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Because XPO, Inc. will manage and operate the business and control the strategic decisions and day-to-day operations of the Company through its ownership of XPO Holdings and because it will also have a substantial financial interest in the Company through its ownership of XPO Holdings, it will consolidate the financial results of the Company and XPO Holdings, and a portion of its net income will be allocated to the non-controlling interest to reflect the entitlement of the Continuing Pre-IPO LLC Members to a portion of XPO Holdings’ net income or loss.

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XPO, Inc.’s amended and restated certificate of incorporation authorizes the issuance of two classes of common stock, Class A common stock and Class B common stock (collectively, “common stock”) and preferred stock and the certificates of designation adopted in connection with the IPO designated 200,000 shares of preferred stock as 6.50% Series A-1 Convertible Preferred Stock (the “Series A-1 preferred stock”) and 200,000 shares of Preferred Stock as 6.50% Series A Convertible Preferred Stock (the “Series A Convertible preferred stock and, together with the Series A-1 preferred stock, the “Convertible Preferred”). Each share of common stock entitles its holder to one vote per share on all matters submitted to a vote of stockholders.

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Prior to completion of the IPO, XPO, Inc. acquired, directly and indirectly, limited liability company units of XPO Holdings (the “LLC Units”) through (i) the contribution of LLC Units by H&W Investco, LP and Lag Fit, Inc. in exchange for Class A common stock (the “IPO Contribution”) and (ii) the “Mergers,” in which Rumble Holdings LLC and H&W Investco Blocker II, LP (the “Blocker Companies”) were contributed by their owners (the “Blocker Shareholders”) to XPO, Inc. in exchange for Class A common stock, and, in the case of H&W Investco Blocker II, LP a cash payment (the “H&W Cash Merger Consideration”), after which the Blocker Companies immediately merged with and into XPO, Inc.

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Prior to the completion of the IPO, XPO, Inc. issued and sold 200,000 shares of Convertible Preferred to certain affiliates of MSD Partners, L.P., a fund within the D.E. Shaw group and a fund managed by Redwood Capital Management, LLC (the “Preferred Investors”) for aggregate cash proceeds of $200,000, before deduction of offering costs.

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Each Continuing Pre-IPO LLC Member (other than LCAT Franchise Fitness Holdings, Inc. (“LCAT”) was issued a number of shares of Class B common stock equal to the number of vested LLC Units held by such Continuing Pre-IPO LLC Member.

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Under the Limited Liability Company Agreement of XPO Holdings (the “Amended LLC Agreement”), holders of LLC Units (other than XPO, Inc.) have the right, from and after the completion of the IPO (subject to the terms of the Amended LLC Agreement), to require XPO Holdings to redeem all or a portion of their LLC Units for, at XPO, Inc.’s election, newly-issued shares of Class A common stock on a one-for-one basis or a cash payment equal to the volume-weighted average market price of one share of Class A common stock for each LLC Unit redeemed (subject to customary adjustments) or the net proceeds from a substantially contemporaneous offering of Class A common stock in accordance with the terms of the Amended LLC Agreement. Additionally, in the event of a redemption request from a holder of LLC Units, XPO, Inc. may, at its option, effect a direct exchange of cash or Class A common stock for LLC Units in lieu of such a redemption. Shares of Class B common stock will be cancelled on a one-for-one basis if XPO, Inc., following a redemption request from a holder of LLC Units, redeems or exchanges LLC Units of such holder pursuant to the terms of the Amended LLC Agreement.

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XPO, Inc. used the net proceeds from the IPO, together with the $200,000 in proceeds received from the sale of Convertible Preferred to (i) acquire newly issued preferred units of XPO Holdings (the “Preferred Units”) and LLC Units, (ii) purchase all of the shares of LCAT from LCAT shareholders and (iii) pay the H&W Cash Merger Consideration.

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After the acquisition of LCAT from LCAT shareholders, LCAT merged with and into XPO, Inc., after which XPO, Inc. owns directly the LLC Units previously held by LCAT.

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XPO, Inc. entered into a tax receivable agreement (“TRA”) that obligates it to make payments to the Continuing Pre-IPO LLC Members, the Blocker Shareholders and any future party to the TRA (the “TRA parties”) in the aggregate generally equal to 85% of the applicable cash savings realized as a result of (i) certain favorable tax attributes acquired from the Blocker Companies in the Mergers (including net operating losses and the Blocker Companies’ allocable share of existing tax basis), (ii) increases in XPO, Inc.’s allocable share of existing tax basis and tax basis adjustments that may result from (x) the IPO Contribution, the redemption of Class A-5 Units of H&W Franchise Holdings, LLC (the “Class A-5 Units”) in connection with the IPO (the “Class A-5 Unit Redemption”), and the purchase of LLC Units from Continuing Pre-IPO LLC Members in the IPO, (y) future taxable redemptions and exchanges of LLC Units by Continuing Pre-IPO LLC Members, and (z) certain payments made under the TRA, and (iii) deductions in respect of interest under the TRA. XPO, Inc. will retain the benefit of the remaining 15% of these tax savings.

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XPO Holdings used the proceeds from the issuance of LLC Units and Preferred Units to (i) to repay approximately $116,059 of outstanding borrowings under the Term Loan (see Note 8), including prepayment penalties and interest, (ii) to pay fees and expenses of approximately $6,700 in connection with the IPO and the Reorganization Transactions, (iii) to pay approximately $20,500 in the Class A-5 Unit Redemption for the Class A-5 Units redeemed from certain of the Continuing Pre-IPO Members and (iv) the remainder for working capital.