DEF 14A of QXO, Inc.
Filed Feb 13, 2024 · FY20230001213900-24-013298
Treatment of Outstanding Equity Awards (Page 36)
Treatment of Outstanding Equity Awards (Page 36) Each option to purchase shares of Common Stock that is outstanding immediately prior to the Closing, if any, will be terminated upon the Closing.
Interests of Certain Company Directors and Executive Officers in the Transactions (Page 35)
Interests of Certain Company Directors and Executive Officers in the Transactions (Page 35) In considering the recommendation of the Company Board to vote in favor of the Investment Proposal, each of the Charter Proposals and the 2024 Plan Proposal, the Company stockholders should be aware that certain of Company directors and executive officers have interests in the proposed Transactions that may be different from, or in addition to, the interests of other Company stockholders generally and may create potential conflicts of interest. These interests are described in “The Transactions — Interests of Certain Directors and Executive Officers in the Transactions” beginning on page 35.
Interests of Certain Company Directors and Executive Officers in the Transactions
Interests of Certain Company Directors and Executive Officers in the Transactions In considering the recommendation of the Company Board to vote for the Investment Proposal, each of the Charter Proposals and the 2024 Plan Proposal, Company stockholders should be aware that certain of the Company’s directors and executive officers have interests in the proposed Transactions that may be different from, or in addition to, the interests of other Company stockholders generally. The members of the Company Board were aware of and considered these interests, among other matters, in evaluating and negotiating the proposed Transactions, and in recommending to Company’s stockholders that the Proposals be approved. These interests include the following: • The Company’s directors and executive officers will become the directors and executive officers, respectively, of SpinCo, and will receive compensation and benefits from SpinCo in respect of their services. • Concurrently with the execution of the Investment Agreement, the Company and Mr. Meller entered into a letter agreement pursuant to which Mr. Meller’s existing employment agreement with the Company will be terminated as of immediately prior to the Closing and, in full satisfaction of all obligations of the Company under such employment agreement, the Company will pay to Mr. Meller a lump sum termination payment equal to the lesser of (i) $3.0 million and (ii) 300% of the average annual amount paid by the Company or any parent or subsidiary thereof to Mr. Meller and included in his gross income for services rendered in each of the five calendar years immediately prior to the Closing, less $100, which is the amount that he is entitled to receive under such employment agreement with the Company for certain terminations of his employment within three years following a change in control of the Company. The information set forth in the table below is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about certain compensation for each named executive officer of the Company that is based on, or otherwise relates to, the proposed Transactions. The table below sets forth the amount of payments that Mr. Meller would receive in connection with the Closing, assuming that the Closing occurs during calendar year 2024.
The Reverse Stock Split
The Reverse Stock Split The Reverse Stock Split is intended to qualify as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Code and/or an exchange described in Section 1036 of the Code and the Company intends to report the Reverse Stock Split consistent with such qualification. However, it is not a condition to the Company’s obligation or SpinCo’s obligation to complete the transactions that the Reverse Stock Split be treated as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the code or an exchange described in Section 1036 of the Code or that the Company or SpinCo receive an opinion from counsel to that effect. The Company and SpinCo have not sought, and will not seek, any ruling from the IRS regarding any matters related to the transactions, and, as a result, there can be no assurance that the IRS would not assert that the Reverse Stock Split does not qualify as a “reorganization” within the meaning of Section 368(a)(1)(E) of the Code or an exchange described in Section 1036 of the Code, or that a court would not sustain such a position. If the Reverse Stock Split qualifies as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Code or an exchange described in Section 1036 of the Code, a U.S. Holder of shares of Common Stock generally is not expected to recognize gain or loss upon the Reverse Stock Split, except with respect to cash received in lieu of a fractional share of Common Stock, as discussed below. A U.S. Holder’s aggregate adjusted tax basis in the shares of Common Stock received pursuant to the Reverse Stock Split (including any fractional share of Common Stock deemed received and sold as discussed below) generally will equal the aggregate adjusted tax basis of the shares of Common Stock surrendered, and such U.S. Holder’s holding period in the shares of Common Stock received in the Reverse Stock Split generally will include the holding period in the shares of Common Stock surrendered. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the shares of Common Stock surrendered to the shares of Common Stock received pursuant to the Reverse Stock Split. U.S. Holders of shares of Common Stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares. A U.S. Holder that receives cash in lieu of a fractional share of Common Stock pursuant to the Reverse Stock Split will be treated as having sold such fractional share for cash and is expected to recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the U.S. holder’s adjusted tax basis in such fractional share of Common Stock. Such gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period for its Common Stock exceeds one year at the time of the Reverse Stock Split. If the Reverse Stock Split does not qualify as a “recapitalization” within the meaning of Section 368(a)(1)(E) of the Code or an exchange described in Section 1036 of the Code, then a U.S. Holder of shares of Common Stock that exchanges such shares for Common Stock in the Reverse Stock Split generally will recognize gain or loss equal to the difference, if any, between (a) the sum of the fair market value of the shares of Common Stock received by such U.S. Holder in the Reverse Stock Split and the amount of any cash received in lieu of a fractional share of Common Stock and (b) such U.S. Holder’s adjusted tax basis in the Common Stock exchanged therefor. Gain or loss must be calculated separately for each block of Common Stock exchanged by such U.S. Holder if such blocks were acquired at different times or for different prices. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period in a particular block of Common Stock exceeds one year at the effective time of the Reverse Stock Split. A U.S. Holder’s aggregate tax basis in the Common Stock received in the Reverse Stock Split will equal the fair market value of such shares of Common Stock as of the effective time of the Reverse Stock Split, and the holding period of such Common Stock will begin on the date after the date of the Reverse Stock Split.
EXECUTIVE COMPENSATION
| Name and Position(s) | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total Compensation ($) | | Mark Meller | 2023 | $1,120,092 | $— | $— | $— | $— | $— | $— | $1,120,092 | | President, Chief Executive Officer, and Director | 2022 | $1,026,650 | $— | $— | $— | $— | $— | $— | $1,026,650 | | Joseph Macaluso, | 2023 | $238,943 | $55,628 | $— | $— | $— | $— | $— | $294,571 | | Chief Financial Officer | 2022 | $228,516 | $45,150 | $— | $— | $— | $— | $— | $273,666 |
Grants of Plan-based Awards Table for Fiscal Year 2023
Grants of Plan-based Awards Table for Fiscal Year 2023 There were no stock option grants for the year ended December 31, 2023.
Director Compensation
Director Compensation The following table sets forth the compensation paid by the Company to its directors for the fiscal year ending on December 31, 2023.
Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Stanley Wunderlich | 12,000 | — | — | — | — | — | 12,000 | | Kenneth Edwards | 20,000 | — | — | — | — | — | 20,000 | | John Schachtel | 18,000 | — | — | — | — | — | 18,000 |
Director Compensation
The Company pays its non-employee directors for their service on the Company Board. Mr. Wunderlich is paid $1,000 per month, payable quarterly for his service as a member of the Company Board and as Chairman of the Nominating and Governance Committee. Mr. Edwards was paid $1,667 per month, payable quarterly for his service as a member of the Company Board and as Chairman of the Audit Committee. Mr. Schachtel is paid $1,500 per month, payable quarterly for his service as a member of the Company Board and as Chairman of the Compensation Committee. Director Agreements The Company and Stanley Wunderlich are parties to an Amended and Restated Director Agreement dated as of August 3, 2011, with respect to Mr. Wunderlich’s service on the Company Board. The agreement provides for compensation to Mr. Wunderlich for his service on the Company Board as follows: (a) a quarterly stipend of $1,000, (b) upon execution thereof, a warrant to purchase shares of Common Stock in an amount equal to $20,000 divided by the Closing price of the Common Stock on the OTC Markets on the date of grant (the “Formula”), and (c) every three months for the duration of his service on the Company Board, a warrant exercisable for the number of shares of Common Stock resulting from the application of the Formula on the applicable grant date. The agreement provides that the exercise price of the Warrants will be the Closing price of the Common Stock on the date of grant plus $0.01, and that the Warrants will be exercisable upon receipt for a period of five years. The agreement also provides that the Company will reimburse Mr. Wunderlich for reasonable out-of-pocket expenses he incurs in attending any in-person meetings. In connection with a recapitalization of the Company in 2012, Mr. Wunderlich and the Company agreed to amend his Director Agreement to: (a) change the stipend to $1,000 per month, payable quarterly, (b) forego the issuance of any Warrants due to Mr. Wunderlich under the Director Agreement, and (c) cancel the future issuance of any Warrants due to Mr. Wunderlich under the Director Agreement. To date no Warrants have been issued pursuant to Mr. Wunderlich’s Director Agreement. The Company entered into a director agreement with John Schachtel dated as of March 27, 2017, in connection with Mr. Schachtel’s appointment to the Company Board effective March 27, 2017. The agreement provides for compensation to Mr. Schachtel for his service on the Company Board as follows: (a) a stipend of $1,500 per month, and (b) upon execution thereof, a warrant to purchase shares of Common Stock in an amount equal to $20,000 divided by the Formula, at an exercise price per share equal to be the Closing price of the Common Stock on the date of grant plus $0.01. The agreement provides that the Warrants are exercisable upon receipt for a period of five years. The agreement also provides that the Company will reimburse Mr. Schachtel for reasonable out-of-pocket expenses he incurs in attending any in-person meetings. The Company and Kenneth Edwards have entered into a Director Agreement dated as of January 4, 2021, in connection with Mr. Edwards’ appointment to the Company Board effective January 4, 2021. The agreement provides that Mr. Edwards will receive a quarterly stipend of $5,000 for his service on the Company Board. The agreement also provides that the Company will reimburse Mr. Edwards for reasonable out-of-pocket expenses he incurs in attending any in-person meetings.
Pay Versus Performance Table
Pay Versus Performance Table The following table shows the total compensation for the named executive officers as set forth in the Summary Compensation Table, the compensation “actually paid” (“CAP”) to the Named Executive Officers, the Company’s TSR, and the Company’s net loss for the years ended December 31, 2023 and 2022. 2023 Pay vs. Performance Table
Pay Versus Performance Table
| Fiscal Year | Summary compensation table total for PEO(1) | Compensation actually paid to PEO(1)(3) | Average summary compensation table total for non-PEO NEOs(2) | Average compensation actually paid to non-PEO NEOs(2)(4) | Value of initial fixed $100 investment based on total stockholder return(3)(5) | Net income(6) | | 2023 | $1,120,092 | $1,120,092 | $294,571 | $294,571 | $610 | $(1,070,095) | | 2022 | $1,026,650 | $1,026,650 | $273,666 | $273,666 | $120 | $(282,219) |
Pay Versus Performance Table
____________ (1) In the table above, our PEO is Mark Meller. (2) In the table above, our only non-PEO NEO is Joseph Macaluso. (3) Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. (4) SEC rules require that certain adjustments be made to the Summary Compensation Table totals to determine CAP, as reported in the Pay versus Performance table above. The following table details the applicable adjustments, if any, that were made to determine CAP for the years ended December 31, 2022 and December 31, 2023. (No such adjustments were required for the years ended December 31, 2022 and December 31, 2023). (5) Cumulative TSR is calculated based on the value of an initial fixed investment of $100 in Common Stock as of December 31, 2021. (6) Results for 2023 based on unaudited financials.
Pay Versus Performance Table
| Executives | | SCT total ($) | Deduct grant date fair value of stock awards & option awards ($) | Add year-end fair value of unvested equity granted in the year ($) | Add year-over- year change in fair value of outstanding and unvested equity granted in prior years ($) | Add fair value as of vesting date of equity awards granted and vested in the year ($) | Add year- over-year change in fair value of equity awards granted in prior years that vested in the year ($) | Deduct fair value at the end of the prior year of equity awards that failed to meet vesting conditions in the year ($) | | 2023 | PEO | 1,120,092 | — | — | — | — | — | — | | | Non-PEO NEOs (average) | 294,571 | — | — | — | — | — | — | | 2022 | PEO | 1,026,650 | — | — | — | — | — | — | | | Non-PEO NEOs (average) | 273,666 | — | — | — | — | — | — |
Pay Versus Performance Table
Relationship Between Compensation Actually Paid and Performance Measures CAP for the PEO and the other Named Executive Officer is primarily wage-based, and changes in the value of the unvested and vested equity awards are not significant. The compensation is based upon contractual requirements as well as industry standards. While the Company reviews performance measures in order to align executive compensation with the Company’s performance, all of those Company measures are not presented in the Pay Versus Performance table above. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align its performance measures with compensation actually paid (which, for all purposes hereof, will be as computed in accordance with SEC rules) for a particular year. The increase in the Company’s TSR reflects management’s efforts to increase stockholder value, however, the Company’s stock price is very volatile and may not be an indicator of future performance. The increase in the Company’s TSR reflects management’s efforts to increase stockholder value, however, the higher stock price at December 31, 2023 is a result of the announcement on December 4, 2023 that the Company entered into the Investment Agreement with JPE and the Investors, providing for an aggregate investment by the Investors of $1,000,000,000 in cash in the Company. Following the closing of the Equity Investment, JPE will be the controlling stockholder of the Company and Mr. Brad Jacobs, who controls JPE, will become Chairman and Chief Executive Officer of the Company.