliff performance period. For XPO, the 2018 and 2019 awards each had both financial and stock-price/TSR-related goals that must be achieved in tandem, and were structured as cliff vesting periods, based on measurement at one end point versus one beginning point in the cumulative period. Recasting the performance goals to reflect the same rigor as the original construct used for the XPO conglomerate could result in failing to credit partial performance gains already attained at that point in the vesting period of each award. Additionally, with the significant changes to XPO’s profile as a result of the RXO spin-off and the uncertainty surrounding the impact of other potential strategic alternatives, the Committee could not reliably project company performance goals out to 2024. In light of these considerations, and taking into account stockholder perspectives on how to address outstanding awards, the Committee decided to convert the combined target shares in these two outstanding awards to time-based RSU awards for each of Mr. Jacobs and Mr. Harik, effective as of the RXO spin-off date. However, in exchange for removing the associated performance hurdles, the Committee enacted the following changes: i.
Extended the vesting schedule of the 2018 award by two years, to December 31, 2024, aligning with the original vesting schedule of the 2019 award; ii.
Applied a post-vesting sales restriction on the entire pool of shares across both awards, which expires on December 31, 2025; and iii.
Modified the change in control provisions applicable to the awards from single-trigger to double-trigger, responding to stockholder requests to eliminate single-trigger vesting provisions from LTIs. | | | | 50 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
From a reporting perspective, these modifications impact the Summary Compensation Table by showing the modified values of these older, previously-reported awards as though they are new, incremental grants with respect to the 2022 performance year. To clarify the Committee’s actual decisions for 2022, we have provided our stockholders with an alternate view of the Summary Compensation Table to consider, entitled Supplemental Summary Compensation Table, located under the required Summary Compensation Table. It is critically important to view these adjustments as tailored changes that maintain the intended operation and values of these awards, as opposed to new grants that represent supplemental value. Modification of the Outstanding 2020 Performance-Based Cash LTI Grant In February 2023, the Committee certified performance achievements in connection with the 2022 tranche of Mr. Jacobs’ 2020 Cash LTI award. The Committee also re-evaluated the structure of the remaining 2023 tranche of the awards for both Mr. Jacobs and Mr. Harik, who had $10 million and $2.25 million, respectively, of target award values outstanding in the tranche. Based on: (i) stockholder feedback to denominate performance awards in equity rather than cash; and (ii) the impact of the RXO spin-off on the company’s profile, which directly affected the construction of the absolute adjusted cash flow per share performance metric in the award structure, the Committee decided to make meaningful revisions, effectively canceling the original version of the award and replacing it with new performance-based shares, with metrics that were realigned with post-spin-off strategic priorities. The target amounts and combined vesting/sales restriction schedules were preserved in the issuance of the replacement awards. Unlike the 2018 and 2019 PSUs, the 2020 Cash LTI award contained distinct annual performance goals and measurements (for each of the years from 2020 through 2023), allowing the Committee to consider recalibrations of the associated metrics more readily, without disrupting previous gains which were already certified and, for the first two tranches, settled and paid. In this case, rather than keeping the same goals as the existing structure, and responsive to stockholder input, the Committee removed the two metrics related to adjusted cash flow per share, replacing them with the metric of relative TSR versus the S&P Transportation Select Industry Index. This was done in response to stockholder insights from off-season engagement sessions that were completed in the first quarter of 2023. The new performance measurement period begins on November 1, 2022 and ends on December 31, 2024 (the annual PSU for 2023 would cover the period between March 6, 2023 and March 6, 2026). Core Elements of the 2020 LTI Replacement Award Issued in 2023 | | Weighting | | | | Performance Metrics | | | | Performance Measurement Period | | | | Payout Scale (straight-line interpolation between values for relative TSR) | | | | | 75% | | | | Relative TSR: XPO vs. S&P Transportation Select Index | | | | November 1, 2022 (RXO spin-off date) through December 31, 2024 (start of 30-day trading average represents the period from November 1, 2022 – December 13, 2022) | | | | Percentile vs. Index | | | | % PSU Earned | | | | < 40th | | | | 0% | | | | 40th | | | | 25% | | | | 50th | | | | 65% | | | | 60th | | | | 100% | | | | 75th | | | | 200% | | | | | 25% | | | | ESG Scorecard | | | | 2023 deliverables stated in the ESG scorecard, modified to reflect remaining XPO business operations post-RXO spin-off | | | | Scorecard Grade (Scale of 1-100) | | | | % PSU Earned | | | | < 80 points | | | | 0% | | | | ≥ 80 points and < 85 points | | | | 100% | | | | ≥ 85 points and < 90 points | | | | 150% | | | | ≥ 90 points | | | | 200% | | | | | Additional Key Features | | | | | ■
Vesting schedule: Cliff vest on February 9, 2025, contingent upon achievement of the above performance hurdles and continued employment through the vesting date. ■
Post-vest sales restriction: Lock-up on the sale or transfer of shares post-vesting until January 15, 2026. Vesting plus sales lock-up aligns with the total vesting period of the 2023 original tranche of the 2020 Cash LTI. | | |
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Original Structure of the 2020 Cash LTI Replaced in 2023 | | Weighting | | | | Performance Metrics | | | | Payout Scale (2023 Tranche) | | | | | 50% | | | | XPO Absolute Adjusted Cash Flow Per Share | | | | Achievement Level | | | | % Earned (straight-line interpolation between values) | | | | < $5.95 | | | | 0% | | | | $5.95 | | | | 100% | | | | $6.55 | | | | 150% | | | | ≥ $7.14 | | | | 200% | | | | | 25% | | | | Relative Cumulative Growth in Adjusted Cash Flow Per Share vs. 2020 (compared to Peer Group) | | | | XPO Percentile Rank | | | | % Earned (straight-line interpolation between values) | | | | < 55th | | | | 0% | | | | 55th | | | | 100% | | | | 65th | | | | 150% | | | | ≥ 75th | | | | 200% | | | | | 25% | | | | ESG Scorecard (39 initiatives for 2023, each equally weighted at 2.6 points) | | | | Scorecard Grade (Scale of 1-100) | | | | % Earned | | | | < 80 points | | | | 0% | | | | ≥ 80 points and < 85 points | | | | 100% | | | | ≥ 85 points and < 90 points | | | | 150% | | | | ≥ 90 points | | | | 200% | | |
Note: Mr. Tulsyan was granted an equity-based award utilizing the same metrics and structure as the 2020 Cash LTI upon his appointment as CFO in September 2021. Due to his separation from the company on January 6, 2023, pursuant to the terms of his award agreement and upon the certification of achievement of the goals in the 2023 tranche of his equity award, he is entitled to a target of 86 shares from this tranche and 2,496 additional shares pursuant to the terms of his separation agreement (the remaining 2,625 shares have been forfeited). The Committee may elect to modify the award for these combined 2,582 target shares at a future date. Modification of the ESG Component in the Replacement PSU Award As part of the modification efforts to develop the 2020 LTI Replacement Award, the Committee reviewed the relevance of the 2023 goals embedded in the ESG scorecard and made the following adjustments, with the majority related to removing goals associated with the operations that were spun off as RXO. With these amendments, the ESG scorecard will continue to have deliverables across the topics of Workforce/Talent, Diversity, Equity and Inclusion, Employee and Community Safety, Environment and Sustainability, Information Security and Governance, with 39 initiatives for 2023. | | | | 52 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
| | | | | | 2023 ESG INITIATIVES | | | | TARGET | | | | CHANGE / RATIONALE | | | | | 1 | | | | US DOT-Recordable Preventable Accident Frequency Rate (when holding number of miles driven constant with full-year 2020) | | | | Prior year actual + 3% improvement | | | | Removed RXO-related impact | | | | | 2 | | | | Lost Workday Rate | | | | <59 | | | | Removed RXO-related impact | | | | | 3 | | | | Total Recordable Incident Rate (TRIR) | | | | <0.95 | | | | Removed RXO-related impact | | | | | 4 | | | | Fuel Efficiency Improvement | | | | Maintain 7.1 mpg or higher by year end | | | | Removed RXO-related impact | | | | | 5 | | | | Registration as a Smartway Approved Carrier Partner | | | | Maintain Partnership | | | | Removed RXO-related impact | | | | | 6 | | | | Average Age of Tractors | | | | 2.5 years | | | | Removed RXO-related impact | | | | | 7 | | | | CO2 Emissions Control in Europe: Includes machinery equipment, installations, and road truck emissions | | | | Minimum 5% improvement from prior year | | | | Replaced entirely due to unavailability of EcoTransit tool that was intended to provide the basis for this measurement; see point 8 below | | | | | 8 | | | | CO2 Emissions Reduction in Europe: Achieved with electric vehicles, biofuels, reduction of empty miles and renewable energies usage | | | | Minimum 10 million Kg of CO2 reduced in 2023 | | | | New goal replaces CO2 Emissions Control in Europe: Achieves a similar environmental benefit as the original goal and alleviates the measurement difficulties caused by a delay in the implementation of the EcoTransit tool | | |
Equitable Adjustments of Equity-Based Awards in the RXO Spin-Off Regarding the impact of the RXO spin-off on equity-based awards, our NEOs were treated the same as our other similarly-situated executives and corporate employees. For all then-active NEOs and corporate employees, each outstanding XPO equity award was treated in a manner similar to that experienced by XPO stockholders with respect to their XPO common stock. More specifically, each of these awards was deemed bifurcated into two separate awards: (i) an adjusted award covering XPO common stock; and (ii) a new award of the same type covering RXO common stock. Each of these two awards remain subject to the same terms and conditions (including with respect to vesting) immediately following the spin-off date as applicable to the corresponding award immediately prior to the spin-off date, except for the modifications and replacement awards relevant to our impacted NEOs, as described herein. OUR EXECUTIVE COMPENSATION GOVERNANCE FRAMEWORK Stock Ownership Policies We believe that executive equity ownership in the company mitigates a number of risks, including risks related to executive attrition and undue risk-taking. Guidelines Stock ownership guidelines are expressed as a multiple of each NEO’s annual base salary: ■
CEO: 6x annual base salary ■
Other NEOs: 3x annual base salary Compliance with our stock ownership guidelines is generally determined using the aggregate count of shares of common stock held directly or indirectly by the NEO, plus unvested restricted stock units subject solely to time-based vesting. Stock options, whether vested or unvested, and equity-based awards subject to performance-based vesting conditions, are not counted toward meeting stock ownership guidelines until they have settled or been exercised, as applicable. | | | | 53 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Until the stock ownership guidelines are met, an executive is required to retain 70% of the net shares (after tax withholding) received upon settlement of equity-based awards. A newly appointed executive is required to reach his or her stock ownership guideline no later than three years from the date of appointment. As of the Record Date, all NEOs were in compliance with our stock ownership guidelines. In addition to our stock ownership guidelines, certain awards of our executive chairman and CEO were amended during 2022 to include one-year holding periods after vesting, as described above. Clawback Policy As described above under the heading Employment Agreements with NEOs — Clawbacks, Mr. Jacobs and Mr. Harik are party to agreements in connection with their employment, which include clawback restrictions with respect to LTI and STI compensation. Mr. Anderson is subject to agreements in connection with his LTI compensation which include clawback restrictions. The Committee is focused on mitigating the company’s risk associated with its compensation program for NEOs and believes that clawback provisions are an important tool to achieve this. Annual STI Compensation The employment agreements for Mr. Jacobs and Mr. Harik provide that if the NEO has engaged in fraud or other willful misconduct that contributes materially to any financial restatement or material loss to the company or any of its affiliates, the company may: (i) require repayment by the NEO of any cash STI or annual STI previously paid, net of any taxes paid by the NEO on such STI; (ii) cancel any earned but unpaid cash STI or annual STI; and/or (iii) adjust the NEO’s future compensation in order to recover an appropriate amount with respect to the restated financial results or the material loss. Long-Term Incentive Compensation The employment agreements for Mr. Jacobs and Mr. Harik include a clawback provision under which the NEO may be required, upon certain triggering events, to repay all or a portion of LTI compensation that was previously paid (including proceeds from previously-exercised and vested equity-based awards) and to forfeit unvested equity-based awards during the term of the employment agreements. In cases where a cure is possible, the NEO will first be provided with a specified cure period. These clawback provisions are generally triggered if any of the following conditions apply; the NEO: ■
Is terminated for cause, as defined in the employment agreement; ■
Has engaged in fraud or other willful misconduct that contributes materially to any significant financial restatement or material loss to our company or any of our affiliates; or ■
Breaches the restrictive covenants that are applicable under the employment agreement. The time period for the company to take action under this clawback provision is up to six months from the date of termination for cause and, for all other specified conditions, at any time up to six months after learning of the conduct but in no event more than two years after the NEO engages in such conduct. Mr. Anderson’s LTI agreements provide that if he breaches any restrictive covenant contained in any arrangements with the company or engages in fraud or willful misconduct that contributes materially to any financial restatement or material loss to the company or any of its subsidiaries, the company may require him to repay any long-term incentive compensation that was previously paid (including proceeds from vested equity-based awards) and to forfeit unvested equity-based awards. In cases where a cure is possible, he will first be provided with a specified cure period. Additional Provision To the extent that the rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act are broader than the clawback provisions contained in our employment agreements for Mr. Jacobs and Mr. Harik, and to the extent the company is required to implement a clawback policy pursuant to applicable law, such NEOs each will be subject to additional clawback provisions pursuant to such rules. Mr. Anderson’s Severance Agreement provides that he will be subject to any legally mandated policy relating to the recovery of compensation, to the extent that the Company is required to implement such policy pursuant to applicable law. Role of the Committee The Committee is responsible for approving our compensation practices and overseeing our executive compensation program in a manner consistent with XPO’s compensation philosophy. The Committee is tasked with: (i) reviewing the annual and long-term performance goals for our NEOs; (ii) approving awards under incentive compensation and equity-based plans; and (iii) approving all other compensation and benefits for our NEOs. The Committee acts independently but works closely with the full Board and executive management in making many of its decisions. To assist it in discharging its responsibilities, the Committee has retained the services of an independent compensation consultant, as discussed further below. | | | | 54 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Role of Management Executive management provides input to the Committee, including with respect to the Committee’s evaluation of executive compensation practices. In particular, our CEO, Mr. Harik, provides recommendations for proposed compensation actions with respect to our executive team, but not with respect to his own or Mr. Jacobs’ compensation. The Committee carefully and independently reviews the recommendations of management without members of management present and consults its independent compensation consultant before making final determinations. We believe this process ensures that our executive compensation program effectively aligns with XPO’s compensation philosophy and stockholder interests. Role of the Committee’s Independent Compensation Consultant The Committee directly retained Exequity as its independent advisor throughout 2022. Among other things, the Committee’s independent advisor consults on compensation and governance matters, monitors trends and evolving market practices in executive compensation and provides general advice and support to the Committee and the Committee’s chairman. Exequity’s support for the Committee in 2022 included reviewing LTI award grant proposals and LTI modifications for NEOs, providing guidance on various approaches and actions related to the RXO spin-off, assisting in guiding the design of the annual STI program and reviewing the content of this CD&A. Exequity did not provide any other services to the company. The Committee considered the independence of Exequity in light of applicable SEC rules and NYSE listing standards. After taking into account the absence of any relationships with management and members of the Committee, as well as Exequity’s internal policies and other information provided to the Committee, the Committee determined that no conflicts of interest existed that would prevent Exequity from serving as an independent compensation consultant to the Committee. OTHER COMPENSATION-RELATED ITEMS Equity Granting Policy All equity awards to NEOs are approved by the Committee with a grant date determined at the time of approval. The Committee does not target a specific time during the year to make equity grants, but grant dates are always on the date of Committee approval. Benefits Our NEOs are provided with the same benefits as are generally offered to other eligible employees, including participation in the XPO, Inc. 401(k) Plan and insurance benefit programs. Our NEOs receive minimal perquisites, as shown in the “All Other Compensation” table following the CD&A. Employment Agreements We have entered into multi-year employment agreements with certain of our NEOs to promote long-term retention, while allowing the Committee to exercise discretion in designing incentive compensation programs. The material compensation-related terms of these agreements are described under the heading Employment Agreements with NEOs and the tables that follow the CD&A. Separation from Employment of Mr. Tulsyan Following Mr. Tulsyan’s separation from the company on January 6, 2023, and pursuant to the terms of his separation agreement, severance agreement, and transition agreement, Mr. Tulsyan received the following payments and benefits from the company in exchange for agreeing to a general release of claims in favor of the company and other promises by Mr. Tulsyan in the separation agreement, including: (i) cash severance payments equal to twelve months of Mr. Tulsyan’s base salary as in effect on the Separation Date, totaling a gross amount of $500,000; (ii) an additional payment of $8,200, equal to the estimated prorated target bonus for the 2023 performance year (January 1 through January 6); (iii) a lump sum equivalent to any unused carryover paid time off for 2022; (iv) a payment equivalent to what Mr. Tulsyan would have received as the funded bonus amount for the company’s 2022 annual incentive plan year if Mr. Tulsyan had remained employed through the payout date; (v) nine (9) months of outplacement services, and (vi) payment of Mr. Tulsyan’s COBRA premiums for medical and dental coverage for up to six (6) months from the Separation Date. Pursuant to the transition agreement, Mr. Tulsyan will receive a lump sum transition payment of $480,000, less applicable taxes and withholdings, to be paid on July 7, 2023. Mr. Tulsyan’s severance benefits are detailed in the “Potential Payments Upon Termination or Change of Control” table following this CD&A. Tax Considerations Section 162(m) of the Internal Revenue Code of 1986 as amended (the “Code”) disallows a federal income tax deduction to public companies for compensation greater than $1 million paid in any tax year to covered executive officers. As a general matter, while tax deductibility is one of several relevant factors considered by the Committee in determining compensation, we believe that the tax deduction limitation imposed by Section 162(m) should not compromise the company’s access to compensation arrangements that will attract and retain a high level of executive talent. Accordingly, the Committee and | | | | 55 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
our Board will take into consideration a multitude of factors in making executive compensation decisions and may approve executive compensation that is not tax deductible. Risk Assessment of Incentive Compensation Programs The company, in partnership with a third-party compensation advisory group, last performed an assessment for the Committee in 2022, in order to determine whether there were material risks that could arise from our compensation plans and programs. This assessment included a review of material elements of non-executive and executive compensation plans that were in place as of March 2022. Any material changes enacted in the course of the RXO spin-off in 2022 and the first quarter of 2023 will be reviewed in this 2023 plan year. The Committee has concluded that for the 2022 plan year, the company’s compensation plans and programs are not reasonably likely to have a material adverse effect on the company. COMPENSATION COMMITTEE REPORT The following statement made by the Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent that we specifically incorporate such statement by reference. The Committee reviewed the Compensation Discussion and Analysis with management as required by Item 402(b) of Regulation S-K, as set forth above. Based on this review and the resulting discussions with management, the Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the company’s 2022 on Form 10-K. COMPENSATION COMMITTEE: Johnny C. Taylor, Jr., chair Allison Landry, member Irene Moshouris, member (since November 1, 2022) | | | | 56 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
COMPENSATION TABLES Summary Compensation Table The table below sets forth information concerning the total compensation awarded to, earned by, or paid to our NEOs for the year ended December 31, 2022. We compensate our NEOs pursuant to the terms of their respective employment agreements. The information reported in the table below reflects the terms of such agreements. For more information about our NEOs’ employment agreements, see the discussion in this Proxy Statement under the heading Employment Agreements with NEOs. Note: The Stock Awards column in the table below includes the impact of modifications to previously-granted outstanding stock awards in connection with the RXO spin-off. As a result, it does not clearly represent the compensation paid to our NEOs for fiscal year 2022. For a clearer representation of the compensation paid to our NEOs for fiscal year 2022, see the table titled “Supplemental Summary Compensation Table” below. | Name and Principal Position | | | | Year | | | | Salary ($) | | | | Bonus(1) ($) | | | | Stock Awards(2)(3) ($) | | | | Non-Equity Incentive Plan Compensation(4) ($) | | | | All Other Compensation(5) ($) | | | | Total ($) | | | Brad Jacobs(6) Executive Chairman | | | | | | 2022 | | | | | | $ | 929,561 | | | | | | | — | | | | | | $ | 34,600,992(7) | | | | | | $ | 11,446,524 | | | | | | $ | 13,880 | | | | | | $ | 46,990,957 | | | | | | 2021 | | | | | | $ | 1,000,000 | | | | | | | — | | | | | | | — | | | | | | $ | 20,625,000 | | | | | | $ | 418,280 | | | | | | $ | 22,043,280 | | | | | | 2020 | | | | | | $ | 1,000,000 | | | | | | $ | 3,300,000 | | | | | | | — | | | | | | $ | 17,500,000 | | | | | | $ | 12,660 | | | | | | $ | 21,812,660 | | | | Mario Harik(8) Chief Executive Officer | | | | | | 2022 | | | | | | $ | 557,857 | | | | | | | — | | | | | | $ | 7,381,069(7) | | | | | | $ | 1,075,334 | | | | | | $ | 13,463 | | | | | | $ | 9,027,723 | | | | | | 2021 | | | | | | $ | 500,000 | | | | | | $ | 100,000 | | | | | | | — | | | | | | $ | 4,914,063 | | | | | | $ | 12,863 | | | | | | $ | 5,526,925 | | | | | | 2020 | | | | | | $ | 500,000 | | | | | | $ | 1,031,250 | | | | | | | — | | | | | | $ | 3,937,500 | | | | | | $ | 12,660 | | | | | | $ | 5,481,410 | | | | Carl Anderson(9) Chief Financial Officer | | | | | | 2022 | | | | | | $ | 93,750 | | | | | | | — | | | | | | $ | 1,091,845(10) | | | | | | $ | 129,452 | | | | | | $ | 263 | | | | | | $ | 1,315,310 | | | | Ravi Tulsyan(11) Former Chief Financial Officer | | | | | | 2022 | | | | | | $ | 498,626 | | | | | | | — | | | | | | | — | | | | | | $ | 93,550 | | | | | | $ | 13,463 | | | | | | $ | 605,639 | | | | | | 2021 | | | | | | $ | 431,539 | | | | | | $ | 100,000 | | | | | | $ | 2,084,951 | | | | | | $ | 874,800 | | | | | | $ | 12,545 | | | | | | $ | 3,503,834 | | |
Supplemental Summary Compensation Table The following table provides a clearer representation of the compensation paid to our NEOs for fiscal year 2022. It excludes the modifications of previously-granted stock awards in connection with the RXO spin-off, as described in footnote 7 below. This Supplemental Summary Compensation Table view is for informational purposes only and is not presented in accordance with SEC requirements. | Name and Principal Position | | | | Year | | | | Salary ($) | | | | Bonus(1) ($) | | | | Stock Awards(2)(3) ($) | | | | Non-Equity Incentive Plan Compensation(4) ($) | | | | All Other Compensation(5) ($) | | | | Total ($) | | | Brad Jacobs(6) Executive Chairman | | | | | | 2022 | | | | | | $ | 929,561 | | | | | | | — | | | | | | | —(7) | | | | | | $ | 11,446,524 | | | | | | $ | 13,880 | | | | | | $ | 12,389,965 | | | | | | 2021 | | | | | | $ | 1,000,000 | | | | | | | — | | | | | | | — | | | | | | $ | 20,625,000 | | | | | | $ | 418,280 | | | | | | $ | 22,043,280 | | | | | | 2020 | | | | | | $ | 1,000,000 | | | | | | $ | 3,300,000 | | | | | | | — | | | | | | $ | 17,500,000 | | | | | | $ | 12,660 | | | | | | $ | 21,812,660 | | | | Mario Harik(8) Chief Executive Officer | | | | | | 2022 | | | | | | $ | 557,857 | | | | | | | — | | | | | | | —(7) | | | | | | $ | 1,075,334 | | | | | | $ | 13,463 | | | | | | $ | 1,646,654 | | | | | | 2021 | | | | | | $ | 500,000 | | | | | | $ | 100,000 | | | | | | | — | | | | | | $ | 4,914,063 | | | | | | $ | 12,863 | | | | | | $ | 5,526,925 | | | | | | 2020 | | | | | | $ | 500,000 | | | | | | $ | 1,031,250 | | | | | | | — | | | | | | $ | 3,937,500 | | | | | | $ | 12,660 | | | | | | $ | 5,481,410 | | | | Carl Anderson(9) Chief Financial Officer | | | | | | 2022 | | | | | | $ | 93,750 | | | | | | | — | | | | | | $ | 1,091,845(10) | | | | | | $ | 129,452 | | | | | | $ | 263 | | | | | | $ | 1,315,310 | | | | Ravi Tulsyan(11) Former Chief Financia Officer | | | | | | 2022 | | | | | | $ | 498,626 | | | | | | | — | | | | | | | — | | | | | | $ | 93,550 | | | | | | $ | 13,463 | | | | | | $ | 605,639 | | | | | | 2021 | | | | | | $ | 431,539 | | | | | | $ | 100,000 | | | | | | $ | 2,084,951 | | | | | | $ | 874,800 | | | | | | $ | 12,545 | | | | | | $ | 3,503,834 | | |
(1)
Annual cash bonus awards for 2022 are included in the column “Non-Equity Incentive Plan Compensation” and reflect formulaic annual cash bonus awards earned in respect of 2022 for Mr. Jacobs, Mr. Harik and Mr. Anderson. Mr. Harik and Mr. Tulsyan received an additional $100,000 cash bonus in 2021 in consideration of their work related to the GXO spin-off. Annual cash bonus awards for 2020 reflect discretionary annual cash bonus awards earned in respect of 2020 for Mr. Jacobs and Mr. Harik. (2)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were adjusted using the ratios and methodologies outlined in each Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The RXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in connection with either spin-off did not result in incremental compensation cost. (3)
The amounts reflected in this column represent the aggregate grant date fair value of the awards made during each respective year, as computed in accordance with FASB ASC Topic 718. For additional information related to the measurement of stock-based compensation awards, see Note 15 to the financial statements included in our 2022 Form 10-K. | | | | 57 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
(4)
The amounts reflected in this column for 2022 include formulaic annual cash bonus awards earned in respect of 2022 of $2,612,822, $1,075,334 and $129,452 for Mr. Jacobs, Mr. Harik and Mr. Anderson, respectively. The amounts reflected in this column for 2022, 2021 and 2020 also include a cash LTI award granted in 2020 and earned in respect of 2022 for Mr. Jacobs, and both 2021 and 2020 for Mr. Jacobs and Mr. Harik. On July 31, 2020, the Committee awarded Mr. Jacobs and Mr. Harik LTI awards subject to achievement of an absolute adjusted cash flow per share goal, a relative growth in adjusted cash flow per share goal and a scorecard related to ESG goals. The award is earned in cash in four installments on the first anniversary of grant (July 31, 2021) and each of January 15, 2022, 2024 and 2026. The goals underlying the 2020 LTI award are subject to both performance-based and service-based conditions. The target award can be earned based on attainment of the absolute adjusted cash flow per share goals of $3.04, $4.51, $5.35 and $5.95 for each of the second half of 2020 and full year 2021, 2022 and 2023, respectively (50% of award); the relative growth in adjusted cash flow per share goal at the 55th percentile (25% of award); or achievement against goals related to ESG as outlined in a comprehensive scorecard (25% of award). The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. As discussed in more detail in Modification of the Outstanding 2020 Performance-Based Cash LTI Grant, on February 9, 2023, in connection with the RXO spin-off, the Committee approved the cancellation and replacement of 100% of the target amount of the 2023 tranche of the 2020 LTI award for Mr. Jacobs and Mr. Harik with PSUs (“PSU Replacement Awards”). Each PSU Replacement Award had a target grant date value equal to the canceled portion of Messrs. Jacobs’ and Harik’s LTI award. The PSU Replacement Awards are subject to a replacement of the absolute adjusted cash flow per share and relative growth in adjusted cash flow per share performance goals from the LTI awards’ final tranche with a relative TSR performance goal, weighted at 75%, and a continuation of the ESG scorecard goal, weighted at 25% and adjusted in connection with the RXO spin-off. The number of PSUs granted pursuant to the PSU Replacement Award for each of Mr. Jacobs and Mr. Harik was determined based on the grant value of the LTI awards final tranche for each of Messrs. Jacobs and Harik and the closing price of a share of the company’s common stock on February 9, 2023. The PSU Replacement Awards have an additional time-based vesting condition that generally requires continued service through February 9, 2025, or an earlier qualifying termination of service, and are subject to a restriction on the sale or transfer of shares until January 15, 2026 (which generally aligns with the vesting period for the corresponding canceled portion of the LTI awards). Also Mr. Tulsyan received $93,550 in connection with a Cash LTI award granted on January 15, 2020. (5)
The components of “All Other Compensation” for 2022 are detailed in the “All Other Compensation” table. (6)
Effective as of November 1, 2022, Mr. Jacobs, chairman and CEO, assumed the role of executive chairman. Mr. Jacobs’ 2022 amounts reflect all of his compensation for the full fiscal year. Mr. Jacobs did not receive any additional compensation for his service as a director. (7)
On November 1, in connection with the completion of the RXO spin-off, the outstanding PSUs granted in 2018 and 2019 to both Mr. Jacobs and Mr. Harik were modified by converting the 2018 PSU award and 2019 PSU awards held by each into time-based vesting RSU awards (“2022 Converted RSUs”). The 2022 Converted RSUs (i) vest on December 31, 2024 generally subject to continued employment by the executive (or, in the case of Mr. Jacobs, willingness to serve on the company’s board of directors) through the vesting date and (ii) the after-tax shares received upon the settlement of the 2022 Converted RSUs are subject to a lock up which prohibits transfers of such shares through December 31, 2025. With respect to the previously awarded PSUs in 2018 and 2019 for Mr. Jacobs and Mr. Harik, the company reported the grant date values of those awards in the Summary Compensation Table (and Grants of Plan-Based Award Table) in the year of grant as if the performance conditions associated with those awards were probable. The performance conditions were not probable and the amounts that should have been reflected were $0. In 2022, these awards were modified and converted to time-based RSUs. The fair value of the awards immediately prior to the 2022 modification were zero as the awards were not probable. The amount shown in this column represents the incremental fair value of the modified awards calculated in accordance with ASC 718 at the 2022 modification date over the sum of the amounts previously reported in respect of the awards in our 2018 and 2019 proxy statements ($12,690,463 and $7,007,415 for Mr. Jacobs, and $1,230,004 and $1,648,799 for Mr. Harik for 2018 and 2019, respectively). The values shown in this column (when taken together with the previously reported values) are equal to the full amount of compensation expense to be taken for these awards under FASB ASC Topic 718. The financial statements properly reflect the accounting for these awards in accordance with ASC 718 for all periods. (8)
Effective as of November 1, 2022, Mr. Harik, chief information officer, chief customer officer, and president, North American LTL, assumed the role of CEO and was appointed a director of the company. Mr. Harik’s 2022 amounts reflect all of his compensation for the full fiscal year. Mr. Harik did not receive any additional compensation for his service as a director. (9)
Effective as of November 8, 2022, Mr. Anderson assumed the role of CFO. Mr. Anderson’s 2022 amounts reflect all of his compensation for the full fiscal year. (10)
The amounts for Mr. Anderson reflect RSU and PSU awards granted upon his appointment to CFO on November 8, 2022. The Committee awarded Mr. Anderson PSUs subject to achievement based on TSR of the shares of the company over the performance period relative to the S&P Midcap 400 Index, with a multiplier based on the company’s TSR over the performance period compared to the aggregate weighted TSR of certain pre-selected transportation peers. The award is eligible to be earned in equity in one installment on November 8, 2026. The goals underlying these PSUs are subject to both performance-based and service-based conditions. The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. (11)
On November 8, 2022, Mr. Tulsyan transitioned from the company’s CFO to senior advisor, finance. Also, on January 23, 2023, the company entered into a separation agreement and general release with Mr. Tulsyan in connection with his termination as senior advisor, effective January 6, 2023. Please see the Potential Payments Upon Termination or Change in Control table below for severance payments paid to Mr. Tulsyan in connection with his termination. All Other Compensation Table The following table sets forth the amounts included in the “All Other Compensation” column in the Summary Compensation Table for our NEOs in 2022. | Name | | | | Matching Contributions to 401(k) Plan(1) ($) | | | | Company- Paid Life Insurance Premiums(2) ($) | | | | Total ($) | | | Brad Jacobs | | | | | $ | 12,200 | | | | | | $ | 1,680 | | | | | | $ | 13,880 | | | | Mario Harik | | | | | $ | 12,200 | | | | | | $ | 1,263 | | | | | | $ | 13,463 | | | | Carl Anderson(3) | | | | | | — | | | | | | | — | | | | | | | — | | | | Ravi Tulsyan | | | | | $ | 12,200 | | | | | | $ | 1,263 | | | | | | $ | 13,463 | | |
(1)
Amounts in this column represent matching contributions made by XPO to the company’s 401(k) plan. Only amounts contributed directly by our NEOs are eligible for matching contributions, and our NEOs are eligible for matching contributions on the same basis as all other eligible employees of our company. (2)
Amounts in this column include the company-paid premiums for basic life insurance. (3)
Effective as of November 8, 2022, Mr. Anderson assumed the role of CFO. Perquisites and personal benefits did not equal or exceed $10,000 for Mr. Anderson in 2022. | | | | 58 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Grants of Plan-Based Awards The following table sets forth additional details regarding grants of equity plan-based awards. | | | | | | | | | | | | | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(1) | | | | Grant Date Fair Value of Stock Awards ($)(3) | | | Name | | | | Grant Date | | | | Grant Type | | | | Threshold (#) | | | | Target (#)(2) | | | | Maximum (#) | | | | Brad Jacobs | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 82,932 | | | | | | | 165,864 | | | | | | | — | | | | | | | — | | | | 11/1/2022 | | | | RSU | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 1,174,495 | | | | | | $ | 34,600,992 | | | | Mario Harik | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 37,320 | | | | | | | 74,640 | | | | | | | — | | | | | | | — | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 53,906 | | | | | | | 107,812 | | | | | | | — | | | | | | | — | | | | 8/5/2022 | | | | PSU | | | | | | — | | | | | | | 172,871 | | | | | | | 345,742 | | | | | | | — | | | | | | | — | | | | 11/1/2022 | | | | RSU | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 221,923 | | | | | | $ | 7,381,069 | | | | Carl Anderson(4) | | | | 11/8/2022 | | | | RSU | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 14,112 | | | | | | $ | 499,988 | | | | 11/8/2022 | | | | PSU | | | | | | — | | | | | | | 14,112 | | | | | | | 28,224 | | | | | | | — | | | | | | $ | 591,857 | | | | Ravi Tulsyan | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 49,759 | | | | | | | 99,518 | | | | | | | — | | | | | | | — | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 82,932 | | | | | | | 82,932 | | | | | | | — | | | | | | | — | | |
(1)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were adjusted using the ratios and methodologies outlined in each Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The RXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in connection with either spin-off did not result in incremental compensation cost. (2)
PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200% of target. (3)
Amounts in this column reflect the grant date fair value of awards calculated in accordance with FASB ASC Topic 718, using the valuation methodology set forth in Note 15 to the financial statements included in our 2022 Form 10-K. Please see Note 7 to the Summary Compensation Table for additional details of the values reflected for Mr. Jacobs and Mr. Harik. (4)
The amount for Mr. Anderson reflects awards granted upon his appointment to CFO on November 8, 2022. Additional information relevant to the awards shown in the above table (including a discussion of the applicable performance criteria and the actual payouts under such awards) is included under the heading Outstanding Equity Awards at Fiscal Year-End. Outstanding Equity Awards at Fiscal Year-End The following table sets forth the outstanding equity awards held by our NEOs as of December 31, 2022. | | | | | Stock Awards | | | Name | | | | Number of Shares or Units of Stock That Have Not Vested (#)(1)(2) | | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(1)(4) | | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | | | Brad Jacobs | | | | | | 1,174,495(5) | | | | | | $ | 39,098,939(5) | | | | | | | 82,932(6) | | | | | | $ | 2,760,806(6) | | | | Mario Harik | | | | | | 221,923(7) | | | | | | $ | 7,387,817(7) | | | | | | | 264,097(8) | | | | | | $ | 8,791,789(8) | | | | Carl Anderson | | | | | | 14,112(9) | | | | | | $ | 469,788(9) | | | | | | | 14,112(10) | | | | | | $ | 469,788(10) | | | | Ravi Tulsyan | | | | | | 23,296(11) | | | | | | $ | 775,524(11) | | | | | | | 153,161(12) | | | | | | $ | 5,098,738(12) | | |
Note: Vesting of all outstanding equity awards is subject to continued employment by the NEO on the applicable vesting date, subject to certain exceptions in connection with a qualifying termination of employment. Please see the Potential Payments Upon Termination or Change in Control table below for more details. (1)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were adjusted using the ratios and methodologies outlined in each Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The RXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in connection with either spin-off did not result in incremental compensation cost. (2)
In accordance with the RXO spin-off distribution ratio, certain outstanding RSUs on November 1, 2022, received additional time-based RSUs covering shares of stock of RXO, Inc. The outstanding RXO RSUs are as follows: Mr. Jacobs received 1,174,495 RXO RSUs valued at $20,201,314; Mr. Harik received 221,923 RXO RSUs valued at $3,817,076; Mr. Tulsyan received 23,296 RXO RSUs valued at $400,691 calculated using $17.20, the closing price of RXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. The value of these RXO RSUs are not reflected in the table above. (3)
The values reflected in this column were calculated using $33.29, the closing price of a company share on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. | | | | 59 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
(4)
In accordance with the RXO spin-off distribution ratio, certain outstanding PSUs on November 1, 2022, received additional PSUs covering shares of stock of RXO, Inc. The outstanding RXO PSUs are as follows: Mr. Jacobs received 82,932 RXO PSUs valued at $1,426,430; Mr. Harik received 91,226 RXO PSUs valued at $1,569,087; Mr. Tulsyan received 145,350 RXO PSUs valued at $2,500,020 calculated using $17.20, the closing price of RXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. The value of these RXO PSUs are not reflected in the table above. (5)
Consists of 1,174,495 RSUs which vest on December 31, 2024 and are restricted from sale until December 31, 2025. (6)
Consists of 82,932 PSUs which vest on December 31, 2023, subject to achievement of the 2022 Performance Criteria (defined below). PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200% of target. The target award can be earned based on attainment of the LTL adjusted EBITDA goal of $1 billion for the fiscal year 2022 (50% of award) or attainment of the LTL adjusted operating ratio goal of 100 basis points of improvement for the fiscal year 2022 (50% of award) (collectively, the “2022 Performance Criteria”). The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. See the CD&A 2022 Performance-Based LTI Outcomes – LTL Performance Stock Units for a description of the 2022 Performance Criteria. (7)
Consists of 221,923 RSUs which vest on December 31, 2024 and are restricted from sale until December 31, 2025. (8)
Consists of 37,320 PSUs which are eligible to vest on December 31, 2023, 53,906 PSUs which are eligible to vest on March 7, 2025 and 172,871 PSUs which are eligible to vest on August 5, 2026, subject to the TSR Performance Goal (defined below) with a relative TSR Multiplier (defined below). The PSUs which vest on August 5, 2026 are restricted from sale until one-year after the settlement date except in death or change-in-control termination. PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200%. The target award can be earned based on individual or aggregate attainment of the performance goals as further detailed below. The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200% of target. a.
The PSUs noted as vesting on December 31, 2023 and March 7, 2025, subject to achievement of the 2022 Performance Criteria. See footnote 6 above for additional terms of these PSUs. b.
The PSUs noted as vesting on August 5, 2026, subject to achievement of a relative TSR goal with a relative TSR multiplier, and cannot be earned until after the four-year performance period ending August 5, 2026. The goals underlying these PSUs are: (i) company TSR ranking at the completion of the Performance Period relative to each company in the S&P Midcap 400 Index TSR at the completion of the Performance Period (in the order of lowest to highest TSR) at a minimum of the 67th percentile (the “TSR Performance Goal”), and (ii) a multiplier of company TSR over the Performance Period exceeds the aggregate weighted TSR of certain pre-selected transportation peers over the Performance Period by a minimum of 200 basis points (the “TSR Multiplier”). (9)
Consists of 14,112 RSUs which vest on November 8, 2024. (10)
Consists of 14,112 PSUs which vest on November 8, 2026, subject to achievement of the TSR Performance Goal with a relative TSR Multiplier. PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200% of target. The target award can be earned based on individual or aggregate attainment of the performance goals as further detailed below. The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. (11)
Consists of 1,867 RSUs which vest on January 15, 2023, 6,653 RSUs which vest on March 15, 2023; 6,864 RSUs which vest on December 8, 2023; 3,526 RSUs which vest ratably on March 10, 2023, 2024 and 2025; and 4,386 RSUs which vest on September 8, 2023. (12)
Consists of 20,470 PSUs which remain eligible to vest on December 31, 2024, and 132,691 PSUs which remain eligible to vest on March 7, 2025, subject to achievement of the performance criteria set forth below. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets, generally reflecting the same features included in previously awarded performance-based equity grants. a.
2,244 PSUs noted as vesting on December 31, 2024 which were certified as achieved at 175% performance, respective of the 2021 performance period. b.
18,226 PSUs noted as vesting on December 31, 2024, subject to achievement of certain performance criteria. PSUs are reflected at 175% estimated performance achievement. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200%. The target award can be earned based on attainment of the absolute adjusted cash flow per share goal of $5.95 for the full year 2023 (50% of award); the relative growth in adjusted cash flow per share goal at the 55th percentile (25% of award); or achievement against goals related to ESG as outlined in a comprehensive scorecard (25% of award). The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. c.
82,932 PSUs noted as vesting on March 7, 2025, subject to achievement of the completion of the RXO spin-off, which was completed in November 2022. PSUs are reflected at the target level, which is also the threshold and maximum level. d.
49,759 PSUs noted as vesting on March 7, 2025, subject to achievement of the 2022 Performance Criteria. See footnote 6 above for additional terms of these PSUs. Option Exercises and Stock Vested The following table sets forth the options exercised and stock vested for our NEOs during 2022. | | | | | Stock Awards(1) | | | Name | | | | Number of Shares Acquired on Vesting (#) | | | | Value Realized on Vesting ($)(2) | | | Brad Jacobs | | | | | | — | | | | | | | — | | | | Mario Harik | | | | | | — | | | | | | | — | | | | Carl Anderson | | | | | | — | | | | | | | — | | | | Ravi Tulsyan | | | | | | 20,949 | | | | | | $ | 1,163,477 | | |
(1)
In accordance with the RXO spin-off distribution ratio, certain outstanding RSUs on November 1, 2022, received additional time-based RSUs covering shares of stock of RXO, Inc. These RXO RSUs vested as follows: Mr. Tulsyan vested in 6,865 RXO RSUs valued at $122,815 calculated using $17.89, the closing price of RXO common stock on the NYSE on each applicable vesting date. The values of these RXO RSUs are not reflected in the table above. (2)
The values reflected in this column were calculated by multiplying the number of shares that vested in 2022 by the closing price of one share of XPO common stock on the NYSE on each applicable vesting date. | | | | 60 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Potential Payments Upon Termination or Change of Control The following table sets forth the amounts of compensation that would be due to Messrs. Jacob and Harik pursuant to their respective employment agreements (or in the cases of Messrs. Anderson and Tulsyan, pursuant to their Change in Control and Severance Agreement), as applicable, upon the termination events as summarized below, as if each such event had occurred on December 31, 2022. The amounts shown below are estimates of the payments that each NEO would receive in certain instances. The actual amounts payable will only be determined upon the actual occurrence of any such event. For Mr. Tulsyan, the following table sets forth the amount of compensation that was due in connection with his actual separation of employment. | | | | | Brad Jacobs | | | | Mario Harik | | | | Carl Anderson | | | | Ravi Tulsyan(1) | | | Termination without Cause: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(3)(4)(5) | | | | | $ | 4,500,000 | | | | | | $ | 3,400,000 | | | | | | $ | 1,875,000 | | | | | | $ | 1,745,892(6) | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745(14) | | | | | | $ | 8,420,006 | | | | | | $ | 52,066 | | | | | | $ | 4,914,722(10) | | | | Outstanding performance-based equity awards(11) | | | | | | — | | | | | | | — | | | | | | | — | | | | | | $ | 92,926 | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Continuation of medical / dental benefits(13) | | | | | $ | 16,632 | | | | | | $ | 23,220 | | | | | | $ | 9,684 | | | | | | $ | 9,684 | | | | Total | | | | | $ | 55,210,079 | | | | | | $ | 11,843,226 | | | | | | $ | 1,936,750 | | | | | | $ | 6,763,225 | | | | Voluntary Termination with Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(5) | | | | | $ | 4,500,000 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Continuation of medical / dental benefits(13) | | | | | $ | 16,632 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Total | | | | | $ | 55,210,079 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Termination for Cause or Voluntary Termination without Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of equity-based awards | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of 2020 LTI | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Total | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Disability: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(5) | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of equity-based awards(8) | | | | | $ | 39,098,939 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of 2020 LTI | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Total | | | | | $ | 39,098,939 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Death: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745 | | | | | | $ | 16,179,606 | | | | | | $ | 939,577 | | | | | | | — | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Total | | | | | $ | 50,693,447 | | | | | | $ | 16,179,606 | | | | | | $ | 939,577 | | | | | | | — | | | | Change of Control and No Termination: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of equity-based awards | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | Total | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Change of Control and Termination without Cause or for Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(3)(4)(5) | | | | | $ | 5,400,000 | | | | | | $ | 9,324,500 | | | | | | $ | 3,125,000 | | | | | | | — | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745 | | | | | | $ | 16,179,606 | | | | | | $ | 939,577 | | | | | | | — | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | Continuation of medical / dental benefits(13) | | | | | $ | 33,264 | | | | | | $ | 46,440 | | | | | | $ | 38,736 | | | | | | | — | | | | Total | | | | | $ | 56,126,711 | | | | | | $ | 25,550,546 | | | | | | $ | 4,103,313 | | | | | | | — | | |
(1)
On November 8, 2022, Mr. Tulsyan transitioned from the company’s CFO to senior advisor, finance. On January 23, 2023, the company entered into a separation agreement and general release with Mr. Tulsyan in connection with his termination as senior advisor, finance, effective January 6, 2023. The values reflected in this column are the actual payments made in connection with his separation; the value reflected for the acceleration of equity-based awards is calculated using $35.99, the closing price of a company share on the NYSE on January 6, 2023. (2)
Amounts shown do not include any payments for accrued and unpaid salary, bonuses or vacation. (3)
In the event of a termination by our company without cause, continuation of cash compensation payable to each of Mr. Harik, Mr. Anderson and Mr. Tulsyan will be reduced, dollar for dollar, by other income earned by such NEO in accordance with the terms of their employment agreement. The calculations of continuation of cash compensation pay for each of Mr. Harik and Mr. Anderson in the above table use the applicable NEO’s base salary and target bonus amounts effective as of December 31, 2022. (4)
In the event of a termination for any reason, our company has the right to extend the period during which each of Mr. Harik, Mr. Anderson and Mr. Tulsyan is bound by the non-competition covenant in their employment agreement for up to 12 additional months for Mr. Harik and Mr. Tulsyan, and up to 18 additional months for Mr. Anderson. This would extend the non-compete period from three years to four years following termination for Mr. Harik and Mr. Tulsyan, and from 18 months to three years following termination for Mr. Anderson. During the period the non-compete is extended, the NEO would be entitled to receive cash compensation consisting of a portion of his monthly base salary as in effect on the date employment is terminated, reduced dollar for dollar by any other income earned at the time by the NEO. Fully extending the non-compete period would increase the amounts shown as continuation of cash compensation by up to $850,000 for Mr. Harik, $937,500 for Mr. Anderson and $500,000 for Mr. Tulsyan. | | | | 61 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
(5)
The values reflected in this row for Mr. Jacobs consist of non-compete payments in accordance with the terms of his employment agreement, including upon termination due to mutual agreement by our company and Mr. Jacobs. In the event of a termination for any reason, our company has the right to extend the period during which Mr. Jacobs is bound by the non-competition covenant in his employment agreement for up to 12 additional months. This would extend the non-compete period from three years to four years following termination. During the period the non-compete is extended, Mr. Jacobs would be entitled to receive cash compensation consisting of a portion of his monthly base salary and 1/12th of his target bonus as in effect on the date employment is terminated, reduced dollar for dollar by any other income earned at the time by Mr. Jacobs. Fully extending the non-compete period would increase the amount shown as continuation of cash compensation by up to $1,500,000 for Mr. Jacobs. (6)
Pursuant to the separation agreement, the severance agreement, and the transition agreement, Mr. Tulsyan received the following payments and benefits from the company in exchange for agreeing to a general release of claims in favor of the company and other promises by Mr. Tulsyan in the separation agreement: (i) cash severance payments equal to 12 months of Mr. Tulsyan’s base salary in effect on the separation date, totaling a gross amount of $500,000, less applicable taxes and withholdings, payable in equal installments over a 12-month period on the Ccompany’s normal payroll dates with the first installment to be paid within 65 days after the separation date, (ii) a lump sum payment of $8,200, less applicable taxes and withholdings, equal to the estimated prorated target bonus for the 2023 performance year, (iii) a lump sum payment, less applicable taxes and withholdings, equivalent to any unused carryover paid time off for 2022 that Mr. Tulsyan would have otherwise forfeited upon separation, (iv) a lump sum payment of $700,000, less applicable taxes and withholdings, equivalent to what Mr. Tulsyan would have received as the funded bonus amount for the company’s 2022 annual incentive plan year if Mr. Tulsyan had remained employed through the payout date, calculated based on Mr. Tulsyan’s base salary as of the separation date multiplied by his bonus target percentage multiplied by the bonus funding percentage for his incentive plan, and (v) nine (9) months of outplacement services. In connection with (iv) above, Mr. Tulsyan received a payment of $700,000 in March 2023. Pursuant to the transition agreement, Mr. Tulsyan will receive a lump sum transition payment of $480,000, less applicable taxes and withholdings, to be paid on July 7, 2023. (7)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were adjusted using the ratios and methodologies outlined in each Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The RXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in connection with either spin-off did not result in incremental compensation cost. (8)
The values reflected in this row for Mr. Jacobs, Mr. Harik and Mr. Anderson, as applicable, were calculated using $33.29, the closing price of a company share on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. The values reflected in this row for Mr. Tulsyan were calculated using $35.99, the closing price of a company share on the NYSE on January 6, 2023. Except for Mr. Tulsyan, the amounts shown for PSUs have been estimated assuming that the applicable performance goals are met at target levels. Although the PSUs would no longer be subject to a continued service requirement upon the occurrence of a termination by our company without cause, payment of such award would remain subject to the actual achievement of the applicable performance goals. As of December 31, 2022, none of the NEOs had any unvested stock options. Values applicable to all individuals include standard pro-rata vesting upon termination pursuant to the applicable award agreement. (9)
In accordance with the RXO spin-off distribution ratio, certain outstanding RSUs and PSUs on November 1, 2022, received additional time-based RSUs and PSUs, as applicable, covering shares of stock of RXO, Inc. These outstanding RXO RSUs and PSUs would accelerate upon termination as follows: Mr. Jacobs would accelerate in 1,174,495 RXO RSUs valued at $20,201,314 and 82,932 RXO PSUs valued at $1,426,430; and Mr. Harik (except in the case of a termination without cause or a voluntary termination for good reason not in connection with a change of control) would accelerate in 221,923 RXO RSUs valued at $3,817,076 and 91,226 RXO PSUs valued at $1,569,087, calculated using $17.20, the closing price of RXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. In the event of a termination without cause for Mr. Harik, these outstanding RXO RSUs and PSUs would accelerate as follows: 144,073 RXO RSUs valued at $2,478,056 and 91,226 RXO PSUs valued at $1,569,087 calculated using $17.20, the closing price of RXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. Mr. Tulsyan accelerated in (i) 10,430 RXO RSUs valued at $175,954, (ii) 5,876 RXO RSUs valued at $99,128, pursuant to the terms of Mr. Tulsyan’s separation agreement and transition agreement, and (iii) 120,252 RXO PSUs valued at $2,028,651 calculated using $16.87, the closing price of RXO common stock on the NYSE on January 6, 2023. The value of these RXO RSUs and PSUs are not reflected in the table above. The amounts shown for Mr. Jacobs’ and Mr. Harik’s PSUs have been estimated assuming that the applicable performance goals are met at target levels. (10)
Pursuant to the terms of the separation agreement, the transition agreement, and the equity award agreements, Mr. Tulsyan is entitled to pro-rata vesting as if his employment was terminated on June 30, 2023. Amount shown includes standard pro-rata vesting upon termination pursuant to the applicable award agreements and additionally includes 5,876 time-based restricted stock units subject to accelerated vesting, pursuant to the terms of Mr. Tulsyan’s separation agreement and transition agreement. (11)
Amount shown for Mr. Tulsyan consists of (i) 86 PSUs subject to standard pro-rata vesting upon termination pursuant to the applicable award agreement, and (ii) 2,496 PSUs subject to accelerated vesting, pursuant to the terms of Mr. Tulsyan’s separation agreement and transition agreement. All PSUs remain eligible to vest on December 31, 2024, subject to achievement of certain performance criteria (for further details related to the performance criteria see footnote 12 in the Outstanding Equity Awards Table at Fiscal Year-end table). The amounts shown assume that all performance criteria are actually met or are deemed met upon a change of control pursuant to the terms of the PSUs. In accordance with the RXO spin-off distribution ratio, certain outstanding PSUs on November 1, 2022, received additional PSUs covering shares of stock of RXO, Inc. Mr. Tulsyan remains eligible to vest in 2,582 RXO PSUs that are valued at $43,558, calculated using $16.87, the closing price of RXO common stock on the NYSE on January 6, 2023. The value of these RXO PSUs are not reflected in the table above. (12)
The amount shown for the 2020 LTI Award, applicable to Mr. Jacobs, reflects the earned amount that is eligible to vest on January 15, 2024 and would no longer be subject to a continued service requirement upon the occurrence of a termination by our company without cause. Please see Note 4 to the Summary Compensation Table for additional details of the cancellation and replacement of 100% of the target amount of the 2023 tranche of the 2020 LTI award for Mr. Jacobs and Mr. Harik. (13)
The amounts of continued medical and dental benefits shown in the table (i) have been calculated based upon our current actual costs of providing the benefits through COBRA and (ii) have not been discounted for the time value of money. In the event of a termination without cause, continued medical and dental benefits would cease for Mr. Jacobs when he receives medical or dental coverage, as applicable, in connection with other employment, for Mr. Harik when he commences employment with a new employer, for Messrs. Anderson and Tulsyan when they become eligible for any medical and dental benefits through a new employer. (14)
The values reflected in this column for Mr. Jacobs include acceleration of equity-based awards upon termination without cause and termination due to mutual agreement between our company and Mr. Jacobs. For more information regarding the payments and benefits to which our NEOs are entitled upon certain termination events or upon a Change of Control, see the discussion in this Proxy Statement under the heading Employment Agreements with NEOs. CEO PAY RATIO DISCLOSURE As required by Item 402(u) of the SEC’s Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our CEO to that of our median employee. The pay ratio and annual total compensation amount disclosed in this section are reasonable estimates that have been calculated using methodologies and assumptions permitted by SEC rules. | | | | 62 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Identifying the Median Employee Due to material changes to XPO’s employee population following the RXO spin-off in 2022, we newly identified our median employee. In accordance with the SEC executive compensation disclosure rules, we elected to run a full analysis to identify a new median employee and selected December 31, 2022 as the measurement date for the median. The median employee was identified based on the same compensation parameters used to select the 2021 median employee, as follows: ■
As of December 31, 2022, we had 37,636 employees globally, including 22,705 US employees and 14,931 non-US employees. We determined the identity of our median employee using this employee group, including full-time, part-time and seasonal employees. ■
The median employee was identified by calculating the 2022 cash compensation for the population of 37,636 employees excluding the CEO. For this purpose, cash compensation included all earnings paid to each employee during the calendar year, including base salary and wages, bonuses, commissions, overtime and holiday or PTO pay. Compensation was converted into US dollars using currency conversion rates as of December 31, 2022. Annual Compensation of Median Employee using Summary Compensation Table Methodology After identifying the median employee as described above, we calculated annual total compensation for this employee using the same methodology we use for our CEO in the 2022 Summary Compensation Table. This compensation calculation includes, where applicable, base salary and wages, bonuses, commissions, overtime, holiday or PTO pay, equity awards, 401(k) company match and company-paid life insurance premiums, as applicable. The compensation for our median employee was $48,416 and the compensation for our company’s CEO was $9,027,723. We note for informational purposes that the compensation for our median employee in North American LTL was approximately $70,000. 2022 Pay Ratio Based on the above information, the ratio of the annual total compensation of our CEO to the median employee is 186:1. The pay ratio reported by other companies may not be comparable to the pay ratio reported above, due to variances in business mix, proportion of seasonal and part-time employees and distribution of employees across geographies. XPO operates globally with approximately 40% of our population located outside of the United States. We seek to attract, incentivize and retain our employees through a combination of competitive base pay, bonus opportunities, 401(k) matching employer contributions and other benefits. PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and the company’s financial performance. For further information on the company’s executive compensation, please see the CD&A beginning on page 30. | | | | 63 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Required Tabular Disclosure of Compensation Actually Paid versus Performance The following table discloses information on “compensation actually paid” (CAP) to our principal executive officers (PEOs) and (on average) to our other NEOs (non-PEO NEOs) during the specified years alongside TSR and net income metrics, as well as a company-selected measure of adjusted EBITDA. The company selected this measure as the most important in linking compensation actually paid to our NEOs for 2022 to company performance, as adjusted EBITDA represents a 50% weighting in the March 7, 2022 PSU awards as well as our 2022 annual incentive plan. | | Fiscal Year | | | | Summary Compensation Table Total for PEO 1(1) | | | | Compensation Actually Paid to PEO 1(2) | | | | Summary Compensation Table Total for PEO 2(1) | | | | Compensation Actually Paid to PEO 2(2) | | | | Average Summary Compensation Table Total for non-PEO NEOs | | | | Average Compensation Actually Paid to non-PEO NEOs | | | | Value of Initial Fixed $100 Investment Based On: | | | | Net Income ($ in millions) | | | | Company- Selected Measure: Adjusted EBITDA ($ in millions)(4) | | | | Total Shareholder Return | | | | Peer Group(3) Total Shareholder Return | | | | | (a) | | | | (b) | | | | (c) | | | | (b) | | | | (c) | | | | (d) | | | | (e) | | | | (f) | | | | (g) | | | | (h) | | | | (i) | | | | | 2022 | | | | | $ | 46,990,957 | | | | | | $ | 66,874,224 | | | | | | $ | 9,027,723 | | | | | | $ | 19,687,049 | | | | | | $ | 1,310,474 | | | | | | $ | 3,184,179 | | | | | | $ | 116.26 | | | | | | $ | 122.85 | | | | | | $ | 666 | | | | | | $ | 997 | | | | | | 2021 | | | | | $ | 22,043,280 | | | | | | $ | 22,043,280 | | | | | | $ | — | | | | | | $ | — | | | | | | $ | 3,990,800 | | | | | | $ | 3,600,679 | | | | | | $ | 164.27 | | | | | | $ | 151.16 | | | | | | $ | 341 | | | | | | $ | 812 | | | | | | 2020 | | | | | $ | 21,812,660 | | | | | | $ | 25,043,462 | | | | | | $ | — | | | | | | $ | — | | | | | | $ | 4,638,287 | | | | | | $ | 4,255,500 | | | | | | $ | 149.56 | | | | | | $ | 114.73 | | | | | | $ | 117 | | | | | | $ | 609 | | | |
(1)
Reflects the total compensation of our executive chairman and former CEO, Mr. Jacobs, who served as our PEO (PEO 1) from January 1, 2022 until November 1, 2022, and the total compensation of our CEO and former president, North American Less-Than-Truckload and CIO, Mario Harik, who is serving as our PEO (PEO 2), effective on November 1, 2022, and is therefore included in this table as an additional PEO in accordance with SEC rules. Amounts shown are as calculated in the Summary Compensation Table for each of the years shown (and for Mr. Harik, solely reflect compensation for the year of his service as our CEO). (2)
The dollar amounts shown in these columns reflect “compensation actually paid” to Mr. Jacobs and Mr. Harik, respectively, calculated in accordance with SEC rules. As required, the dollar amounts include (among other items) unpaid amounts of equity compensation that may be realizable in future periods, and as such, the dollar amounts shown do not fully represent the actual final amount of compensation earned or actually paid to either individual during the applicable years. The adjustments made to each officer’s total compensation for each year to determine CAP are shown in the tables below. For Mr. Harik, information is only included with respect to 2022. (3)
Our peer group is represented by the Dow Jones Transportation Average. (4)
Our company-selected measure is adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which we define as income from continuing operations before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, goodwill impairment charges, transaction and integration costs, restructuring costs and other adjustments. Adjusted EBITDA is a non-GAAP financial measure. See Annex A for reconciliations of non-GAAP measures. | | | | | | PEO 1 | | | | | Prior FYE Current FYE Fiscal Year | | | | 12/31/2019 12/31/2020 2020 | | | 12/31/2020 12/31/2021 2021 | | | 12/31/2021 12/31/2022 2022(a) | | | | | Summary Compensation Table Total | | | | | $ | 21,812,660 | | | | | $ | 22,043,280 | | | | | $ | 46,990,957 | | | | | | - Grant Date Fair Value of Modified Awards Disclosed in Fiscal Year (FASB ASC 718) | | | | | | | | | | | | | | | | | | (54,298,870) | | | | | | + Previously Reported Grant Date Fair Value of Modified Awards | | | | | | | | | | | | | | | | | | 19,697,878 | | | | | | - Grant Date Fair Value of Modified Awards over Previously Reported Grant Date Fair Value of Modified Awards | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | (34,600,992) | | | | | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 54,484,259 | | | | | | + Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | + Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | | | | | $ | 3,230,802 | | | | | $ | 0 | | | | | $ | 0 | | | | | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | Compensation Actually Paid | | | | | $ | 25,043,462 | | | | | $ | 22,043,280 | | | | | $ | 66,874,224 | | | |
(a)
For a description of the modifications and valuations of awards held by PEO 1, see footnote 7 of the Summary Compensation Table above. | | | | 64 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
| | | | | | PEO 2 | | | | | Prior FYE Current FYE Fiscal Year | | | | 12/31/2019 12/31/2020 2020 | | | 12/31/2020 12/31/2021 2021 | | | 12/31/2021 12/31/2022 2022(a) | | | | | Summary Compensation Table Total | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 9,027,723 | | | | | | - Grant Date Fair Value of Modified Awards Disclosed in Fiscal Year (FASB ASC 718) | | | | | | | | | | | | | | | | | | (10,259,872) | | | | | | + Previously Reported Grant Date Fair Value of Modified Awards | | | | | | | | | | | | | | | | | | 2,878,803 | | | | | | - Grant Date Fair Value of Modified Awards over Previously Reported Grant Date Fair Value of Modified Awards | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | (7,381,069) | | | | | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 18,040,395 | | | | | | + Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | + Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | Compensation Actually Paid | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 19,687,049 | | | |
(a)
For a description of the modifications and valuations of awards held by PEO 2, see footnote 7 of the Summary Compensation Table above. | | | | | | NEO | | | | | Prior FYE Current FYE Fiscal Year | | | | 12/31/2019 12/31/2020 2020 | | | 12/31/2020 12/31/2021 2021 | | | 12/31/2021 12/31/2022 2022 | | | | | Summary Compensation Table Total | | | | | $ | 4,638,287 | | | | | $ | 3,990,800 | | | | | $ | 1,310,474 | | | | | | - Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | (1,317,067) | | | | | $ | (521,238) | | | | | $ | (545,923) | | | | | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | 627,445 | | | | | $ | 1,199,280 | | | | | $ | 4,175,040 | | | | | | + Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years | | | | | $ | 124,838 | | | | | $ | 0 | | | | | $ | 0 | | | | | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | | | | | $ | 61,561 | | | | | $ | 0 | | | | | $ | 184,257 | | | | | | + Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | | | | | $ | 180,900 | | | | | $ | 9,732 | | | | | $ | (86,372) | | | | | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | | | | $ | (60,464) | | | | | $ | (1,077,895) | | | | | $ | (1,853,297) | | | | | | Compensation Actually Paid | | | | | $ | 4,255,500 | | | | | $ | 3,600,679 | | | | | $ | 3,184,179 | | | |
Required Tabular Disclosure of Most Important Measures Linking Compensation Actually Paid During 2022 to Company Performance As required, we disclose below the most important measures used by the company to link compensation actually paid to our NEOs for 2022 to company performance. For further information regarding these performance metrics and their function in our executive compensation program, please see the CD&A beginning on page 30. | 2022 Most Important Measures (Unranked) | | | ■
Adjusted EBITDA | | | ■
Relative TSR | | | ■
Adjusted Operating Ratio LTL | | | ■
ESG Scorecard | | | ■
Adjusted Cash Flow per Share | | | ■
Relative Adjusted Cash Flow per Share | |
Required Disclosure of the Relationship Between Compensation Actually Paid and Financial Performance Measures The following graphs further illustrate the relationship between the pay and performance figures that are included in the pay versus performance tabular disclosure above. In addition, the first graph below further illustrates the relationship between company TSR and that of the Dow Jones Transportation Average Index. As noted above, “compensation actually paid” for purposes of the tabular | | | | 65 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
disclosure and the following graphs were calculated in accordance with SEC rules and do not fully represent the actual final amount of compensation earned by or actually paid to our NEOs during the applicable years. | | | | 66 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
(1)
Adjusted EBITDA is a non-GAAP financial measure. See Annex A for reconciliations of non-GAAP measures. EMPLOYMENT AGREEMENTS WITH NEOS On September 13, 2022, in connection with the transition of Mr. Jacobs’ role to executive chairman, we entered into an employment agreement with Mr. Jacobs, which, effective November 1, 2022, replaced his prior employment agreement with XPO dated July 31, 2020. Effective November 1, 2022, we entered into an amendment to the employment agreement with Mr. Jacobs, amending the non-solicitation covenant in the employment agreement. On August 11, 2022, in connection with the transition of Mr. Harik’s role to CEO, we entered into an employment agreement with Mr. Harik, which, effective November 1, 2022, replaced his prior employment agreement with XPO dated July 31, 2020. On October 9, 2022, in connection with hiring Mr. Anderson as CFO, effective November 8, 2022, we entered into an offer letter, Change in Control and Severance Agreement (“Severance Agreement”), and Confidential Information Protection Agreement with Mr. Anderson (collectively, “Mr. Anderson’s NEO Agreement”). Mr. Anderson’s NEO Agreement together with the employment agreement with Mr. Jacobs, as amended, and the employment agreement with Mr. Harik are referred to in this section as the “NEO Agreements.” Term The NEO Agreements with Messrs. Jacobs and Harik have five-year and four-year terms, respectively, commencing on November 1, 2022. The NEO Agreement with Mr. Anderson provides no term, as he is employed on an at-will basis. Severance Payments and Benefits The severance payments pursuant to the NEO Agreements are generally subject to and conditioned upon the applicable NEO signing and not revoking a waiver and general release agreement (which, for Mr. Jacobs, such agreement shall exclude certain claims from Mr. Jacobs’ general release and include a general release by the company with certain exclusions), and also complying with the restrictive covenants contained in the applicable NEO Agreement. The material terms of the severance payments and benefits under the NEO Agreements are described below. In the event that any amounts payable to the applicable NEO in connection with a change of control constitute “parachute payments” within the meaning of Section 280G of the Code, then any such amounts will be reduced to avoid triggering the excise tax imposed by Section 4999 of the Code, if such reduction would be more favorable to the NEO on a net after-tax basis. No NEO is entitled to a gross-up payment for excise taxes imposed by Section 4999 of the Code on “excess parachute payments,” as defined in Section 280G of the Code. Mr. Jacobs’ NEO Agreement Non-Change of Control. In the event (i) of termination of Mr. Jacobs’ employment by reason of his death, (ii) we terminate Mr. Jacobs’ employment without cause (as defined in Mr. Jacobs’ NEO Agreement) either prior to a change of control of the company (as defined in the company’s 2016 Omnibus Incentive Compensation Plan) or more than two years after a change of | | | | 67 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
control of the company occurs, or (iii) Mr. Jacobs resigns due to certain events of good reason (as defined in Mr. Jacobs’ NEO Agreement), Mr. Jacobs will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
Any annual bonus that the company has notified Mr. Jacobs in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Except in the event of termination by reason of Mr. Jacobs’ death, medical and dental coverage for a period of up to 12 months from the date of termination, or, if earlier, until Mr. Jacobs begins to receive medical or dental coverage, as applicable, in connection with other employment; and ■
Accelerated vesting of all equity-based or other LTI compensation awards then outstanding. Change of Control. In the event that upon or within the two-year period following a change of control of the company, Mr. Jacobs’ employment is terminated by the company without cause or he resigns due to good reason, Mr. Jacobs will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): · ■
A cash payment equal to the pro rata target bonus for the year of termination; · ■
A cash payment equal to any annual bonus that the company has notified Mr. Jacobs in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Medical and dental coverage for a period of 24 months from the date of termination; and ■
Accelerated vesting of all equity-based or other lLTI compensation awards then outstanding. Disability. In the event that Mr. Jacobs’ employment is terminated due to disability (as defined in Mr. Jacobs’ NEO Agreement), Mr. Jacobs shall become vested in a pro-rata portion of all outstanding equity-based or other LTI compensation awards granted to him on or after the effective date of the NEO Agreement, subject to Mr. Jacobs’ continued compliance with the terms and conditions of the NEO Agreement. Mutual Agreement. In the event that Mr. Jacobs’ employment is terminated by mutual agreement between us and Mr. Jacobs, Mr. Jacobs shall become fully vested in all of his outstanding equity-based or other LTI compensation awards, subject to Mr. Jacobs’ continued compliance with the terms and conditions of his NEO Agreement. Mr. Harik’s NEO Agreement Non-Change of Control. If we terminate Mr. Harik’s employment without cause (as defined in Mr. Harik’s NEO Agreement) or Mr. Harik’s employment is terminated by reason of his death, in either event either prior to a change in control of the company or more than two years after a change of control of the company, Mr. Harik will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
Except in the event of termination by reason of Mr. Harik’s death, a cash payment, payable in equal installments over the twelve-month period following the date of termination, equal to the sum of (i) 24 months of Mr. Harik’s base salary in effect on the date of termination, (ii) the pro rata target bonus for the year of termination, and (iii) any annual bonus that we have notified Mr. Harik in writing that he earned prior to the date of termination but is unpaid as of the date of termination; provided, however, any monies Mr. Harik earns from any other work while he is receiving any such payments shall reduce, on a dollar-for-dollar basis, the amount that we are obligated to pay Mr. Harik; ■
Except in the event of termination by reason of Mr. Harik’s death, medical and dental coverage for a period of up to 12 months from the date of termination, or, if earlier, until Mr. Harik secures other employment; and ■
Vesting of equity based or other LTI compensation awards solely to the extent set forth in the applicable award agreement. Change of Control. If we terminate Mr. Harik’s employment without cause or he resigns for good reason (as defined in Mr. Harik’s NEO Agreement), in either event, upon or within the two-year period following a change of control of the company, Mr. Harik will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
A cash lump-sum payment equal to 2.99 times the sum of (i) Mr. Harik’s base salary in effect on the date of termination and (ii) the target bonus in effect on the date of termination; ■
A cash lump-sum payment equal to the pro rata target bonus for the year of termination; ■
Any annual bonus that we have notified Mr. Harik in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Medical and dental coverage for a period of 24 months from the date of termination; and ■
Vesting of equity based or other LTI compensation awards solely to the extent set forth in the applicable award agreement. Mr. Anderson’s NEO Agreement Non-Change of Control. If we terminate Mr. Anderson’s employment without cause (as defined in the Severance Agreement) either prior to a change of control of the company or more than two years following a change of control of the company, Mr. Anderson will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): | | | | 68 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
■
A cash payment, payable in equal installments over the twelve-month period following the date of termination, equal to the sum of (i) 12 months of Mr. Anderson’s base salary in effect on the date of termination and (ii) the target bonus in effect on the date of termination; provided, however, that certain monies earned by Mr. Anderson while he is receiving such payments shall reduce, on a dollar-for-dollar basis, the amount we are obligated to pay him. ■
A cash payment equal to the pro rata target bonus for the year of termination; and ■
Medical and dental coverage for a period of six months from the date of termination, or, if earlier, until Mr. Anderson becomes eligible for medical and dental benefits through another employer. Change of Control. If we terminate Mr. Anderson’s employment without cause or he resigns for good reason (as defined in the Severance Agreement), in either event, upon or within the two-year period following a change of control of the company, Mr. Anderson will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
A cash lump-sum payment equal to two (2) times the sum of his base salary and the target bonus; ■
A cash lump-sum payment equal to the pro rata target bonus for the year of termination; ■
A cash lump-sum payment equal to any annual bonus that we have notified Mr. Anderson in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Medical and dental coverage for a period of 24 months from the date of termination. Clawbacks Under the NEO Agreements for Messrs. Jacobs and Harik, the applicable NEO is subject to certain LTI compensation forfeiture and clawback provisions in the event of: (1) a breach of the restrictive covenants, (2) termination of his employment by our company for cause, or (3) the applicable NEO’s engagement in fraud or willful misconduct that contributes materially to any financial restatement or material loss to our company or its affiliates. Furthermore, under the NEO Agreements for Messrs. Jacobs and Harik, the applicable NEO is subject to certain annual bonus forfeiture and clawback provisions in the event that the applicable NEO engages in fraud or other willful misconduct that contributes materially to any financial restatement or material loss to our company. In addition, in the event that the applicable NEO breaches any restrictive covenant, such NEO will be required, upon written notice from us, to forfeit or repay to our company the applicable NEO’s severance payments, extended non-compete payments, and, with respect to Mr. Jacobs, the Non-Compete Payment (as defined below). In certain circumstances, the triggering event must have occurred within a certain period in order for us to be able to cause the forfeiture or clawback the equity-based awards, annual bonus, severance payments, extended non-compete payments, and the Non-Compete Payment, as applicable. Each NEO shall also be subject to any other clawback or recoupment policy of the company as may be in effect from time to time or any clawback or recoupment as may be required by applicable law. Restrictive Covenants Under the NEO Agreements, the applicable NEO is generally subject to the following restrictive covenants: employee and customer non-solicitation during employment and for a period of two years thereafter; confidentiality and non-disparagement during employment and thereafter; and non-competition during employment and for a period of three years thereafter (in the case of Messrs. Jacobs and Harik) or eighteen months thereafter (in the case of Mr. Anderson). Non-Compete Payments. In the event Mr. Jacobs’ employment is terminated for any reason (including due to mutual agreement by our company and Mr. Jacobs) other than (x) due to his death, (y) by the company for cause, or (z) Mr. Jacobs’ voluntary resignation (A) prior to a change of control or more than two years following a change of control, other than due to certain events of good reason, or (B) upon or during the two years following a change of control, other than for good reason, then Mr. Jacobs will be entitled to receive payments for each year of the three year non-compete period in an amount equal to one times the sum of (i) Mr. Jacobs’ base salary in effect on the date of termination and (ii) the target bonus in effect on the date of termination (collectively, the “Non-Compete Payment”). Extended Non-Compete Payments. In addition, the company has the option to extend the non-competition period in Messrs. Jacobs and Harik’s NEO Agreement for up to an additional 12 months and in Mr. Anderson’s NEO Agreement for up to an additional 18 months; provided, however, that, in the case of Messrs. Harik and Anderson, we continue to pay the applicable NEO’s base salary as in effect on the date of termination during each month of the extended non-competition period, and, in the case of Mr. Jacobs, we continue to pay him an amount equal to one-twelfth of the Non-Compete Payment during each month of the extended non-compete period. The extended non-compete payments for Messrs. Harik and Anderson will be offset by any monies the applicable NEO earns from any other work during such period. Our right to extend the non-compete for each NEO lapses upon a change of control. | | | | 69 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
EQUITY COMPENSATION PLAN INFORMATION The following table gives information as of December 31, 2022, with respect to the company’s compensation plans, under which equity securities are authorized for issuance. | Plan Category | | | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | | | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | | | Equity compensation plans approved by security holders | | | | | | 3,446,708(1) | | | | | | | — | | | | | | | 6,628,280(2) | | | | Equity compensation plans not approved by security holders | | | | | | — | | | | | | | — | | | | | | | — | | | | Total | | | | | | 3,446,708 | | | | | | | — | | | | | | | 6,628,280 | | |
(1)
Consists of 3,446,708 RSUs and PSUs granted under the XPO Logistics, Inc. 2016 Omnibus Incentive Compensation Plan. (2)
Includes 5,007,389 securities available for issuance under the XPO Logistics, Inc. 2016 Omnibus Incentive Compensation Plan and 1,620,891 securities available for issuance under the XPO Logistics, Inc. Employee Stock Purchase Plan. | | | | 70 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
DELINQUENT SECTION 16(a) Section 16(a) of the Securities Exchange Act of 1934 requires that XPO’s directors, executive officers, chief accounting officer and persons who beneficially own 10% or more of XPO’s common stock file with the SEC initial reports of ownership and reports of changes in ownership of our stock and our other equity securities. To XPO’s knowledge, based solely on a review of the copies of such reports furnished to XPO and written representations that no other reports were required, during the year ended December 31, 2022, all such filing requirements applicable to XPO’s directors, executive officers, chief accounting officer and greater than 10% beneficial owners were complied with, except that each of Ravi Tulsyan and Christopher Brown filed one late report for one transaction. | | | | 71 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
AUDIT COMMITTEE REPORT The following statement made by our Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate such statement by reference. The Audit Committee (“we” in this Audit Committee Report) currently consists of Mr. Aiken (chair), Mr. Jesselson and Ms. Moshouris. The Board of Directors has determined that each current member of the Audit Committee has the requisite independence and other qualifications for audit committee membership under SEC rules, the listing standards of NYSE, our Audit Committee charter, and the independence standards set forth in the XPO, Inc. Corporate Governance Guidelines. The Board of Directors has also determined that Mr. Aiken qualifies as an “audit committee financial expert” as defined under Item 407(d)(5) of Regulation S-K of the Exchange Act. As described more fully below, in carrying out its responsibilities, the Audit Committee relies on management and XPO’s independent registered public accounting firm (“KPMG” or the “outside auditors”). The Audit Committee members are not professionally engaged in the practice of accounting or auditing. The Audit Committee operates under a written charter that is reviewed annually and is available at www.xpo.com. In accordance with our charter, the Audit Committee assists the Board of Directors in fulfilling its responsibilities in a number of areas. These responsibilities include, among others, oversight of: (i) XPO’s accounting and financial reporting processes, including the company’s systems of internal controls over financial reporting and disclosure controls, (ii) the integrity of XPO’s financial statements, (iii) XPO’s compliance with legal and regulatory requirements, (iv) the qualifications and independence of XPO’s outside auditors, and (v) the performance of XPO’s outside auditors and internal audit function. Management is responsible for XPO’s financial statements and the financial reporting process, including the system of internal controls over financial reporting. We are solely responsible for selecting and reviewing the performance of XPO’s outside auditors and, if we deem appropriate in our sole discretion, terminating and replacing the outside auditors. We also are responsible for reviewing and approving the terms of the annual engagement of XPO’s outside auditors, including the scope of audit and non-audit services to be provided by the outside auditors and the fees to be paid for such services, and discussing with the outside auditors any relationships or services that may impact the objectivity and independence of the outside auditors. In fulfilling our oversight role, we met and held discussions, both together and separately, with the company’s management and our outside auditor KPMG. Management advised us that the company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and we reviewed and discussed the consolidated financial statements and key accounting and reporting issues with management and KPMG, both together and separately, in advance of the public release of operating results and filing of annual and quarterly reports with the SEC. We discussed with KPMG the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC, and reviewed a letter from KPMG disclosing such matters. KPMG also provided us with the written disclosures and letter required by applicable requirements of the PCAOB regarding the outside auditors’ communications with the Audit Committee concerning independence, and we discussed with KPMG matters relating to their independence and considered whether their provision of certain non-audit services is compatible with maintaining their independence. KPMG has confirmed its independence, and we determined that KPMG’s provision of non-audit services to XPO is compatible with maintaining its independence. We also reviewed a report by KPMG describing the firm’s internal quality-control procedures and any material issues raised in the most recent internal quality-control review or external peer review or inspection performed by the PCAOB. Based on our review and discussion of XPO’s audited consolidated financial statements with management and KPMG, and KPMG’s report on such financial statements, and based on the discussions and written disclosures described above, and our business judgment, we recommended to the Board of Directors, and the Board approved, that the audited consolidated financial statements be included in XPO’s 2022 Form 10-K, for filing with the SEC. AUDIT COMMITTEE: Jason Aiken, chair Michael Jesselson, member Irene Moshouris, member (since November 1, 2022) | | | | 72 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
POLICY REGARDING PRE-APPROVAL OF SERVICES PROVIDED BY THE OUTSIDE AUDITORS The Audit Committee’s charter requires review and pre-approval by the Audit Committee of all audit services provided by our outside auditors and, subject to the de minimis exception under applicable SEC rules, all permissible non-audit services provided by our outside auditors. The Audit Committee has delegated to its chairman the authority to approve, within guidelines and limits established by the Audit Committee, specific services to be provided by our outside auditors and the fees to be paid. Any such approval must be reported to the Audit Committee at the next scheduled meeting. As required by Section 10A of the Exchange Act, the Audit Committee pre-approved all audit and non-audit services provided by our outside auditors during 2022 and 2021, and the fees paid for such services. SERVICES PROVIDED BY THE OUTSIDE AUDITORS As described above, the Audit Committee is responsible for the appointment, compensation, oversight, evaluation and termination of our outside auditors. Accordingly, the Audit Committee appointed KPMG to serve as our independent registered public accounting firm for fiscal year 2023 on April 12, 2023. The following table shows the fees for audit and other services provided by KPMG for fiscal years 2022 and 2021. | Fee Category | | | | 2022 | | | | 2021 | | | Audit Fees | | | | | $ | 6,963,000 | | | | | | $ | 5,306,000 | | | | Audit-Related Fees | | | | | | 3,386,200 | | | | | | | 4,815,197 | | | | Tax Fees | | | | | | 11,213 | | | | | | | 5,893 | | | | All Other Fees | | | | | | — | | | | | | | — | | | | Total Fees | | | | | $ | 10,360,413 | | | | | | $ | 10,127,090 | | | |
Audit Fees. This category includes fees for professional services rendered by KPMG for 2022 and 2021, for the audits of our financial statements included in our 2022 Form 10-K, and reviews of the financial statements included in our Quarterly Reports on Form 10-Q. Audit fees also include comfort letter fees for 2022. Audit-Related Fees. The 2022 and 2021 fees include transaction-related carve-out audit and other audit-related services. Tax Fees. This category includes fees billed for professional services rendered by KPMG in connection with general tax consulting services in 2022 and 2021. All Other Fees. This category represents fees for all other services or products provided and not covered by the categories above. There were no such fees for 2022 and 2021. | | | | 73 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING | |
This Proxy Statement sets forth information relating to the solicitation of proxies by XPO’s Board of Directors in connection with our Annual Meeting or any adjournment or postponement thereof. This Proxy Statement is being furnished by our Board for use at the Annual Meeting to be held on May 17, 2023 at 10:00 a.m. Eastern Time. The meeting will be held exclusively as a live webcast. You can access the meeting at meetnow.global/MU5KPDC. You are required to have a control number to access the Annual Meeting. Please follow the instructions below to receive your control number. This Proxy Statement and form of proxy forare first being mailed on or about April 20, 2023, to our stockholders of record as of the Company’s 2018 annual meetingclose of stockholders in accordance with Rule 14a-8 underbusiness on March 31, 2023 (the “Record Date”). The following answers address some questions you may have regarding our Annual Meeting. These questions and answers may not include all of the Exchange Act and the Company’s 2nd Amended and Restated Bylaws (the “Bylaws”), as described below.As more specifically provided in our Bylaws, no businessinformation that may be brought before an annual meetingimportant to you as a stockholder of our stockholders unless it is specifiedcompany. Please refer to the more detailed information contained elsewhere in the noticethis Proxy Statement.
What items of the annual meeting or is otherwise brought before the annual meeting by orbusiness will be voted on at the directionAnnual Meeting? We expect that the business put forth for a vote at the Annual Meeting will be as follows: ■
To elect nine (9) members of our Board of Directors for a term to expire at the 2024 Annual Meeting of Stockholders or until their successors are duly elected and qualified (Proposal 1); ■
To ratify the appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for fiscal year 2023 (Proposal 2); ■
To conduct an advisory vote to approve the executive compensation of our named executive officers (“NEOs”) as disclosed in this Proxy Statement (Proposal 3); ■
To consider and transact other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. Senior management of XPO and representatives of our outside auditor, KPMG, will be available to respond to appropriate questions. Who can attend and vote at the Annual Meeting? You are entitled to receive notice of, attend and vote at the Annual Meeting, or any adjournment or postponement thereof, if, as of the close of business on March 31, 2023, the Record Date, you were a holder of record of our common stock. We have designed the virtual Annual Meeting to provide substantially the same opportunities to participate as stockholders would have at an in-person meeting. Our virtual Annual Meeting will be conducted on the internet via live webcast. You can access the Annual Meeting at meetnow.global/MU5KPDC. You will be required to provide the control number on your proxy card to access the Annual Meeting. If the shares of common stock you hold are in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in “street name”), you must register in advance to participate in the Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. Requests for registration should be directed to Computershare by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time on Thursday, May 11, 2023. You will receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to meetnow.global/MU5KPDC and enter your control number. Can I ask questions during the Annual Meeting? The virtual Annual Meeting format allows stockholders to communicate with XPO during the Annual Meeting so they can ask questions of XPO’s management and Board of Directors, as appropriate. Stockholders (or their proxy holders) may submit questions for the Annual Meeting’s question and answer session in advance by logging on to the meeting website at meetnow.global/MU5KPDC. You will need the control number on your proxy card or confirmation email from Computershare in order to submit a question. Click on the “Q&A” icon in the top right corner of the screen and submit your question. You may provide your name, address and organization, and, if applicable, the specific proposal to which your question relates. Questions can be submitted in advance of the Annual Meeting beginning at 9:00 a.m. Eastern Time on May 15, 2023. Questions may also be submitted during the Annual Meeting through the meeting website. We will answer as many questions during the meeting as time will allow and will group questions together where appropriate. We reserve the right to exclude questions regarding topics that are not pertinent to the Annual Meeting matters or company business or are inappropriate. | | | | 74 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
What if I have trouble accessing the Annual Meeting virtually? The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Note: Internet Explorer is not a supported browser. Participants should ensure that they have a strong internet connection wherever they intend to participate in the Annual Meeting. We encourage you to access the meeting prior to the start time. Should you need further assistance prior to or during the meeting, you may call 1-888-724-2416. How many shares of XPO common stock must be present to conduct business at the Annual Meeting? As of the Record Date, there were 115,750,166 shares of common stock issued and outstanding, with each share entitled to one vote on each matter to come before the Annual Meeting. Therefore, 115,750,166 votes are eligible to be cast at the Annual Meeting. A quorum is necessary to hold a valid meeting of stockholders. Pursuant to the company’s bylaws, the presence, in person or by proxy, of the holders of a stockholdermajority of the shares issued and outstanding and entitled to vote who has delivered proper noticeis necessary for each of the proposals to us not less than 90 daysbe presented at the Annual Meeting. Accordingly, holders of shares of our common stock representing 57,875,084 votes must be present at the Annual Meeting. If you vote by internet, telephone or proxy card, the shares you vote will be counted toward the quorum for the Annual Meeting. Abstentions and broker non-votes are counted as present for the purpose of determining a quorum. What are my voting choices? With respect to the election of directors, you may vote “FOR” or “AGAINST” each of the director nominees, or you may “ABSTAIN” from voting for one or more than 180 days priorof such nominees. With respect to the earlier of the date of the annual meeting and the first anniversary of the preceding year’s annual meeting. Accordingly, assuming that our 2018 annual meeting of stockholders is held on or after May 10, 2018, any stockholder proposalother proposals to be considered at the 2018 annual meeting, including nominationsAnnual Meeting, you may vote “FOR” or “AGAINST” or you may “ABSTAIN” from voting on any proposal. If you sign your proxy without giving specific instructions, your shares will be voted in accordance with the recommendations of personsour Board of Directors with respect to the specific proposals described in this Proxy Statement and at the discretion of the proxy holders on any other matters that properly come before the Annual Meeting. What vote is required to approve the proposals being considered at the Annual Meeting? ■
Proposal 1: Election of nine (9) directors. The election of each of the nine (9) director nominees named in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” a nominee must exceed the number of shares voted “against” such nominee) by holders of shares of our common stock at the Annual Meeting at which a quorum is present. If any incumbent director standing for re-election receives a greater number of votes “against” his or her election than votes “for” such election, our bylaws require that such person must promptly tender his or her resignation to our Board of Directors. You may not accumulate your votes for the election of directors. Brokers may not use discretionary authority to vote shares of our common stock on the election of directors if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, in order for your vote to be counted in the election of directors, you will need to communicate your voting decisions to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the election of director nominees. ■
Proposal 2: Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2023. Ratification of the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2023 requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” such proposal must exceed the number of shares voted “against” such proposal) by holders of shares of our common stock at the Annual Meeting at which a quorum is present. Abstentions are not considered votes cast for purposes of tabulation and will have no effect on the proposed ratification of KPMG. We do not expect any broker non-votes, as brokers have discretionary authority to vote on this proposal. ■
Proposal 3: Advisory vote to approve executive compensation. Advisory approval of the resolution on executive compensation of our NEOs as disclosed in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” such proposal must exceed the number of shares voted “against” such proposal) by holders of shares of our common stock at the Annual Meeting at which a quorum is present. This resolution, commonly referred to as a “say-on-pay” resolution, is not binding on our Board of Directors. Although it is non-binding, our Board and the Compensation Committee will consider the voting results when making future decisions regarding our executive compensation program. Brokers may not use discretionary authority to vote shares of our common stock on the advisory vote to approve executive compensation if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, in order for your vote to be counted in the advisory vote to approve executive compensation, you will need to communicate your voting decisions to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the advisory vote to approve executive compensation. | | | | 75 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
In general, other business properly brought before the Annual Meeting at which a quorum is present requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” such proposal must exceed the number of shares voted “against” such proposal) by holders of shares of our common stock. How does the Board of Directors recommend that I vote? Our Board of Directors, after careful consideration, recommends that our stockholders vote “FOR” the election of each director nominee named in this Proxy Statement, “FOR” the ratification of KPMG as our independent registered public accounting firm for fiscal year 2023, and “FOR” the advisory approval of the resolution to approve executive compensation. What do I need to do now? We urge you to read this Proxy Statement carefully, then vote via internet or by telephone by following the instructions on the proxy card, or mail your completed, dated and signed proxy card in the enclosed return envelope as soon as possible, so that your shares of our common stock can be voted at the Annual Meeting. How do I cast my vote? Registered Stockholders. If you are a registered stockholder (i.e., you hold your shares in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in “street name”), you may vote by proxy via internet or by telephone by following the instructions provided on the proxy card, or mail your completed, dated and signed proxy card in the enclosed return envelope. Proxies submitted via internet or by telephone must be received by 1:00 a.m. Eastern Time on May 17, 2023. Please see the proxy card provided to you for instructions on how to submit your proxy via internet or by telephone. Stockholders of record who attend the Annual Meeting may vote directly at the Annual Meeting by following the instructions provided during the Annual Meeting. Beneficial Owners. If you are a beneficial owner of shares (i.e., your shares are held in the name of a brokerage firm, bank or a trustee), you may vote by proxy by following the instructions provided in the voting instruction form or other materials provided to you by the brokerage firm, bank or other nominee that holds your shares. To vote directly at the Annual Meeting, you must obtain a legal proxy from the brokerage firm, bank or other nominee that holds your shares. Follow the instructions provided above to obtain a control number and the voting instructions provided during the Annual Meeting. What is the deadline to vote? If you hold shares as the stockholder of record, your vote by proxy must be received before the polls close at the Annual Meeting. As indicated on the proxy card provided to you, proxies submitted prior to the Annual Meeting via internet or by telephone must be received by 1:00 a.m. Eastern Time on May 17, 2023. If you are the beneficial owner of shares of our common stock, please follow the voting instructions provided by your broker, trustee or other nominee. What happens if I do not respond, or if I respond and fail to indicate my voting preference, or if I abstain from voting? If you fail to vote via internet or by telephone as indicated on your proxy card, or fail to properly submittedsign, date and return your proxy card, your shares will not be counted towards establishing a quorum for the Annual Meeting, which requires holders representing a majority of the outstanding shares of our common stock to usbe present in person or by proxy. Failure to vote, assuming the presence of a quorum, will have no effect on the tabulation of the votes on the proposals. If you are a stockholder of record and you properly sign, date and return your proxy card, but do not earlier than November 11, 2017 nor later than February 9, 2018. Detailed informationindicate your voting preference, we will count your proxy as a vote “FOR” the election of the nine nominees for submittingdirector named in “Proposal 1 — Election of Directors,” “FOR” the ratification of KPMG as our independent registered public accounting firm for fiscal year 2023, and “FOR” the advisory approval of the resolution to approve executive compensation. If my shares are held in “street name” by my broker, dealer, commercial bank, trust company or other nominee, will my broker or other nominee vote my shares for me? You should instruct your broker or other nominee on how to vote your shares of our common stock using the instructions they provide to you. Brokers or other nominees who hold shares of our common stock in “street name” for customers are prevented by the rules set forth in the Listed Company Manual (the “NYSE Rules”) of the New York Stock Exchange (the “NYSE”) from exercising voting discretion with respect to non-routine or contested matters (i.e., they must receive specific voting instructions from a stockholder in order to vote that stockholder’s shares on non-routine or contested matters). Shares not voted by a broker or other nominee, because they did not receive specific voting instructions from the stockholder on one or more proposals, are referred to as “broker non-votes.” We expect that when the NYSE determines whether each of the three proposals to be voted on at our Annual Meeting is a routine or nominationsnon-routine matter, only “Proposal 2 — Ratification of director candidatesthe Appointment of KPMG LLP as Our Independent Registered Public | | | | 76 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Accounting Firm for Fiscal Year 2023” will be determined to be routine. It is important that you instruct your broker or other nominee on how to vote your shares of our common stock held in “street name” by following the instructions provided upon writtento you by your broker or other nominee. What if I want to change my vote? Whether you attend the Annual Meeting or not, you may revoke a proxy at any time before your proxy is voted at the Annual Meeting. You may do so by properly delivering a later-dated proxy either via internet, by telephone, by mail, or by attending the Annual Meeting virtually and voting. Please note, however, that your attendance at the Annual Meeting will not automatically revoke any prior proxy, unless you vote again at the Annual Meeting or specifically request to:in writing that your prior proxy be revoked. You also may revoke your proxy by delivering a notice of revocation to Corporate Secretary, XPO, Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.The foregoing requirements are separate from06831 prior to the SEC’s requirements thatvote at the Annual Meeting. If you hold your shares through a stockholder must meet in order to have a stockholder proposal included in our proxy statement forbroker, dealer, commercial bank, trust company or other nominee, you should follow the 2018 annual meetinginstructions of stockholders. Stockholders interested in submitting a proposal for inclusion in our proxy materials for the 2018 annual meeting may do so by following the procedures set forth in Rule 14a-8 under the Exchange Act. To be eligible for inclusion in such proxy materials pursuant to such rule, stockholder proposals must be received by our Secretary not later than December 18, 2017.
OTHER MATTERS
No businessyour broker or other than that set forth in the attached noticenominee regarding revocation of special meeting is expected to come before the special meeting. However, should any other matters requiring a vote of stockholders arise,proxies.
How will the persons named as proxies vote? If you are a registered stockholder (i.e., if you hold your shares of our common stock in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in “street name”) and you complete and submit a proxy, the accompanyingpersons named as proxies will follow your instructions. If you submit a proxy but do not provide voting instructions, or if your instructions are unclear, the persons named as proxies will vote thereon according toas recommended by our Board of Directors or, if no recommendation is given, by using their best judgment inown discretion. Where can I find the interestresults of the Company.SOLICITATION OF PROXIES
It is expected thatvoting?
We intend to announce preliminary voting results at the solicitation of proxiesAnnual Meeting and will publish final results on a Current Report on Form 8-K to be primarily by mail. Proxies mayfiled with the U.S. Securities and Exchange Commission (the “SEC”) within four (4) business days after the Annual Meeting. The Current Report on Form 8-K will also be solicited personally by regular employees of the Company, by telephone or by other means of communication at nominal cost. The Companyavailable on our website, www.xpo.com. Who will bearpay for the cost of such solicitation. Itsoliciting proxies? The company will reimburse banks, brokers and trustees, or their nominees,pay for reasonable expenses incurred by them in forwarding proxy material to beneficial ownersthe cost of stock in accordance with the NYSE schedule of charges. In addition, the Company has retainedsoliciting proxies. We have engaged Innisfree M&A Incorporated to assist us in soliciting proxies and verifying the records relating to the solicitations in connection with the special meeting. Innisfree M&A Incorporated will receiveAnnual Meeting and have agreed to pay them approximately $9,000,$15,000 plus their reasonable and customary expenses for providing such services.WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject As is customary, we will reimburse brokerage firms, fiduciaries, voting trustees and other nominees for forwarding our proxy materials to the informational requirementseach beneficial owner of shares of our common stock held through them as of the Exchange Act. We file reports, proxy statementsRecord Date. Our directors, officers and other information withemployees, without additional compensation, may solicit proxies personally, in writing, by telephone, by email or otherwise.
What is “householding” and how does it affect me? In cases where multiple company stockholders share the SEC. You may readsame address, and the shares are held through a bank, broker or other holder of record in a street-name account, only one copy these reports,of our proxy statements and other informationmaterials will be delivered to that address unless a stockholder at the SEC’s Public Reference Section at 100 F Street, N.E., Washington, D.C. 20459. You may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. The SEC also maintains an internet website, located at www.sec.gov, which contains reports, proxy statements and other information regarding companies and individuals that file electronically with the SEC. Annex A
XPO LOGISTICS, INC.
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF THE PLAN.
The purpose of the XPO Logistics, Inc. Employee Stock Purchase Plan (the “Planaddress requests otherwise. This practice, known as “householding,”) is to provide Eligible Employees (defined in Section 15, below) with an opportunity to increase their proprietary interest in the success of XPO Logistics, Inc. (the “Company”) by purchasing Stock (defined in Section 15, below) on favorable terms and to pay for such purchases through payroll deductions. The Plan is intended to qualify under Section 423reduce our printing and postage costs. However, any such street-name stockholders residing at the same address who wish to receive a separate copy of our proxy materials may request a copy by contacting their bank, broker or other holder of record, or by sending a written request to Investor Relations, XPO, Inc., Five American Lane, Greenwich, Connecticut 06831, or by contacting Investor Relations by email at investors@xpo.com. The voting instruction form sent to a street-name stockholder should provide information on how to request a separate copy of future materials for each company stockholder at that address, if that is your preference. Similarly, if you currently receive separate copies of our proxy materials but which to participate in householding, please contact us through the method described above.
Can I obtain an electronic copy of the Code. The Plan shall be effectivecompany’s proxy materials? Yes, this Proxy Statement and our 2022 Annual Report are available on the dateinternet at www.edocumentview.com/XPO. | | | | 77 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
PROPOSALS TO BE PRESENTED Proposal 1: Election of Directors Our Board of Directors has nominated for election at the Plan is first adoptedAnnual Meeting each of the following persons to serve until the 2024 Annual Meeting of Stockholders or until their successors are duly elected and qualified: Brad Jacobs Jason Aiken Bella Allaire Wes Frye Mario Harik Michael Jesselson Allison Landry Irene Moshouris Johnny C. Taylor, Jr. Mr. Jacobs, Mr. Aiken, Mr. Jesselson, Ms. Landry and Mr. Taylor were elected as directors by our stockholders at our 2022 Annual Meeting of Stockholders. As a result of the RXO spin-off, three of our directors resigned from the XPO Board and became directors of RXO. To fill the vacancies, the Board engaged an independent third party to conduct a search to find highly qualified candidates who bring relevant experience and diverse perspectives to the Board. Ms. Allaire and Mr. Moshouris were identified as such candidates and, upon the recommendation of the Nominating, Corporate Governance and Sustainability Committee, appointed directors by the Board (the “Effective Date”). The effectivenesson November 1, 2022. Also on November 1, 2022, Mr. Harik became a director and the CEO of the Plan shall be subject to approvalcompany. On March 8, 2023, upon the recommendation of the Plan byexecutive chairman and the stockholdersNominating, Corporate Governance and Sustainability Committee, the Board appointed Mr. Frye as a director of the Company in accordance with Section 14.SECTION 2. ADMINISTRATION OF THE PLAN.
(a)Plan Administrator. The Plan shall be administered bycompany. Information about the Board. The Board has delegated its full authoritynominees is set forth above under the Planheading Board of Directors and Corporate Governance — Directors. In the event that any of these nominees is unable or declines to serve as a director at the Committee, and the Committee may further delegate any or all of its authority under this Plan to such senior management employee(s)time of the Company as it may designate. Notwithstanding any such delegation of authority,Annual Meeting, the Board may itself take any action under the Plan in its discretion at any time, and any reference in this Plan document to the rights and obligations of the Committee shall be construed to apply equally to the Board. Any references to the Board mean only the Board. The authority that may be delegated by the Committee includes, without limitation, the authority to determine proceduresproxies voting for Eligible Employees to enroll in or withdraw from the Plan, setting or changing payroll deduction percentages, and obtaining necessary tax withholdings.(b)Administrator Responsibilities.The Administrator shall be vested with full authority and discretion to construe the terms of the Plan and make factual determinations under the Plan, and to make, administer, and interpret such rules and regulations as it deems necessary to administer the Plan, and any determination, decision, or action of the Administrator in connection with the construction, interpretation, administration, or application of the Plan shall be final, conclusive, and binding upon all Participants and any and all persons claiming under or through any Participant. The Administrator may retain outside entities and professionals to assist in the administration of the Plan including, without limitation, a vendor or vendors to perform enrollment and brokerage services. The rights and privileges of all employees purchasing Stock under the Plan shall be the same.
SECTION 3. ENROLLMENT AND PARTICIPATION.
(a)Offering Periods.While the Plan is in effect, two Offering Periods shall commence in each calendar year. Offering Periods shall consist of thesix-month periods commencing on each April 1 and October 1. The initial Offering Period available under the Plan starts April 1, 2018 and ends on September 30, 2018.
(b)Enrollment. Any individual who, on the day preceding the first day of an Offering Period, qualifies as an Eligible Employee may elect to become a Participant in the Plan for such Offering Period by completing the enrollment process prescribed for this purpose by the Administrator.
(c)Duration of Participation. Once enrolled in the Plan, a Participant shall continue to participate in the Plan until he or she (1) ceases to be an Eligible Employee, (2) withdraws from the Plan under Section 5(a), or (3) reaches the end of the Offering Period in which his or her employee contributions were discontinued under Section 8(b). A Participantelection will be voted for any nominee who withdrew from the Plan under Section 5(a) may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Subsection (b) above. A Participant whose employee contributions were discontinued automatically under Section 8(b) shall automatically resume participation at the beginning of the earliest Offering Period ending in the next calendar year, if he or she then is an Eligible Employee.
SECTION 4. EMPLOYEE CONTRIBUTIONS.
(a)Frequency of Payroll Deductions. A Participant may purchase shares of Stock under the Plan solely by means of payroll deductions. Payroll deductions, asbe designated by the Participant pursuantBoard of Directors to Subsection (b) below, shall occur duringfill the Offering Period on the payment dates of all Compensation while a Participant.
(b)Amount of Payroll Deductions. An Eligible Employee shall designate in the enrollment process the portion of his or her Compensation that he or she elects to have withheld for the purchase of Stock. Such portion shall be a whole percentage of the Eligible Employee’s Compensation, but not less than one percent (1%) nor more than ten percent (10%). The Eligible Employee’s election hereunder shall remain in place until it is either (i) changed (pursuant to Subsection (c)), (ii) discontinued (pursuant to Subsection (d)), (iii) withdrawn (pursuant to Section 5) or (iv) automatically withdrawn (pursuant to Section 6).
(c)Changing Withholding Rate. If a Participant wishes to change his or her rate of payroll withholding, he or she may do so by notifying the Company using the process prescribed for this purpose by the Administrator. The new withholding rate shall be effective as soon as reasonably practicable after such notification by the Administrator.
(d)Discontinuing Payroll Deductions. If a Participant wishes to discontinue employee contributions entirely, he or she may do so at any time by using the process prescribed for this purpose by the Administrator. Payroll withholding shall cease as soon as reasonably practicable after such notification. (In addition, employee contributions may be discontinued automatically pursuant to Section 8(b)). A Participant who has discontinued employee contributions may resume such contributions by using the process prescribed for this purpose by the Administrator.
SECTION 5. WITHDRAWAL FROM THE PLAN.
(a)Withdrawal. A Participant may elect to withdraw from the Plan by using the process and timing prescribed for this purpose by the Administrator. As soon as reasonably practicable after the effective date of a Participant’s withdrawal, payroll deductions shall cease and the entire amount credited to the Participant’s Plan Account shall be refunded to him or her in cash, without interest. No partial withdrawals shall be permitted.
(b)Re-enrollment after Withdrawal. A former Participant who has withdrawn from the Plan shall not be a Participant until he or shere-enrolls in the Plan under Section 3(b).Re-enrollment may be effective only at the commencement of an Offering Period.
SECTION 6. CHANGE IN EMPLOYMENT STATUS.
(a)Termination of Employment.Termination of employment as an Eligible Employee for any reason, including death, shall be treated as an automatic withdrawal from the Plan under Section 5(a). (A transfer from one Participating Company to another shall not be treated as a termination of employment.)
(b)Leave of Absence. For purposes of the Plan, employment shall not be deemed to terminate when the Participant goes on an approved leave of absence. Employment shall be deemed to terminate in any event when the approved leave ends, unless the Participant immediately returns to work.
(c)Death. In the event of the Participant’s death the amount credited to his or her Plan Account, and any shares of Stock held by the ESPP Broker, shall be paid to the Participant’s estate.
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES.
(a)Plan Accounts. A Plan Account shall be maintained in the name of each Participant. Whenever an amount is deducted from the Participant’s Compensation under the Plan, such amount shall be credited to the Participant’s Plan Account. Amounts credited to Plan Accounts shall not be trust funds and may be commingled with the Company’s general assets and applied to general corporate purposes. No interest shall be credited to Plan Accounts.
(b)Purchase Price. The Purchase Price for each share of Stock purchased at the close of an Offering Period shall be ninety-five percent (95%) of the Fair Market Value of such share on the last trading day in such Offering Period.
(c)Number of Shares Purchased.vacancy. As of the last daydate of this Proxy Statement, we are not aware that any of the nominees is unable or will decline to serve as a director if elected.
REQUIRED VOTE The election of each Offering Period, each Participant shall be deemed to have elected to purchaseof the nine (9) director nominees named in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares of Stock calculated in accordance with this Subsection (c), unless the Participant has previously elected to withdraw from the Plan in accordance with Section 5(a). The amount then in the Participant’s Plan Account shall be divided by the Purchase Price, andvoted “for” a nominee must exceed the number of shares voted “against” such nominee) by holders of shares of our common stock. If any incumbent director standing for election receives a greater number of votes “against” his or her election than votes “for” his or her election, our bylaws require that results shallsuch person must promptly tender his or her resignation to the Board of Directors, subject to acceptance by the Board of Directors. RECOMMENDATION Our Board of Directors recommends a vote “FOR” the election of each of the nominees listed above to our Board of Directors. | | | | 78 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Proposal 2: Ratification of the Appointment of KPMG LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2023 The Audit Committee of our Board of Directors has appointed KPMG LLP (“KPMG”) to serve as our independent registered public accounting firm for the year ending December 31, 2023. KPMG has served in this capacity since 2011. We are asking our stockholders to ratify the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2023. Although ratification is not required by our bylaws or otherwise, our Board of Directors is submitting the appointment of KPMG to our stockholders for ratification as a matter of good corporate governance. If our stockholders fail to ratify the appointment of KPMG, the Audit Committee will consider whether it is appropriate and advisable to appoint a different independent registered public accounting firm. Even if our stockholders ratify the appointment of KPMG, the Audit Committee in its discretion may appoint a different registered public accounting firm at any time if it determines that such a change would be purchased from the Company with the funds in the Participant’s Plan Account. The foregoing notwithstanding, no Participant shall purchase more than one thousand (1,000) sharesbest interests of Stock with respectour company and our stockholders. Representatives of KPMG are expected to any Offering Period nor more thanbe present at the amountsAnnual Meeting and will have an opportunity to make a statement if they desire to do so, and to respond to appropriate questions. REQUIRED VOTE Ratification of Stock set forth in Sections 8(b) and 13(a). Any fractional share,the appointment of KPMG as calculated under this Subsection (c), shall be rounded down toour independent registered public accounting firm for the next lower whole share.(d)Available Shares Insufficient. Inyear ending December 31, 2023 requires the event thataffirmative vote of a majority of the aggregate number of shares that all Participants elect to purchase during an Offering Period exceeds the maximum number of shares remaining available for issuance under Section 13(a), thenvotes cast (meaning the number of shares to which each Participant is entitled shall be determined by multiplyingvoted “for” such proposal must exceed the number of shares availablevoted “against” such proposal) by holders of shares of our common stock at the annual meeting at which a quorum is present.
RECOMMENDATION Our Board of Directors recommends a vote “FOR” the ratification of the appointment of KPMG as our independent registered public accounting firm for issuance byfiscal year 2023. | | | | 79 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
Proposal 3: Advisory Vote to Approve Executive Compensation The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, and Section 14A of the Securities Exchange Act of 1934, require that we provide our stockholders with the opportunity to vote to approve, on a fraction,non-binding advisory basis, the numeratorcompensation of whichour NEOs as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. Accordingly, we are asking our stockholders to approve the following advisory resolution: “RESOLVED, that the stockholders of XPO, Inc. (the “company”) hereby approve, on an advisory basis, the compensation of the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in the Proxy Statement for the company’s 2023 Annual Meeting of Stockholders.” We encourage stockholders to review the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosures included in this Proxy Statement. As described in detail under the heading Executive Compensation — Compensation Discussion and Analysis, we believe that our compensation programs appropriately reward executive performance and align the interests of our NEOs and key employees with the long-term interests of our stockholders, while also enabling us to attract and retain talented executives. This resolution, commonly referred to as a “say-on-pay” resolution, is not binding on our Board of Directors. Although non-binding, our Board of Directors and the Compensation Committee will consider the voting results when making future decisions regarding our executive compensation program. At the 2018 Annual Meeting of Stockholders, our stockholders voted to approve an annual holding of the advisory vote on executive compensation. This frequency will continue until the next required non-binding, advisory vote is held on the frequency of advisory votes on executive compensation in 2024, as per the SEC rules. REQUIRED VOTE Approval of this advisory resolution, commonly referred to as a “say-on-pay” resolution, requires the affirmative vote of a majority of the votes cast (meaning the number of shares thatvoted “for” such Participant has elected to purchase and the denominator of which isproposal must exceed the number of shares that all Participants have elected to purchase.(e)Mandatory Holding Period / Issuancevoted “against” such proposal) by holders of Stock.At or as promptly as practicable after the last day of each Offering Period, the Company will deliver the shares of Stock purchasedour common stock at the annual meeting at which a quorum is present.
RECOMMENDATION Our Board of Directors recommends a vote “FOR” approval of the advisory resolution to approve executive compensation set forth above. OTHER MATTERS We do not expect that any matter other than the foregoing proposals will be brought before the Annual Meeting. If, however, such a matter is properly presented at the Annual Meeting or any adjournment or postponement of the Annual Meeting, the persons appointed as proxies will vote as recommended by our Board of Directors or, if no recommendation is given, in accordance with their judgment. | | | | 80 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
AVAILABILITY OF ANNUAL REPORT AND PROXY STATEMENT If you would like to receive a copy of our 2022 Annual Report or this Proxy Statement, please contact us at Investor Relations, XPO, Inc., Five American Lane, Greenwich, Connecticut 06831 or by email at investors@xpo.com, and we will send a copy to you without charge. A NOTE ABOUT OUR WEBSITE Although we include references to our website, www.xpo.com, and certain additional third-party websites, throughout this Proxy Statement, information that is included on our website is not incorporated by reference into, and is not a part of, this Proxy Statement. Our website address is included as an inactive textual reference only. We use our website as one means of disclosing material non-public information and for complying with our disclosure obligations under the SEC’s Regulation FD. Such disclosures typically will be included within the Investor Relations section of our website. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. | | | | 81 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
ANNEX A— RECONCILIATION OF NON-GAAP MEASURES | |
CONSOLIDATED RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA Unaudited $ in millions | | | | | Years Ended December 31, | | | | | | | 2022 | | | | 2021 | | | | 2020 | | | Income (loss) from continuing operations | | | | | $ | 184 | | | | | | $ | 96 | | | | | | $ | (110) | | | | Debt extinguishment loss | | | | | | 39 | | | | | | | 54 | | | | | | | — | | | | Interest expense | | | | | | 135 | | | | | | | 211 | | | | | | | 308 | | | | Income tax provision (benefit) | | | | | | 74 | | | | | | | 11 | | | | | | | (54) | | | | Depreciation and amortization expense | | | | | | 392 | | | | | | | 385 | | | | | | | 378 | | | | Goodwill impairment(1) | | | | | | 64 | | | | | | | — | | | | | | | — | | | | Transaction and integration costs | | | | | | 58 | | | | | | | 36 | | | | | | | 67 | | | | Restructuring costs | | | | | | 50 | | | | | | | 19 | | | | | | | 22 | | | | Other | | | | | | 1 | | | | | | | — | | | | | | | (2) | | | | Adjusted EBITDA | | | | | $ | 997 | | | | | | $ | 812 | | | | | | $ | 609 | | | | | | | | | | | | | | | | | |
(1)
The goodwill impairment relates to the ESPP BrokerEuropean Transportation reportable segment CONSOLIDATED RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS AND ADJUSTED DILUTED EARNINGS FROM CONTINUING OPERATIONS PER SHARE (“ADJUSTED DILUTED EPS”) Unaudited $ in millions, except per share data | | | | | Years Ended December 31, | | | | | | | 2022 | | | | 2021 | | | Net income from continuing operations attributable to common shareholders | | | | | $ | 184 | | | | | | $ | 96 | | | | Debt extinguishment loss | | | | | | 39 | | | | | | | 54 | | | | Unrealized loss on foreign currency option and forward contracts | | | | | | — | | | | | | | 1 | | | | Amortization of acquisition-related intangible assets | | | | | | 54 | | | | | | | 55 | | | | ABL amendment cost | | | | | | — | | | | | | | 1 | | | | Goodwill impairment(1) | | | | | | 64 | | | | | | | — | | | | Transaction and integration costs | | | | | | 58 | | | | | | | 36 | | | | Restructuring costs | | | | | | 50 | | | | | | | 19 | | | | Income tax associated with the adjustments above | | | | | | (41) | | | | | | | (35) | | | | Discrete and other tax-related adjustments | | | | | | — | | | | | | | (5) | | | | Adjusted net income from continuing operations attributable to common shareholders | | | | | $ | 408 | | | | | | $ | 222 | | | | Adjusted diluted earnings from continuing operations per share | | | | | $ | 3.53 | | | | | | $ | 1.94 | | | | Weighted-average common shares outstanding | | | | | | | | | | | | | | | | | Diluted weighted-average common shares outstanding | | | | | | 116 | | | | | | | 114 | | |
(1)
The goodwill impairment relates to the European Transportation reportable segment. | | | | 82 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
CONSOLIDATED RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS TO FREE CASH FLOW Unaudited $ in millions | | | | | Years Ended December 31, | | | | | | | 2022 | | | | 2021 | | | Net cash provided by operating activities from continuing operations | | | | | $ | 824 | | | | | | $ | 490 | | | | Payment for purchases of property and equipment | | | | | | (521) | | | | | | | (269) | | | | Proceeds from sales of property and equipment | | | | | | 88 | | | | | | | 131 | | | | Free cash flow | | | | | $ | 391 | | | | | | $ | 352 | | | | | | | | | | | | | |
CONSOLIDATED RECONCILIATION OF NET LEVERAGE AND NET DEBT Unaudited $ in millions | | | | | December 31, 2022 | | | | March 31, 2022 As Reported(1) | | | | December 31, 2021 As Reported(1) | | | Reconciliation of Net Debt | | | | | | | | | | | | | | | | | | | | | | | | Total debt | | | | | $ | 2,532 | | | | | | $ | 3,559 | | | | | | $ | 3,572 | | | | Less: Cash and cash equivalents | | | | | | 460 | | | | | | | 1,004 | | | | | | | 260 | | | | Net debt | | | | | $ | 2,072 | | | | | | $ | 2,555 | | | | | | $ | 3,312 | | | | | | | | | | | | | | | | | |
| | | | | Year Ended December 31, 2022 | | | | Three Months Ended March 31, 2022 As Reported(1) | | | | Year Ended December 31, 2021 As Reported(1) | | | Reconciliation of Net Leverage | | | | | | | | | | | | | | | | | | | | | | | | Net debt | | | | | $ | 2,072 | | | | | | $ | 2,555 | | | | | | $ | 3,312 | | | | Trailing twelve months adjusted EBITDA | | | | | $ | 997 | | | | | | $ | 1,281 | | | | | | $ | 1,239 | | | | Net leverage | | | | | | 2.1x | | | | | | | 2.0x | | | | | | | 2.7x | | |
| | | | | Trailing Twelve Months Ended March 31, | | | | Three Months Ended March 31, | | | | Twelve Months Ended December 31, | | | | Three Months Ended March 31, | | | | | | | 2022(1) | | | | 2022(1) | | | | 2021(1) | | | | 2021(1) | | | Reconciliation of Income from Continuing Operations to Adjusted EBITDA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income from continuing operations | | | | | $ | 749 | | | | | | $ | 489 | | | | | | $ | 323 | | | | | | $ | 63 | | | | Debt extinguishment loss | | | | | | 46 | | | | | | | — | | | | | | | 54 | | | | | | | 8 | | | | Interest expense | | | | | | 183 | | | | | | | 37 | | | | | | | 211 | | | | | | | 65 | | | | Income tax provision | | | | | | 181 | | | | | | | 113 | | | | | | | 87 | | | | | | | 19 | | | | Depreciation and amortization expense | | | | | | 473 | | | | | | | 116 | | | | | | | 476 | | | | | | | 119 | | | | Unrealized (gain) loss on foreign currency option and forward contracts | | | | | | 2 | | | | | | | — | | | | | | | 1 | | | | | | | (1) | | | | Gain on sale of business | | | | | | (450) | | | | | | | (450) | | | | | | | — | | | | | | | — | | | | Litigation settlements | | | | | | 31 | | | | | | | — | | | | | | | 31 | | | | | | | — | | | | Transaction and integration costs | | | | | | 42 | | | | | | | 10 | | | | | | | 37 | | | | | | | 5 | | | | Restructuring costs | | | | | | 24 | | | | | | | 6 | | | | | | | 19 | | | | | | | 1 | | | | Adjusted EBITDA | | | | | $ | 1,281 | | | | | | $ | 321 | | | | | | $ | 1,239 | | | | | | $ | 279 | | | | | | | | | | | | | | | | | | | | | |
(1)
Represents amounts previously reported for deposit into the Participant’s Account. Such Account shall be registeredperiods presented, prior to RXO spin-off | | | | 83 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
RECONCILIATION OF CONSTANT CURRENCY REVENUE FOR EUROPEAN TRANSPORTATION SEGMENT Unaudited $ in millions | | | | | Years Ended December 31, | | | | | | | 2022 | | | | 2021 | | | Revenue | | | | | $ | 3,073 | | | | | | $ | 3,077 | | | | Foreign exchange rates | | | | | | 379 | | | | | | | — | | | | Constant currency revenue | | | | | $ | 3,452 | | | | | | $ | 3,077 | | | | Constant currency revenue growth(1) | | | | | | 12.2% | | | | | | | | | | | | | | | | | | | | |
(1)
Constant currency revenue growth is calculated as the relative change in year-over-year constant currency revenue, expressed as a percentage of 2021 constant currency revenue RECONCILIATION OF NORTH AMERICAN LTL SEGMENT ADJUSTED OPERATING RATIO AND ADJUSTED EBITDA Unaudited $ in millions | | | | | Years Ended December 31, | | | | | | | 2022 | | | | 2021 | | | Revenue (excluding fuel surcharge revenue) | | | | | $ | 3,631 | | | | | | $ | 3,493 | | | | Fuel surcharge revenue | | | | | | 1,014 | | | | | | | 632 | | | | Revenue | | | | | | 4,645 | | | | | | | 4,125 | | | | Salaries, wages and employee benefits | | | | | | 2,079 | | | | | | | 1,909 | | | | Purchased transportation | | | | | | 499 | | | | | | | 452 | | | | Fuel and fuel-related taxes | | | | | | 424 | | | | | | | 282 | | | | Other operating expenses | | | | | | 601 | | | | | | | 556 | | | | Depreciation and amortization | | | | | | 239 | | | | | | | 227 | | | | Rents and leases | | | | | | 92 | | | | | | | 79 | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | Operating income | | | | | | 703 | | | | | | | 619 | | | | Operating ratio(1) | | | | | | 84.9% | | | | | | | 85.0% | | | | Other income(2) | | | | | | 60 | | | | | | | 58 | | | | Amortization expense | | | | | | 34 | | | | | | | 34 | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | Adjusted operating income | | | | | $ | 805 | | | | | | $ | 712 | | | | Adjusted operating ratio(3) | | | | | | 82.7% | | | | | | | 82.7% | | | | Depreciation expense | | | | | | 205 | | | | | | | 193 | | | | Other | | | | | | 2 | | | | | | | 1 | | | | Adjusted EBITDA(4) | | | | | $ | 1,012 | | | | | | $ | 906 | | | | Gains on real estate transactions | | | | | | (55) | | | | | | | (62) | | | | Adjusted EBITDA, excluding gains on real estate transactions | | | | | $ | 957 | | | | | | $ | 844 | | | | Adjusted operating income, excluding gains on real estate transactions | | | | | $ | 750 | | | | | | $ | 650 | | | | Adjusted operating ratio, excluding gains on real estate transactions(3) | | | | | | 83.9% | | | | | | | 84.3% | | | | | | | | | | | | | |
The above table reflects the results of our North American LTL segment as reported in our 2022 Form 10-K, we subsequently filed a Current Report on Form 8-K on April 11, 2023 that recast these amounts to reflect incremental Corporate costs. Please see the following table for further information Effective in the namefourth quarter 2022, the financial results of the Participant.Duringcompany’s trailer manufacturing operations are reported in the three (3) monthNorth American LTL segment and prior period fromresults have been recast to reflect the last daycurrent presentation
(1)
Operating ratio is calculated as (1 – (operating income divided by revenue)) (2)
Other income primarily consists of each Offering Period,pension income (3)
Adjusted operating ratio is calculated as (1 – (adjusted operating income divided by revenue)); adjusted operating margin is the inverse of adjusted operating ratio (4)
Adjusted EBITDA is used by the company’s chief operating decision maker to evaluate segment profit (loss) in accordance with ASC 280 | | | | 84 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
RECONCILIATION OF NORTH AMERICAN LTL SEGMENT ADJUSTED OPERATING RATIO AND ADJUSTED EBITDA REFLECTING INCREMENTAL CORPORATE COSTS Unaudited $ in millions | | | | | Years Ended December 31, | | | | | | | 2022 | | | | 2021 | | | Revenue (excluding fuel surcharge revenue) | | | | | $ | 3,631 | | | | | | $ | 3,493 | | | | Fuel surcharge revenue | | | | | | 1,014 | | | | | | | 632 | | | | Revenue | | | | | | 4,645 | | | | | | | 4,125 | | | | Salaries, wages and employee benefits | | | | | | 2,176 | | | | | | | 2,028 | | | | Purchased transportation | | | | | | 499 | | | | | | | 452 | | | | Fuel, operating expenses and supplies(1) | | | | | | 983 | | | | | | | 782 | | | | Operating taxes and licenses | | | | | | 48 | | | | | | | 44 | | | | Insurance and claims | | | | | | 123 | | | | | | | 113 | | | | Gains on sales of property and equipment | | | | | | (54) | | | | | | | (61) | | | | Depreciation and amortization | | | | | | 239 | | | | | | | 227 | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | Operating income | | | | | | 623 | | | | | | | 539 | | | | Operating ratio(2) | | | | | | 86.6% | | | | | | | 86.9% | | | | Other income | | | | | | 1 | | | | | | | — | | | | Amortization expense | | | | | | 34 | | | | | | | 34 | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | Gains on real estate transactions | | | | | | (55) | | | | | | | (62) | | | | Adjusted operating income | | | | | $ | 611 | | | | | | $ | 512 | | | | Adjusted operating ratio(3) | | | | | | 86.8% | | | | | | | 87.6% | | | | Depreciation expense | | | | | | 205 | | | | | | | 193 | | | | Pension income | | | | | | 59 | | | | | | | 58 | | | | Gains on real estate transactions | | | | | | 55 | | | | | | | 62 | | | | Other | | | | | | 2 | | | | | | | 1 | | | | Adjusted EBITDA(4) | | | | | $ | 932 | | | | | | $ | 826 | | | | Adjusted EBITDA Margin(5) | | | | | | 20.1% | | | | | | | 20.0% | | | | | | | | | | | | | |
Effective in the first quarter of 2023, XPO began allocating incremental Corporate costs to its North American LTL segment. The above table reflects a Participant (whether or not still an Employee) may not withdraw, sell or transfer sharesrecast of stock acquired during such Offering Period exceptour previously reported results to reflect incremental allocations of approximately $80 million annually. (1)
Fuel, operating expenses and supplies includes fuel-related taxes (2)
Operating ratio is calculated as (1 – (operating income divided by revenue)) (3)
Adjusted operating ratio is calculated as (1 – (adjusted operating income divided by revenue)); adjusted operating margin is the inverse of adjusted operating ratio (4)
Adjusted EBITDA is used by our chief operating decision maker to evaluate segment profit (loss) in accordance with ASC 280 (5)
Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue | | | | 85 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
NORTH AMERICAN LTL SEGMENT RETURN ON INVESTED CAPITAL Unaudited $ in millions | | | | | Year Ended | | | Select income statement items | | | | December 31, 2022 | | | Adjusted EBITDA | | | | | $ | 1,012 | | | | (-) Corporate costs(1) | | | | | | 80 | | | | (-) Depreciation | | | | | | 205 | | | | (-) Pension income | | | | | | 59 | | | | (-) Real estate gains | | | | | | 55 | | | | (+) Operating lease interest(2) | | | | | | 12 | | | | (-) Cash taxes(3) | | | | | | 83 | | | | Net operating profit after tax (NOPAT) | | | | | $ | 542 | | | |
| | | | | As of December 31, | | | Select balance sheet items | | | | 2022 | | | Total assets (excluding intercompany and investment in affiliates) | | | | | $ | 3,288 | | | | (-) Cash | | | | | | (5) | | | | (-) Goodwill and intangibles | | | | | | 1,024 | | | | Operating assets | | | | | | 2,269 | | | | Total liabilities (excluding intercompany) | | | | | | 1,119 | | | | (-) Short-term debt | | | | | | 18 | | | | (-) Operating lease liabilities | | | | | | 417 | | | | (-) Long-term debt | | | | | | 27 | | | | Non-debt liabilities | | | | | | 657 | | | | Invested capital | | | | | $ | 1,612 | | | | Return on invested capital | | | | | | 34% | | | |
(1)
Effective in the first quarter of 2023, XPO began allocating incremental Corporate costs to its North American LTL segment. The return on accountinvested capital calculation reflects these incremental allocations of approximately $80 million annually (2)
Operating lease interest is calculated as period end operating lease assets multiplied by XPO’s incremental borrowing rate, net of tax (3)
Cash taxes is calculated as the ratio of the Participant’s death, or such other reason asNorth American LTL segment’s adjusted EBITDA, excluding real estate gains, to XPO adjusted EBITDA, multiplied by XPO’s cash paid for taxes | | | | 86 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
NON-GAAP FINANCIAL MEASURES As required by the Administrator may promulgate in its discretion from time to time.After the end of such three (3) month period, the Participant shall be free to undertake a disposition (as that term is defined in Section 424(c)rules of the Code) of such shares at any time, whether by sale, exchange, gift, or other transfer of legal title, but in the absence of such a dispositionSecurities and Exchange Commission (“SEC”), we provide reconciliations of the shares,non-GAAP financial measures contained in this Proxy Statement to the shares must remain in the Participant’s ESPP Broker Account until the holding periodmost directly comparable measure under GAAP, which are set forth in Section 423(a)the financial tables above.
XPO’s non-GAAP financial measures used in this Proxy Statement include: adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”); free cash flow; adjusted net income from continuing operations attributable to common shareholders and adjusted earnings per share from continuing operations (diluted) (“adjusted EPS”) on a consolidated basis. We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments’ core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate these non-GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures of other companies. These non-GAAP financial measures should only be used as supplemental measures of our operating performance. Adjusted EBITDA, adjusted net income from continuing operations attributable to common shareholders and adjusted EPS include adjustments for transaction and integration costs and restructuring costs. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition and include transaction costs, acquisition and integration consulting fees, internal salaries and wages (to the Codeextent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems. Restructuring costs primarily relate to severance costs associated with business optimization initiatives. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating XPO’s and each business segment’s ongoing performance. We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value. We believe that adjusted EBITDA improves comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has been satisfied. determined are not reflective of core operating activities and thereby assist investors with assessing trends in our underlying businesses. We believe that adjusted net income attributable to common shareholders and adjusted EPS improve the comparability of our operating results from period to period by removing the impact of certain costs and gains that management has determined are not reflective of our core operating activities. We believe that adjusted operating income and adjusted operating ratio for our North American Less-Than-Truckload business improve the comparability of our operating results from period to period by (i) removing the impact of certain transaction, integration and restructuring costs and amortization expenses and, (ii) including the impact of pension income incurred in the reporting period as set out in the attached tables. With respect to sharesour full year 2021 financial target for which the foregoing holding period has been satisfied, the Participant may move those shares to another brokerage accountadjusted EBITDA, a reconciliation of Participant’s choosing or receive a certificate for such shares.If a Participant elects to withdraw shares in certificated form, one or more certificates for whole shares shall be issued in the name of, and deliveredthis non-GAAP measure to the Participant. A Participant seeking to withdraw, sell or transfer shares of Stock must give instructionscorresponding GAAP measure is not available without unreasonable effort due to the ESPP Broker in such mannervariability and formcomplexity of the reconciling items described above that we exclude from this non-GAAP target measure. The variability of these items may have a significant impact on our future GAAP financial results and, as may be prescribed bya result, we are unable to prepare the Administratorforward-looking statement of income and the ESPP Broker, which instructions will be acted upon as promptly as practicable. Withdrawals and transfers will be subject to any fees imposedstatement of cash flows prepared in accordance with Section 7(f), below.
Each Participant shallGAAP that would be required to notifyproduce such a reconciliation.
FORWARD-LOOKING STATEMENTS This Proxy Statement includes forward-looking statements within the Company in the event of the disposition of any of such shares, including for shares transferred away from the ESPP Broker to another brokerage account and for shares withdrawn in certificated form. (f)Costs and Expenses.Costs and expenses incurred in the administration of the Plan and maintenance of Accounts will be paid by the Company, including annual fees of the ESPP Broker and any brokerage fees and commissions for the purchase of Stock upon reinvestment of dividends and distributions. The foregoing notwithstanding, the ESPP Broker may impose or pass through a reasonable fee for the withdrawal of Stock in the form of stock certificates (as permitted under Section 7(e)), and reasonable fees for other services unrelated to the purchase of Stock under the Plan, to the extent approved in writing by the Company and communicated to participants. In no circumstance shall the Company pay any brokerage fees and commissions for the sale or disposition of Stock acquired under the Plan by a Participant.
(g)Unused Cash Balances. Any amount remaining in the Participant’s Plan Account that represents the Purchase Price for a fractional share shall be carried over in the Participant’s Plan Account to the next Offering Period. Any amount remaining in the Participant’s Plan Account that represents the Purchase Price for whole shares that could not be purchased by reason of Subsection (c) above, or Section 13(a) shall be refunded to the Participant in cash, without interest.
(h)Shareholder Approval. Any other provision of the Plan notwithstanding, no shares of Stock shall be purchased under the Plan unless and until the Company’s shareholders have approved the adoption of the Plan.
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP.
(a)Five Percent Limit. Any other provision of the Plan notwithstanding, no Participant shall be granted a right to purchase Stock under the Plan if such Participant, immediately after his or her election to purchase such Stock, would own stock possessing five percent (5%) or more of the total combined voting power or value (determined under Section 423 of the Code) of all classes of stock of the Company or any parent or Subsidiary of the Company. For purposes of this Subsection (a), the following rules shall apply:
(i) Ownership of stock shall be determined after applying the attribution rulesmeaning of Section 424(d)27A of the Code;
(ii) Each Participant shall be deemed to own any stock that he or she has a right or option to purchase under this or any other plan; and
(iii) For purposes of applying subsection (ii), each Participant shall be deemed to have the right or option to purchase one thousand (1,000) shares of Stock under this Plan with respect to each Offering Period.
(b)Dollar Limit. Any other provision of the Plan notwithstanding, no Participant shall purchase Stock with a Fair Market Value in excess of the following limit:
(i) In the case of Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Stock that the Participant previously purchased in the current calendar year under this Plan.
(ii) In the case of Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A) $50,000 minus (B) the Fair Market Value of the Stock that the Participant previously purchased under this Plan in the current calendar year and in the immediately preceding calendar year.
For purposes of this Subsection (b), the Fair Market Value of Stock shall be determined in each case as of the beginning of the Offering Period in which such Stock is purchased. If a Participant is precluded by this Subsection (b) from purchasing additional Stock under the Plan, then his or her employee contributions shall automatically be discontinued and shall resume at the beginning of the earliest Offering Period ending in the next calendar year (if he or she then is an Eligible Employee).
SECTION 9. RIGHTS NOT TRANSFERABLE.
The rights of any Participant under the Plan, or any Participant’s interest in any Stock or monies to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or in any other manner other than by the laws of descent and distribution. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than by the laws of descent and distribution, then such act shall be treated as an election by the Participant to withdraw from the Plan under Section 5(a).
SECTION 10. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan or in any right granted under the Plan shall confer upon the Participant any right to continue in the employ of a Participating Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Participating Companies or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her employment at any time and for any reason, with or without cause.
SECTION 11. NO RIGHTS AS A SHAREHOLDER.
A Participant shall have no rights as a shareholder with respect to any shares of Stock that he or she may have a right to purchase under the Plan until such shares have been purchased on the last day of the applicable Offering Period.
SECTION 12. SECURITIES LAW REQUIREMENTS.
Shares of Stock shall not be issued under the Plan unless the issuance and delivery of such shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulationsSection 21E of any stock exchange or other securities market on which the Company’s securities may then be traded.
SECTION 13. STOCK OFFERED UNDER THE PLAN.
(a)Authorized Shares. The aggregate authorized number of shares of Stock available for purchase under the Plan is two million (2,000,000) shares, conditioned on approval by the Company’s shareholders within twelve (12) months before or after the Plan’s Effective Date, and subject to adjustment pursuant to this Section 13.
(b)Antidilution Adjustments. The aggregate number of shares of Stock offered under the Plan, the one thousand (1,000) share limitation described in Section 7(c) and the price of shares that any Participant has elected to purchase shall be adjusted proportionately by the Administrator for any increase or decrease in the number of outstanding shares of Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend, any other increase or decrease in such shares effected without receipt or payment of consideration by the Company, the distribution of the shares of a Subsidiary to the Company’s shareholders or a similar event.
(c)Reorganizations. Any other provision of the Plan notwithstanding, immediately prior to the effective time of a Corporate Reorganization, the Offering Period then in progress shall terminate and shares shall be purchased pursuant to Section 7, unless the Plan is assumed by the surviving corporation or its parent corporation pursuant to the plan of merger or consolidation. The Plan shall in no event be construed to restrict in any way the Company’s right to undertake a dissolution, liquidation, merger, consolidation or other reorganization.
SECTION 14. EFFECTIVE DATE; TERM OF PLAN; AMENDMENT OR DISCONTINUANCE.
The Plan shall be submitted for the approval of the Company’s stockholders within twelve (12) months after the Effective Date. No right may be granted under the Plan prior to such stockholder approval. The Plan shall be in effect until the tenth (10th) anniversary of the Effective Date, unless sooner terminated under this Section 14. The Board shall have the right to amend, suspend or terminate the Plan at any time and without notice. No rights may be granted under the Plan during any period of suspension of the Plan or after termination of the Plan. Any amendment that increases the aggregate number of shares of Stock to be issued under the Plan shall be subject to approval by a vote of the shareholders of the Company within twelve (12) months before, or twelve (12) months after, the Board’s adoption of the amendment. In addition, any other amendment of the Plan shall be subject to approval by a vote of the shareholders of the Company to the extent required by an applicable law or regulation. To the extent an amendment does not require shareholder or Board approval (as described above), the Committee shall have the authority to make technical and administrative amendments to the Plan for the sole purpose of carrying out its administrative responsibilities under the Plan.
SECTION 15. DEFINITIONS.
(a) “Administrator” or “Plan Administrator” means the Committee or the persons acting within the scope of their authority to administer the Plan pursuant to a delegation of authority from the Committee pursuant to Section 2(a).
(b) “Board” means the Board of Directors of the Company, as constituted from time to time.
(c) “Code” means the Internal Revenue Code of 1986, as amended.
(d) “Committee” means the Compensation Committee of the Board.
(e) “Company” means XPO Logistics, Inc., a Delaware corporation.
(f) “Compensation” means (i) the total compensation paid in cash to a Participant by a Participating Company, including salaries, wages, bonuses, commissions, overtime pay and shift premiums, short-term disability payments, PTO and holiday pay plus (ii) anypre-tax contributions made by the Participant under Section 401(k) or 125 of the Code. “Compensation” shall exclude allnon-cash items, moving or relocation allowances,cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans (includingnon-qualified deferred compensation plans), income attributable to equity awards or the exercise of stock options, and similar items. The Administrator shall determine whether a particular item is included in Compensation.
(g) “Corporate Reorganization” means:
(i) The consummation of a merger or consolidation of the Company with or into another entity, or any other corporate reorganization; or
(ii) The sale, transfer or other disposition of all or substantially all of the Company’s assets or the complete liquidation or dissolution of the Company.
(h) “Eligible Employee” means anycommon-law employee who is employed by a Participating Company on February 1 or August 1. The following are excluded from the definition of an Eligible Employee:
(i) any individual whose participation in the Plan is prohibited by the law of any country which has jurisdiction over him or her or if complying with such laws would causenon-conformity with the requirements of Section 423 of the Code;
(ii) any employee who is covered by a collective bargaining agreement, if the collective bargaining agreement excludes the employee (or the bargaining unit of which the employee is a member) from participation in the Plan;
(iii) to the extent permitted by Section 423 of the Code, any individual designated by a Participating Company as an independent contractor, even if the individual later is determined by a court of competent jurisdiction to be a common law employee of a Participating Company; and
(iv) any employee of a Participating Company who is both a highly compensated employee within the meaning of Section 423(b)(4)(D) of the Code and subject to the disclosure requirements of Section 16(a) of the Exchange Act as of the first day of an Offering Period. Whether an employee is a highly compensated employee for Plan purposes will be determined on whether the employee is a highly compensated employee under any of the qualified retirement plans sponsored by XPO Logistics, Inc. or an affiliate, with the applicable measuring period based on the calendar year.
(i)“ESPP Broker” means a stock brokerage or other entity designated by the Administrator to establish accounts for Stock purchased under the Plan by Participants.
(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(k)“Fair Market Value All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” means“estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.
These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include our ability to achieve the expected benefits of RXO spin-off, the risks discussed in our filings with the SEC, and the following: economic conditions generally; the severity, magnitude, duration and aftereffects of the COVID-19 pandemic, including supply chain disruptions due to plant and port shutdowns and transportation delays, the global shortage of certain components such as semiconductor chips, strains on production or extraction of raw materials, cost inflation and labor and equipment shortages, which may lower levels of service, including the timeliness, productivity and quality of service, and government responses to these factors; our ability to align our investments in capital assets, including equipment, service centers, and warehouses and other network facilities, to our customers’ demands; our ability to implement our cost and revenue initiatives; the effectiveness of our action plan, and other management actions, to improve our North | | | | 87 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | |
American LTL business; our ability to benefit from a sale or other divestiture of one or more business units; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies; goodwill impairment, including in connection with a business unit sale or other divestiture; matters related to our intellectual property rights; fluctuations in currency exchange rates; fuel price and fuel surcharge changes; natural disasters, terrorist attacks, wars or similar incidents, including the Stockconflict between Russia and Ukraine and increased tensions between Taiwan and China; the impact of the prior spin-offs of GXO and RXO on the size and business diversity of our company; the ability of the spin-off of a business unit to qualify for tax-free treatment for U.S. federal income tax purposes; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; our indebtedness; our ability to raise debt and equity capital; fluctuations in fixed and floating interest rates; our ability to maintain positive relationships with our network of third-party transportation providers; our ability to attract and retain qualified drivers; labor matters; litigation; risks associated with our self-insured claims; risks associated with defined benefit plans for our current and former employees; the impact of potential sales of common stock by our chairman; governmental regulation, including trade compliance laws, as well as changes in international trade policies, sanctions and tax regimes; governmental or political actions, including the United Kingdom’s exit from the European Union; and competition and pricing pressures. All forward-looking statements set forth in this Proxy Statement are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this Proxy Statement speak only as of the date hereof, and we do not undertake any given date, (i)obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the closingper-share sales priceoccurrence of the Stock as reported by the Applicable Exchange for such stock exchange or if there were no sales on such date, on the closest preceding date on which there was a sale of Stock or (ii) in the event there shall be no public market for the Stock on such date, the fair market value of the Stock as determined in good faith by the Committee. Such determination shall be conclusive and binding on all persons. For purposes of the foregoing, “Applicable Exchange” means the New York Stock Exchange LLC or any other national stock exchange or quotation system on which the Stock may be listed or quoted.(l) “Offering Period” means asix-month period with respect to which the right to purchase Stock may be granted under the Plan, as determined pursuant to Section 3(a).
(m) “Participant” means an Eligible Employee who elects to participate in the Plan, as provided in Section 3(b). Only Eligible Employees may become Participants in this Plan.
(n) “Participating Company” means (i) the Company and (ii) each present or future Subsidiary that is affirmatively designated by the Committee as a Participating Company. Except as provided in the preceding sentence, no other Subsidiary shall be a Participating Company. Notwithstanding the foregoing, the term “Participating Company” shall not include any Subsidiary that offers its employees the opportunity to participate in an employee stock purchase plan covering the Subsidiary’s common stock. As of the Effective Date, each of the following entities is a Participating Company under the Plan:
Bounce Logistics, LLC
Con-way Multimodal Inc.
Jacobson Transportation Company, Inc.
Jacobson Warehouse Company, Inc.
Pacer Services, Inc.
XPO Air Charter, LLC
XPO CNW, Inc.
XPO Courier, LLC
XPO Customs Clearance Solutions, LLC
XPO Distribution Services, Inc.
XPO Enterprise Services, Inc.
XPO GF America, Inc.
XPO Global Forwarding, Inc.
XPO Intermodal Solutions, Inc.
XPO Last Mile, Inc.
XPO Last Mile Holding, Inc.
XPO Logistics, LLC
XPO Logistics Cartage, LLC
XPO Logistics Drayage, LLC
XPO Logistics Express, LLC
XPO Logistics Freight, Inc.
XPO Logistics Manufacturing, LLC
XPO Logistics NLM, LLC
XPO Logistics Port Services, LLC
XPO Logistics Supply Chain of New Jersey, LLC
XPO Logistics Supply Chain of Puerto Rico, Inc.
XPO Logistics Supply Chain of Texas, LLC
XPO Logistics Supply Chain Corporate Services, Inc.
XPO Logistics Supply Chain, Inc.
XPO Logistics Worldwide, Inc.
XPO Logistics Worldwide Government Services, LLC
XPO LTL Solutions, Inc.
XPO Ocean World Lines, Inc.
XPO Transport, LLC
The Administrator is authorized to change a present or future Subsidiary’s designation as a Participating Company at any time without additional shareholder approval. For the avoidance of doubt, no international Subsidiary (where employees receive no U.S. source income) shall be considered a Participating Company.
(o) “Plan” means this XPO Logistics, Inc. Employee Stock Purchase Plan, as it may be amended from time to time.
(p) “Plan Account” or “Account” means the account established and maintained on behalf of each Participant by the Company for the purpose of investing in Stock and engaging in other transactions permitted under the Plan pursuant to Section 7(a). The funds allocated to a Participant’s Account shall remain the property of the Participant at all times but may be commingled with the general funds of the Company,unanticipated events, except to the extent such commingling may be prohibitedrequired by the laws of any applicable jurisdiction.
(q) “Purchase Price” means the price at which Participants may purchase Stock under the Plan, as determined pursuant to Section 7(b).
(r) “Stock” means the Common Stock of the Company, with par value of $0.001 per share.
(s) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
SECTION 16. MISCELLANEOUS.
(a)Notices.All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
(b)Plan Effective Date and Shareholder Approval.The Plan was adopted by the Board on October 18, 2017, and became effective upon approval by the Company’s stockholders on , 2017 by a vote sufficient to meet the requirements of Section 423(b)(2) of the Code. law. | | | | 88 | | | | | | © 2023 XPO, Inc. | |
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ANNEX B— ESG SCORECARD—2022 DELIVERABLES AND ACHIEVEMENTS | | Electronic Voting Instructions
| | | | | | Available 24 hours a day, 7 days a week! | | | | | | Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. | | | | | | VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | | | | | | Proxies submitted by the Internet or telephone must be received by 11:59 P.M., New York Time, on December 19, 2017.
| | | | | | | | Vote by Internet | | | | | | | • Go towww.envisionreports.com/XPOspc
| | | | | | | • Or scan the QR code with your smartphone
| | | | | | | • Follow the steps outlined on the secure website
| | | | | | Vote by telephone
| | | | | | | | | • Call toll free 1-800-652-VOTE (8683) within the USA, US territories
& Canada on a touch tone telephone
• Follow the instructions provided by the recorded message |
| | | | | | | | Using ablack ink pen, mark your votes with anX as shown in
this example. Please do not write outside the designated areas. | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS EARNED | | | | COMMENTS | | |
| | 1 | | | | WORKFORCE / TALENT | | | | | 1 | | | | Average Job Satisfaction Score: Aggregate of all XPO engagement surveys conducted within the year, measured on a 1-10 scale | | | | ≥ 7.0 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 2 | | | | Average Job Satisfaction Score: Annual Hourly LTL Engagement Survey (North America), measured on a 1-10 scale | | | | Prior year +10 basis points or ≥ 7.0 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 3 | | | | Global Retention Rate of High Performers: Annualized rate based on performance management process, among the professional population | | | | ≥ 85% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 4 | | | | Succession Planning: For designated levels globally | | | | All vice presidents and above have a succession plan | | | | | | | | 2.3 | | | | Met goal | | | | | 5 | | | | Annualized Voluntary Turnover Rate: North American LTL drivers, excluding retirees | | | | Reduction of three percentage points versus prior year | | | | | | | | 0.0 | | | | Improved consecutively each quarter, but fell short of a 3% improvement year-over-year | | | | | 6 | | | | Employee Training Hours: Number of hours completed by employees per year globally, tracked via time-keeping system and XPO University | | | | 600,000 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 7 | | | | Employee Training Courses: Number of courses completed by employees per year globally, tracked via XPO University | | | | 700,000 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 8 | | | | Performance Goals for Salaried Employees: As defined and tracked for eligible salaried employees | | | | ≥ 80% of eligible employees | | | | | | | | 2.3 | | | | Surpassed goal | | |
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q
| | | | | | | | | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS EARNED | | | | COMMENTS | | |
| | 2 | | | | EMPLOYEE AND COMMUNITY SAFETY | | | | | 9 | | | | US DOT-Recordable Preventable Accident Frequency Rate: North American managed transportation (when holding number of miles driven constant to full-year 2020) | | | | + 3% improvement over prior year | | | | | | | | 2.3 | | | | Surpassed goal (measured through Q3, the pre-spin-off period) | | | | | 10 | | | | Lost Workday Rate: North American transportation | | | | < 62 | | | | | | | | 2.3 | | | | Surpassed goal (measured through Q3, the pre-spin-off period) | | | | | 11 | | | | US DOT-Recordable Accident Frequency Rate: North American LTL (when holding number of miles driven constant to full-year 2021) | | | | + 2% improvement over prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 12 | | | | Total Recordable Incident Rate (TRIR): North American transportation | | | | < 1.00 | | | | | | | | 2.3 | | | | Surpassed goal (measured through Q3, the pre-spin-off period) | | | | | 13 | | | | Million Mile Driver Achievement Awards: North American LTL | | | | ≥ 250 awards for achieving 1 million to 3 million miles driven without a preventable accident | | | | | | | | 2.3 | | | | Surpassed goal slightly | | | | | 14 | | | | Lost Workday Rate: North American transportation | | | | + 2% improvement over prior year | | | | | | | | 0.0 | | | | Improved on a quarterly basis, but not enough to meet the full-year target (measured through Q3, the pre-spin-off period) | | | | | 15 | | | | Driver Training School Graduates: North American LTL | | | | ≥ 500 employees graduate from our driver schools and earn their CDL | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 16 | | | | Lost Time Incident Rate in Europe: Number of workplace incidents resulting in employees losing time from work (excluding the day of the incident) / total hours worked x 200,000 | | | | Minimum 5% improvement from prior year | | | | | | | | 2.3 | | | | Met goal | | | | | 17 | | | | Registered Additional Training Hours in Europe: Hours outside of mandatory and on-boarding trainings (i.e., qualifying training hours covering health, safety and security matters | | | | Minimum of three hours or more per employee | | | | | | | | 2.3 | | | | Met goal | | | | | 18 | | | | Safety Actions Completion Rate in Europe: Preventive or corrective actions completed, measured by number of actionable safety cards | | | | Minimum of 60% of safety cards completed/closed | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 19 | | | | Crash Rate in Europe: Preventable accidents per 1,000,000 kilometers driven (includes all preventable incidents reported to insurance/third party claims) | | | | Minimum of 5% improvement from prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 20 | | | | Health Safety Audits in Europe: Audits to be conducted across all European sites over a span of two years | | | | Minimum of 50% of sites audited | | | | | | | | 2.3 | | | | Surpassed goal | | |
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| | | | | | | | | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS EARNED | | | | COMMENTS | | |
| | 3 | | | | DIVERSITY, EQUITY AND INCLUSION | | | | | 21 | | | | Diversity in Hiring: Overall annual percentage of diverse US employee hires | | | | ≥ 50% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 22 | | | | Diversity in Management: Expansion of women pipeline for managerial positions | | | | Cumulative growth of ≥10% from 2020 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 23 | | | | Diversity in Management: Expansion of ethnic and/or racial groups’ pipeline for managerial positions | | | | Cumulative growth of ≥10% from 2020 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 24 | | | | Diversity in Graduate Programs: Percentage of diverse Graduate Program hires globally | | | | ≥ 50% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 25 | | | | Female Representation in Graded Positions in Europe: Number of females in graded positions as a percentage of the total graded XPO population | | | | Increase representation to minimum 42.2% | | | | | | | | 0.0 | | | | Missed goal by a narrow margin of 0.1% | | | | | 26 | | | | European Diversity Recruitment Strategy and Process: Director level and above | | | | Diversity/sensitivity training attended by entire European leadership team | | | | | | | | 2.3 | | | | European leadership team training was completed on November 29, 2022 | | | | | 27 | | | | HRC Corporate Equality Index | | | | Score of at least 80 to 85 out of 100 | | | | | | | | 2.3 | | | | Met goal Scored 85, at high end of range | | | | | 4 | | | | INFORMATION SECURITY | | | | | 28 | | | | Information Security Compliance and Training: Compliance with information security policy and related training mandates for eligible employees with access to email | | | | 75% to 85% compliance | | | | | | | | 2.3 | | | | Surpassed goal range | | | | | 29 | | | | Information Security Benchmark Assessment: Annual independent third-party information security health check/benchmark assessment | | | | Score within the top two quartiles and supersede the average for the industry | | | | | | | | 2.3 | | | | Met goal Compared to transportation peers, XPO is comfortably in the upper quartile | | | | | 30 | | | | Efficacy in Blocking Email Threats: Percent blocked containing malicious attachments | | | | ≥ 95% | | | | | | | | 2.3 | | | | Met goal Maintained over 99% throughout year | | | | | 31 | | | | Target Mean Time to Resolve (MTTR): Industry average 1.85 days | | | | Maintain MTTR below industry average | | | | | | | | 2.3 | | | | Met goal MTTR was usually less than one day | | | | | 32 | | | | Impact of Security Breaches on Customers | | | | No security breaches that could impact at least 25% of customers | | | | | | | | 2.3 | | | | Surpassed goal | | |
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| | | | | | | | | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS EARNED | | | | COMMENTS | | |
| | 5 | | | | ENVIRONMENT AND SUSTAINABILITY | | | | | 33 | | | | Fuel Efficiency Improvement: North American managed transportation | | | | Maintain 7.1 miles per gallon or higher by year-end | | | | | | | | 2.3 | | | | Surpassed goal (measured through Q3, the pre-spin-off period) | | | | | 34 | | | | Registration as a Smartway* Approved Carrier Partner: Helps to maintain “gold standard” in fuel efficiency and emissions | | | | Maintain partnership | | | | | | | | 2.3 | | | | Met goal (measured through Q3, the pre-spin-off period) | | | | | 35 | | | | LTL Fuel Efficiency: Annual average improvement in miles per gallon (mpg) for drivers in North America | | | | Maintain flat efficiency relative to the same quarter of prior year | | | | | | | | 0.0 | | | | Narrowly missed by 0.02 mpg due to fuel additive, which accounts for an average mpg loss of 0.5 | | | | | 36 | | | | Annual Tractor Replacement Rate: North American LTL | | | | Replace at least 450 tractors with newer units, emitting less nitrogen oxide | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 37 | | | | Average Tractors Age: North American managed transportation | | | | 2.5 years | | | | | | | | 0.0 | | | | Missed due to ongoing supply chain constraints that cause delays in getting new tractor orders filled (measured through Q3, the pre-spin-off period) | | | | | 38 | | | | Carbon Emissions Reduction by Equipment Usage: Percentage of fleet supplied with carbon reducing equipment (i.e., trailer side skirts, engine and transmission upgrades) | | | | At least 3% increase in tractors with carbon-reducing equipment versus prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 39 | | | | Load Factor Change Rate: North American LTL | | | | At minimum, maintain prior year achievement level | | | | | | | | 0.0 | | | | Missed due to: (i) some internal initiatives that improved service but decreased load factor; (ii) a strategic decision to reduce reliance on high-cost third-party linehaul providers and instead utilize XPO equipment; and (iii) lower tonnage levels in 2H 2022 resulting from macroeconomic pressure on industrywide shipping demand | | | | | 40 | | | | CO2 Emissions Control in Europe: Includes machinery equipment, installations, and road truck emissions | | | | Minimum 5% improvement from prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 41 | | | | LTL Trailer Recycle Rate: Percentage of retired LTL trailers that are recycled in North America | | | | Pre-2016 trailers: ≥ 95% 2016+trailers: ≥ 85% | | | | | | | | 2.3 | | | | Met goal | | | | | 6 | | | | CORPORATE GOVERNANCE | | | | | 42 | | | | Compliance Course Completion Rate: Completion of mandatory compliance training courses on an annual basis (e.g., diversity and inclusion, sexual harassment, anti-discrimination, etc.) | | | | ≥ 85% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | 43 | | | | Board of Directors’ oversight of ESG matters | | | | Review, calibration and approval of annual ESG goals and/or ESG goal revisions | | | | | | | | 2.3 | | | | Met goal | | |
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–You may vote online or by phone instead of mailing this card.OnlineGo to www.envisionreports.com/XPO or scan the QR code — login details are located in the shaded bar below.PhoneCall toll free 1-800-652-VOTE (8683) within the USA, US territories and CanadaUsing a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q q+ 1.Election of Directors:01 - Brad Jacobs 04 - Wes Frye07 - Allison Landry For AbstainFor02 - Jason Aiken 05 - Mario Harik08 - Irene Moshouris Abstain 03 - Bella Allaire06 - Michael Jesselson 09 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - | | | | | A
| | Proposals — UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
| | | | | BOARD OF DIRECTORS’ RECOMMENDATIONS. THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR PROPOSALS 1 AND 2.
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| | | | |
| | | | | | | | | | | | | | | | | | | | | 1.
| | To consider and vote on a proposal to approve the adoption of the XPO Logistics, Inc. Employee Stock Purchase Plan. | | | | For
☐
| | Against
☐
| | Abstain
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| | | | | | | | | | | | | | | | | | | | | | 2.
| | To consider and vote on a proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies. | | | | For
☐
| | Against
☐
| | Abstain
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| | | | | | | | | | | | | | | | | | | | | 3.
| | To transact such other business as may properly come before the special meeting and any adjournment or postponement thereof. | | | | | | | | | | | | | | | | |
| | | | | | | | | B
| | Non-Voting Items | | | | | | | Change of Address— Please print new address below. | | | | Comments — Please print your comments below. | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | Please date and sign exactly as your name(s) appear(s) hereon. When signing as Executor, Administrator, Trustee, Guardian or Attorney, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized corporate officer. If a partnership, please sign in partnership name by authorized person. Joint owners should each sign. |
| | | | | | | | | Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | | | | | | | | | | / / | | | | | | | | |
Johnny C. Taylor, Jr. For Abstain 2.Ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal year 2023. For Abstain 3.Advisory vote to approve executive compensation. For Abstain
03S97D 1 U P X+ YOUR VOTE IS IMPORTANTRegardlessIMPORTANTRegardless of whether you plan to attend the SpecialAnnual Meeting of Stockholders,you can be sure your shares are represented at the Meetingmeeting by promptly returning your proxy in the enclosed envelope.
| | | | | | | Important Notice Regarding the Availability of Proxy Materials for the
Special Meeting of Stockholders to be Held on December 20, 2017.
This Proxy Statement is available at
www.edocumentview.com/xpospc.
| | |
qenvelope.The 2023 Annual Meeting of Stockholders of XPO, Inc. will be held onMay 17, 2023 at 10:00 a.m. Eastern Time, virtually via the internet at meetnow.global/MU5KPDC.To access the virtual meeting, you must have the control number that is printed in the shaded bar located on the reverse side of this form.Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 17, 2023:The Proxy Statement and our Annual Report on Form 10-K for theYear Ended on December 31, 2022 are available at www.edocumentview.com/XPOq IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proxy — XPO LOGISTICS, INC.
PROXYqPROXY FOR THE SPECIALANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 20, 2017
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OFMAY 17, 2023This Proxy is solicited on behalf of the Board of Directors of XPO, LOGISTICS, INC.
TheInc.The undersigned hereby acknowledges receipt of the XPO, Logistics, Inc. Notice of SpecialAnnual Meeting and Proxy Statement and hereby constitutes and appoints Bradley S.Brad Jacobs and Karlis P. Kirsis,Wendy Cassity, and each of them, its true and lawful agents and proxies, with full power of substitution in each, to attend the SpecialAnnual Meeting of Stockholders of XPO, Logistics, Inc. on December 20, 2017,Wednesday, May 17, 2023 held as a virtual meeting via webcast, and any adjournmentpostponement or postponementadjournment thereof, and to vote on the matters indicated all the shares of Common Stock, par value $0.001, per share, or Series A Convertible Perpetual Preferred Stock, par value $0.001 per share, that the undersigned would be entitled to vote if personally present.
THIS You can access the meeting at meetnow.global/MU5KPDC. You will need to enter your control number to access the meeting. The control number is located in the shaded area on the opposite side of this proxy card.THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
PLEASERECOMMENDATIONS.PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAILDATE THIS PROXY ON THE REVERSE SIDE AND MAIL IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ENVELOPE.Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.Date (mm/dd/yyyy) — Please print date below.Signature 1 — Please keep signature within the box.Signature 2 — Please keep signature within the box. Change of Address — Please print new address below.Comments — Please print your comments below.+
0001166003 6 2022-01-01 2022-12-31 |