As filed with the Securities and Exchange Commission on April 22, 1999
Registration No. 333-____________
_______________________________________________________________________________
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TREX COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1910453
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
20 SOUTH CAMERON STREET
WINCHESTER, VIRGINIA 22601
-------------------- -----
(Address of Principal Executive Offices) (Zip Code)
TREX COMPANY, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN
TREX COMPANY, INC. 1999 STOCK OPTION AND INCENTIVE PLAN
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(Full title of the plans)
ANTHONY J. CAVANNA
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TREX COMPANY, INC.
20 SOUTH CAMERON STREET
WINCHESTER, VIRGINIA 22601
(540) 678-4070
--------------
(Name, address and telephone number of agent for service)
Copy to:
RICHARD J. PARRINO, ESQ.
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
(202) 637-5600
CALCULATION OF REGISTRATION FEE
====================================================================================================================
Proposed Proposed
Title of securities Amount to be maximum offering maximum aggregate Amount of
to be registered registered (1) price per share offering price registration fee
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCK,
PAR VALUE $.01 300,000 (2) $13.875 (4) $ 4,162,500 (4) $1,157.18
- --------------------------------------------------------------------------------------------------------------------
Common Stock,
PAR VALUE $.01 500,000 (3) $13.875 (4) $ 6,937,500 (4) $1,928.62
- --------------------------------------------------------------------------------------------------------------------
Total 800,000 $ 11,100,000 (4) $3,085.80
====================================================================================================================
(1) Pursuant to Rule 416 under the Securities Act of 1933, this Registration
Statement covers, in addition to the number of shares of Common Stock shown
above, an indeterminate number of shares of Common Stock which, by reason
of certain events specified in each plan, may become subject to such plans.
(2) Represents shares of Common Stock issuable pursuant to the Trex Company,
Inc. 1999 Employee Stock Purchase Plan.
(3) Represents shares of Common Stock issuable pursuant to the Trex Company,
Inc. 1999 Stock Option and Incentive Plan.
(4) Estimated pursuant to Rule 457(h) under the Securities Act solely for
purposes of calculating the amount of the registration fee.
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
Item 1. Plan Information.*
Item 2. Registrant Information And Employee Plan Annual Information.*
* The documents containing the information specified in Part I will
be sent or given to employees participating in the Trex Company, Inc. 1999
Employee Stock Purchase Plan and the Trex Company, Inc. 1999 Stock Option and
Incentive Plan as specified by Rule 428(b)(1) under the Securities Act of 1933,
as amended. According to the Note to Part I of Form S-8, such documents will
not be filed with the SEC either as part of this Registration Statement or as
prospectuses or prospectus supplements pursuant to Rule 424 under the Securities
Act. These documents and the documents incorporated by reference pursuant to
Item 3 of Part II of this Registration Statement, taken together, constitute the
prospectus as required by Section 10(a) of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation Of Documents By Reference.
The following documents which have been filed by Trex Company, Inc. (the
"Company" or the "Registrant") with the Securities and Exchange Commission (the
"SEC") are hereby incorporated into this registration statement by reference:
(a) the Company's Prospectus dated April 8, 1999, which forms a part of
the Company's Registration Statement on Form S-1 (File No. 333-63287),
as amended as of April 8, 1999; and
(b) the description of the Common Stock which is contained in the
Registrant's Registration Statement on Form 8-A filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on November 25, 1998, as amended as of March 24,
1999, including any amendments or reports filed for the purpose of
updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered hereby have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
hereof from the date of the filing of such documents.
In addition, any statement contained in a document incorporated or deemed
to be incorporated by reference into this Registration Statement will be deemed
to be modified or superseded for purposes of this Registration Statement to the
extent that a statement contained in this Registration Statement or any other
subsequently filed document which also is or is deemed to be incorporated into
this Registration Statement modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable. The Common Stock is registered under Section 12 of the
Exchange Act.
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware General Corporation Law. Section 145(a) of the Delaware General
Corporation Law provides that a corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
Section 145(b) of the Delaware General Corporation Law states that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
Section 145(c) of the Delaware General Corporation Law provides that to the
extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of Section 145, or in defense
of any claim, issue or matter therein, the person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection therewith.
Section 145(d) of the Delaware General Corporation Law states that any
indemnification under subsections (a) and (b) of Section 145 (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because the
person has met the applicable standard of conduct set forth in subsections (a)
and (b) of Section 145. Such determination shall be made with respect to a
person who is a director or officer at the time of such determination (i) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, (ii) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (iii) if there are no such directors,
-3-
or if such directors so direct, by independent legal counsel in a written
opinion, or (iv) by the stockholders.
Section 145(f) of the Delaware General Corporation Law states that the
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of Section 145 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office.
Section 145(g) of the Delaware General Corporation Law provides that a
corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of Section
145.
Section 145(j) of the Delaware General Corporation Law states that the
indemnification and advancement of expenses provided by, or granted pursuant to,
Section 145 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Certificate of Incorporation. Article XI of the Company's Restated
Certificate of Incorporation provides that, to the fullest extent permitted by
the Delaware General Corporation Law, the Company's directors will not be
personally liable to the registrant or its stockholders for monetary damages
resulting from a breach of their fiduciary duties as directors. However,
nothing contained in such Article XI will eliminate or limit the liability of
directors (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the Delaware General Corporation Law or (iv) for any transaction from
which the director derived an improper personal benefit.
By-Laws. The Amended and Restated By-Laws of the Company provide for the
indemnification of the officers and directors of the Company to the fullest
extent permitted by the Delaware General Corporation Law. Article XII of such
By-Laws provides that each person who was or is made a party to (or is
threatened to be made a party to) any civil or criminal action, suit or
proceeding by reason of the fact that such person is or was a director or
officer of the Company shall be indemnified and held harmless by the Company to
the fullest extent authorized by the Delaware General Corporation Law against
all expenses, liability and loss (including, without limitation, attorneys'
fees) incurred by such person in connection therewith, if such person acted in
good faith and in a manner such person reasonably believed to be or not opposed
to the best interests of the Company and had no reason to believe that such
person's conduct was illegal.
Insurance. The directors and officers of the Company are covered by
insurance policies indemnifying against certain liabilities, including certain
liabilities arising under the Securities Act, which might be incurred by them in
such capacities and against which they cannot be indemnified by the Company.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
-4-
ITEM 8. EXHIBITS.
Exhibit No. DESCRIPTION OF EXHIBIT
----------- ----------------------
*4.1 Trex Company, Inc. 1999 Employee Stock Purchase Plan.
*4.2 Trex Company, Inc. 1999 Stock Option and Incentive
Plan.
*4.3 Form of Trex Company, Inc. 1999 Stock Option and
Incentive Plan Non-Incentive Stock Option Agreement.
*4.4 Description of the Registrant's Common Stock which is
contained in the Registrant's Registration Statement on
Form 8-A filed with the Securities and Exchange
Commission pursuant to the Exchange Act, on November
25, 1998, as amended on March 24, 1999, including any
amendments or reports filed for the purpose of updating
such description and incorporated herein by reference.
*5.1 Opinion of Hogan & Hartson L.L.P. with respect to the
legality of the Common Stock registered hereby.
*23.1 Consent of Ernst & Young LLP, independent accountants.
*23.2 Consent of Hogan & Hartson L.L.P. (contained in Exhibit
5.1)
*24.1 Power of Attorney (included on the signature page to
this registration statement).
______________________
* Filed herewith.
ITEM 9. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement;
and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act, that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
-5-
(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than for the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
-6-
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Winchester, Commonwealth of Virginia, on the 22nd day
of April, 1999.
TREX COMPANY, INC.
By: /s/ Robert G. Matheny
---------------------
Robert G. Matheny
President
(Duly Authorized Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert G. Matheny and Anthony J. Cavanna,
jointly and severally, each in his own capacity, his true and lawful attorneys-
in-fact, with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do so and perform each and every act and thing
requisite and necessary to be done as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or his or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert G. Matheny President (Principal Executive Officer), April 22, 1999
- ------------------------------------------
Robert G. Matheny Director
/s/ Anthony J. Cavanna Chief Financial Officer (Principal April 22, 1999
- ------------------------------------------
Anthony J. Cavanna Financial and Accounting Officer),
Director
/s/ Andrew U. Ferrari Director April 22, 1999
- ------------------------------------------
Andrew U. Ferrari
/s/ Roger A. Wittenberg Director April 22, 1999
- ------------------------------------------
Roger A. Wittenberg
/s/ William H. Martin, III Director April 22, 1999
- ------------------------------------------
William H. Martin, III
/s/ William F. Andrews Director April 22, 1999
- ------------------------------------------
William F. Andrews
-8-
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
*4.1 Trex Company, Inc. 1999 Employee Stock Purchase Plan.
*4.2 Trex Company, Inc. 1999 Stock Option and Incentive Plan.
*4.3 Form of Trex Company, Inc. 1999 Stock Option and Incentive
Plan Non-Incentive Stock Option Agreement.
*4.4 Description of the Registrant's Common Stock which is
contained in the Registrant's Registration Statement on Form
8-A filed with the Securities and Exchange Commission
pursuant to the Exchange Act, on November 25, 1998, as
amended on March 24, 1999, including any amendments or
reports filed for the purpose of updating such description
and incorporated herein by reference.
*5.1 Opinion of Hogan & Hartson L.L.P. with respect to the
legality of the Common Stock registered hereby.
*23.1 Consent of Ernst & Young LLP, independent accountants.
*23.2 Consent of Hogan & Hartson L.L.P. (contained in Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page to this
Registration Statement).
________________________
* Filed herewith.
EXHIBIT 4.1
TREX COMPANY, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase Plan
of Trex Company, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company
-------
and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the
Internal Revenue Code of 1986, as amended. The provisions of the Plan
shall, accordingly, be construed so as to extend and limit participation in
a manner consistent with the requirements of that section of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
-------------
(d) "Company" shall mean Trex Company, Inc., a Delaware corporation and any
-------
entity which is treated as a "disregarded entity" pursuant to Section 7701
of the Code.
(e) "Compensation" shall mean all regular gross earnings (including scheduled
------------
overtime) and commissions, and shall not include payments for unscheduled
overtime, incentive compensation, incentive payments, bonuses and other
compensation.
(f) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of a leave
of absence agreed to in writing by the Company, provided that such leave is
for a period of not more than 90 days or reemployment upon the expiration
of such leave is guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "Employee" shall mean any person, including an Officer, who is customarily
--------
employed for at least twenty (20) hours per week and more than five (5)
months in a calendar year by the Company.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
------------
(k) "Exercise Date" shall mean the last day of each Offering Period of the
-------------
Plan.
(l) "Offering Date" shall mean the first business day of each Offering Period
-------------
of the Plan.
(m) "Offering Period" shall mean a period of three (3) months commencing on the
---------------
first business day of January, April, July and October of each year.
(n) "Officer" shall mean a person who is an officer of the Company within the
-------
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Plan" shall mean this Employee Stock Purchase Plan.
----
(p) "Subsidiary" shall mean any company or other trade or business that is a
-----------
subsidiary of the Company (determined in accordance with the principles of
Sections 424(e) and (f) of the Code and the regulations thereunder),
whether or not such entity now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. Eligibility.
-----------
(a) Any person who has been an Employee for six months as of the Offering Date
for a given Offering Period shall be eligible to participate in such
Offering Period under the Plan, subject to the requirements of Section 5(a)
and the limitations imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed
to such employee pursuant to Section 424(d) of the Code) would own stock
and/or hold outstanding options to purchase stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of
stock of the Company or of any Subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee
stock purchase plans (described in Section 423 of the Code) of the Company
and its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) of fair market value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods.
----------------
(a) The Plan shall be implemented by a series of Offering Periods of three (3)
months duration, other than the first Offering Period, with new Offering
Periods commencing on the first business day of January, April, July and
October of each year (or at such other time or times as may be determined
by the Board of Directors). The first Offering Period shall commence on
the date determined by the Board of Directors and end on the last business
day of the calendar quarter in which such Offering Period commenced. The
Plan shall continue until terminated in accordance with Section 19 hereof.
The Board of
2
Directors of the Company shall have the power to change the duration and/or
the frequency of Offering Periods with respect to future offerings without
shareholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be
affected. Eligible employees may not participate in more than one Offering
Period at a time.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by completing a
subscription agreement on the form provided by the Company and filing it
with the Company's payroll office at least fifteen (15) days prior to the
applicable Offering Date, unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a
given offering. The subscription agreement shall set forth the percentage
of the participant's Compensation (which shall be not less than one percent
(1%) and not more than fifteen percent (15%) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid on or prior to the
Exercise Date of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in
Section 10.
6. Method of Payment of Contributions.
----------------------------------
(a) The participant shall elect to have payroll deductions made on each payday
during the Offering Period in an amount not less than one percent (1%) and
not more than fifteen percent (15%) of such participant's Compensation on
each such payday. All payroll deductions made by a participant shall be
credited to his or her account under the Plan. A participant may not make
any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan as
provided in Section 10, or, on one occasion only during the Offering
Period, may decrease the rate of his or her Contributions during the
Offering Period by completing and filing with the Company a new
subscription agreement. The change in rate shall be effective as of the
beginning of the next calendar month following the date of filing of the
new subscription agreement, if the agreement is filed at least ten (10)
business days prior to such date and, if not, as of the beginning of the
next succeeding calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year. Payroll
deductions shall recommence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which
is scheduled to end in the following calendar year, unless terminated by
the participant as provided in Section 10.
3
7. Grant of Option.
---------------
(a) On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to
purchase on the Exercise Date a number of shares of the Company's Common
Stock determined by dividing such Employee's Contributions accumulated
prior to such Purchase Date and retained in the participant's account as of
the Exercise Date by the option price which is the lower of (i) eighty-five
percent (85%) of the fair market value of a share of the Company's Common
Stock on the Offering Date, or (ii) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Exercise Date;
provided, however, that the maximum number of shares and such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12. The
fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given Offering Period
shall be the lower of: (i) eighty-five percent (85%) of the fair market
value of a share of the Common Stock of the Company on the Offering Date;
or (ii) eighty-five percent (85%) of the fair market value of a share of
the Common Stock of the Company on the Exercise Date. The fair market
value of the Company's Common Stock on a given date shall be determined by
the Board in its discretion as follows: if shares of Common Stock are
listed on an established national or regional stock exchange, are admitted
to quotation on the National Association of Securities Dealers Automated
Quotation System, or are publicly traded on an established securities
market, the fair market value of the shares of Common Stock shall be the
closing price of the shares of Common Stock on such exchange or in such
market (the highest such closing price if there is more than one such
exchange or market) (or if there is no such reported closing price, the
fair market value shall be the mean between the highest bid and lowest
asked prices or between the high and low sale prices on such trading day)
or, if no sale of the shares of Common Stock is reported for such trading
day, on the next preceding day on which any sale shall have been reported.
If the shares of Common Stock are not listed on such an exchange, quoted on
such System or traded on such a market, fair market value shall be
determined by the Board in good faith.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date of the Offering Period, and
the maximum number of full shares subject to the option will be purchased
at the applicable option price with the accumulated Contributions in his or
her account. The shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the participant on the Exercise Date.
During his or her lifetime, a participant's option to purchase shares
hereunder is exercisable only by him or her.
9. Issuance of Share Certificates. On the Exercise Date, a participant will
------------------------------
be credited with the number of shares of Common Stock purchased for the
participant's account under the Plan during the Offering Period. Shares
purchased under the Plan will be held in the custody of an agent (the
"Agent") appointed by the Board of Directors. The Agent may
4
hold the shares purchased under the Plan in stock certificates in nominee
names and may commingle shares held in its custody in a single account or
stock certificate without identification as to individual participating
employees. A participant may, at any time following the purchase of shares
under the Plan, by written notice instruct the Agent to have all or part of
such shares reissued in the participant's own name and have the stock
certificate delivered to the participant. Any cash remaining to the credit
of a participant's account under the Plan after a purchase by him or her of
shares at the termination of each Offering Period which is insufficient to
purchase a full share of Common Stock of the Company shall be carried over
to the next Offering Period if the Employee continues to participate in the
Plan, or if the Employee does not continue to participate, shall be
returned to such participant. Any other monies left over in a participant's
account after an Exercise Date shall be returned to the Employee.
10. Voluntary Withdrawal; Termination of Employment.
-----------------------------------------------
(a) A participant may withdraw all but not less than all the Contributions
credited to his or her account under the Plan at any time prior to the
Exercise Date of the Offering Period by giving written notice to the
Company. All of the participant's Contributions credited to his or her
account will be paid to him or her promptly after receipt of his or her
notice of withdrawal and his or her option for the current period will be
automatically terminated, and no further Contributions for the purchase of
shares will be made during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an Employee
prior to the Exercise Date of an Offering Period for any reason, including
retirement or death, the Contributions credited to his or her account will
be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option
will be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as an
Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be
deemed to have elected to withdraw from the Plan and the Contributions
credited to his or her account will be returned to him or her and his or
her option terminated.
(d) A participant's withdrawal from an offering will not have any effect upon
his or her eligibility to participate in a succeeding offering or in any
similar plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the Contributions of a participant
--------
in the Plan.
12. Stock.
------
(a) The maximum number of shares of the Company's Common Stock which shall be
made available for sale under the Plan shall be 300,000 shares, subject to
adjustment upon
5
changes in capitalization of the Company as provided in Section 18. If the
total number of shares which would otherwise be subject to options granted
pursuant to Section 7(a) on the Offering Date of an Offering Period exceeds
the number of shares then available under the Plan (after deduction of all
shares for which options have been exercised or are then outstanding), the
Company shall make a pro rata allocation of the shares remaining available
for option grant in as uniform a manner as shall be practicable and as it
shall determine to be equitable. In such event, the Company shall give
written notice of such reduction of the number of shares subject to the
option to each Employee affected thereby and shall similarly reduce the
rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in shares covered by
his or her option until such option has been exercised.
13. Administration. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend
and rescind any rules deemed desirable and appropriate for the
administration of the Plan and not inconsistent with the Plan, to construe
and interpret the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The composition of the
committee shall be in accordance with the requirements to obtain or retain
any available exemption from the operation of Section 16(b) of the Exchange
Act pursuant to Rule 16b-3 promulgated thereunder.
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of
an Offering Period but prior to delivery to him or her of such shares and
cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to the Exercise
Date of an Offering Period. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the participant (and his
or her spouse, if any) at the time by written notice. In the event of the
death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's
death, the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or
if no spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.
15. Transferability. Neither Contributions credited to a participant's account
---------------
nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be
6
assigned, transferred, pledged or otherwise disposed of in any way (other
than by will, the laws of descent and distribution, or as provided in
Section 13) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance
with Section 10.
16. Use of Funds. All Contributions received or held by the Company under the
------------
Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. Reports. Individual accounts will be maintained for each participant in
-------
the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the shareholders of the
----------
Company, the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but
have not yet been placed under option (collectively, the "Reserves"), as
well as the price per share of Common Stock covered by each option under
the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment
shall be made by the Board, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an option.
(b) Corporate Transactions. In the event of the proposed dissolution or
----------------------
liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise
provided by the Board. In the event of a proposed sale of all or
substantially all of the assets of the Company, the merger of the Company
with or into another corporation in which the Corporation is not the
surviving corporation or upon any transaction (including, without
limitation, a merger or reorganization in which the Company is the
surviving corporation) approved by the Board that results in any person or
entity owning more than 80 percent of the combined voting power of all
classes of stock of the Company, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or
7
subsidiary of such successor corporation, unless the Board determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a
new Exercise Date (the "New Exercise Date"). If the Board shortens the
Offering Period then in progress in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify each
participant in writing, at least ten (10) days prior to the New Exercise
Date, that the Exercise Date for his or her option has been changed to the
New Exercise Date and that his or her option will be exercised
automatically on the New Exercise Date, unless prior to such date he or she
has withdrawn from the Offering Period as provided in Section 10. For
purposes of this Section 18(b), an option granted under the Plan shall be
deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to
the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property)
received in the sale of assets, merger or other transaction by holders of
Common Stock for each share of Common Stock held on the effective date of
the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however,
that if such consideration received in the sale of assets, merger or other
transaction was not solely common stock of the successor corporation or its
parent (as defined in Section 424(e) of the Code), the Board may, with the
consent of the successor corporation and the participant, provide for the
consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by holders of Common
Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per
share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding
Common Stock, and in the event of the Company being consolidated with or
merged into any other corporation.
20. Amendment or Termination.
------------------------
(a) The Board may at any time terminate or amend the Plan. Except as provided
in Section 19, no such termination may affect options previously granted,
nor may an amendment make any change in any option theretofore granted
which adversely affects the rights of any participant. In addition, to the
extent necessary to comply with Rule 16b-3 under the Exchange Act, or under
Section 423 of the Code (or any successor rule or provision or any
applicable law or regulation), the Company shall obtain shareholder
approval in such a manner and to such a degree as so required.
(b) Without shareholder consent and without regard to whether any participant
rights may be considered to have been adversely affected, the Board (or its
committee) shall be entitled to change the Offering Periods and Purchase
Periods, change the option price per share
8
provided that such option price shall not be less than the lesser of eighty
five percent (85%) of the fair market value of the Common Stock (i) on the
Offering Date or (ii) on the Exercise Date, limit the frequency and/or
number of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a currency
other than U.S. dollars, permit payroll withholding in excess of the amount
designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or accounting and
crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld
from the participant's Compensation, and establish such other limitations
or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
21. 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.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
option of counsel for the Company, such a representation is required by any
of the aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon the
----------------------------
earlier to occur of its adoption by the Board of Directors or its approval
by the shareholders of the Company. It shall continue in effect for a term
of twenty (20) years unless sooner terminated under Section 20.
24. Additional Restrictions of Rule 16b-3. The terms and conditions of options
-------------------------------------
granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions
of Rule 16b-3. This Plan shall be deemed to contain, and such options
shall contain, and the shares issued upon exercise thereof shall be subject
to, such additional conditions and restrictions as may be required by Rule
16b-3 to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
9
EXHIBIT 4.2
TREX COMPANY, INC.
1999 STOCK OPTION AND INCENTIVE PLAN
TABLE OF CONTENTS
Page
----
1. PURPOSE........................................................................................... 1
2. DEFINITIONS....................................................................................... 1
3. ADMINISTRATION OF THE PLAN........................................................................ 4
3.1. Board..................................................................................... 4
3.2. Committee................................................................................. 4
3.3. Grants.................................................................................... 5
3.4. No Liability.............................................................................. 6
3.5. Applicability of Rule 16b-3............................................................... 6
4. STOCK SUBJECT TO THE PLAN......................................................................... 6
4.1. Aggregate Limitation...................................................................... 6
4.2. Other Plan Limits......................................................................... 7
4.3. Payment Shares............................................................................ 7
4.4. Application of Aggregate Limitation....................................................... 7
4.5. Per-Grantee Limitation.................................................................... 7
5. EFFECTIVE DATE AND TERM OF THE PLAN............................................................... 8
5.1. Effective Date............................................................................ 8
5.2. Term...................................................................................... 8
6. PERMISSIBLE GRANTEES.............................................................................. 8
6.1. Employees and Service Providers........................................................... 8
6.2. Multiple Grants........................................................................... 9
7. LIMITATIONS ON GRANTS OF INCENTIVE STOCK OPTIONS.................................................. 9
8. AWARD AGREEMENT................................................................................... 9
9. OPTION PRICE...................................................................................... 9
10. VESTING, TERM AND EXERCISE OF OPTIONS............................................................. 10
10.1. Vesting and Option Period................................................................. 10
10.2. Term...................................................................................... 10
10.3. Acceleration.............................................................................. 10
10.4. Termination of Employment or Other Relationship for a
Reason Other than Death or Disability.................................................... 10
10.5. Rights in the Event of Death.............................................................. 11
10.6. Rights in the Event of Disability......................................................... 11
10.7. Rights in the Event of Retirement......................................................... 11
10.8. Limitations on Exercise of Option......................................................... 12
10.9. Method of Exercise........................................................................ 12
10.10. Rights as a Stockholder; Dividend Equivalents............................................. 13
10.11. Delivery of Stock Certificates............................................................ 13
11. TRANSFERABILITY OF OPTIONS......................................................................... 13
11.1. General Rule.............................................................................. 13
11.2. Family Transfers.......................................................................... 13
12. RESTRICTED STOCK................................................................................... 14
-i-
12.1. Grant of Restricted Stock or Restricted Stock Units....................................... 14
12.2. Restrictions.............................................................................. 14
12.3. Restricted Stock Certificates............................................................. 15
12.4. Rights of Holders of Restricted Stock..................................................... 15
12.5. Rights of Holders of Restricted Stock Units............................................... 15
12.6. Termination of Employment or Other Relationship for a
Reason Other than Death or Disability.................................................... 16
12.7. Rights in the Event of Death.............................................................. 16
12.8. Rights in the Event of Disability......................................................... 17
12.9. Delivery of Shares and Payment Therefor................................................... 17
13. STOCK APPRECIATION RIGHTS.......................................................................... 17
13.1. Grant of Stock Appreciation Rights........................................................ 17
13.2. Nature of a Stock Appreciation Right...................................................... 17
13.3. Terms and Conditions Governing SARs....................................................... 17
14. UNRESTRICTED STOCK................................................................................. 18
15. PARACHUTE LIMITATIONS.............................................................................. 18
16. REQUIREMENTS OF LAW................................................................................ 19
16.1. General................................................................................... 19
16.2. Rule 16b-3................................................................................ 19
17. AMENDMENT AND TERMINATION OF THE PLAN.............................................................. 20
18. EFFECT OF CHANGES IN CAPITALIZATION................................................................ 20
18.1. Changes in Stock.......................................................................... 20
18.2. Reorganization, Sale of Assets or Sale of Stock........................................... 21
18.3. Adjustments............................................................................... 22
18.4. No Limitations on Company................................................................. 22
19. DISCLAIMER OF RIGHTS............................................................................... 22
20. NONEXCLUSIVITY OF THE PLAN......................................................................... 23
21. WITHHOLDING TAXES.................................................................................. 23
22. CAPTIONS........................................................................................... 23
23. OTHER PROVISIONS................................................................................... 24
24. NUMBER AND GENDER.................................................................................. 24
25. SEVERABILITY....................................................................................... 24
26. POOLING............................................................................................ 24
27. GOVERNING LAW...................................................................................... 24
-ii-
TREX COMPANY, INC.
1999 STOCK OPTION AND INCENTIVE PLAN
Trex Company, Inc., a Delaware corporation (the "Company"), sets forth
herein the terms of its 1999 Stock Option and Incentive Plan (the "Plan") as
follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain
highly qualified officers, key employees, outside directors and other persons,
and to motivate such officers, key employees, outside directors and other
persons to serve the Company and its affiliates (as defined herein) and to
expend maximum effort to improve the business results and earnings of the
Company, by providing to such officers, key employees, outside directors and
other persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the
Plan provides for the grant of stock options, restricted stock, restricted stock
units, unrestricted stock and stock appreciation rights in accordance with the
terms hereof. Stock options granted under the Plan may be non-qualified stock
options or incentive stock options, as provided herein, except that stock
options granted to outside directors and all Service Providers shall in all
cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1. "Affiliate" of, or person "affiliated" with, a person means any company
or other trade or business that controls, is controlled by or is under
common control with such person within the meaning of Rule 405 of
Regulation C under the Securities Act.
2.2. "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement, stock appreciation right
agreement or other written agreement between the Company and a Grantee
that evidences and sets out the terms and conditions of a Grant.
2.3. "Board" means the Board of Directors of the Company.
2.4. "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.5. "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two
members of
1
the Board, none of whom shall be an officer or other salaried employee of
the Company or any affiliate of the Company.
2.6. "Company" means Trex Company, Inc., a Delaware corporation and any entity
which is treated as a "disregarded entity" pursuant to Section 7701 of
the Code.
2.7. "Effective Date" means the date designated by the Board in its resolution
adopting the Plan.
2.8. "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.9. "Fair Market Value" means the closing price of a share of Stock reported
on the New York Stock Exchange ("NYSE") on the date Fair Market Value is
being determined, provided that if there should be no closing price
reported on such date, the Fair Market Value of a share of Stock on such
date shall be deemed equal to the closing price as reported by the NYSE
for the last preceding date on which sales of shares were reported.
Notwithstanding the foregoing, in the event that the shares of Stock are
listed upon more than one established stock exchange, Fair Market Value
means the closing price of a share of Stock reported on the exchange that
trades the largest volume of shares on such date. If the Stock is not at
the time listed or admitted to trading on a stock exchange, Fair Market
Value means the mean between the lowest reported bid price and highest
reported asked price of the Stock on the date in question in the over-
the-counter market, as such prices are reported in a publication of
general circulation selected by the Board and regularly reporting the
market price of Stock in such market. If the Stock is not listed or
admitted to trading on any stock exchange or traded in the over-the-
counter market, Fair Market Value shall be as determined in good faith by
the Board.
2.10. "Grant" means an award of an Option, Restricted Stock, Restricted Stock
Unit, Unrestricted Stock, or Stock Appreciation Right under the Plan.
2.11. "Grant Date" means, as determined by the Board or authorized Committee,
(i) the date as of which the Board or such Committee approves a Grant or
(ii) such other date as may be specified by the Board or such Committee.
2.12. "Grantee" means a person who receives or holds an Option, Restricted
Stock, Restricted Stock Unit, Stock Appreciation Right or Unrestricted
Stock under the Plan.
2.13. "Immediate Family Members" means the spouse, children, grandchildren,
parents and siblings of the Grantee.
2
2.14. "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code.
2.15. "Option" means an option to purchase one or more shares of Stock pursuant
to the Plan.
2.16. "Option Period" means the period during which Options may be exercised as
set forth in SECTION 10 hereof.
2.17. "Option Price" means the purchase price for each share of Stock subject
to an Option.
2.18. "Outside Director" means a member of the Board who is not an officer or
employee of the Company or any Subsidiary.
2.19. "Plan" means this Trex Company, Inc. 1999 Stock Option and Incentive
Plan, as amended from time to time.
2.20. "Reporting Person" means a person who is required to file reports under
Section 16(a) of the Exchange Act.
2.21. "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant
to SECTION 12.2 hereof.
2.22. "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant
to SECTION 12 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.23. "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
SECTION 12 hereof, which represents a conditional right to receive a
share of Stock in the future, and which is subject to restrictions and to
a risk of forfeiture.
2.24. "Securities Act" means the Securities Act of 1933, as now in effect or as
hereafter amended.
2.25. "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or Affiliate of the Company, and employees of any of the
foregoing, as such persons may be designated from time to time by the
Board pursuant to SECTION 6 hereof.
2.26. "Stock" means the common stock, par value $0.01 per share, of the
Company.
3
2.27. "Stock Appreciation Right" or "SAR" means a right granted to a Grantee
pursuant to SECTION 13 hereof.
2.28. "Subsidiary" means any "subsidiary corporation" of the Company within the
meaning of Section 424(f) of the Code.
2.29. "Termination Date" means the date upon which an Option shall terminate or
expire, as set forth in SECTION 10.2 hereof.
2.30. "Unrestricted Stock" means an award of Stock granted to a Grantee
pursuant to SECTION 14 hereof.
3. ADMINISTRATION OF THE PLAN
3.1. BOARD
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's certificate of
incorporation, bylaws and applicable law. The Board shall have full power and
authority to take all actions and to make all determinations required or
provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Grant or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's certificate of incorporation, bylaws
and applicable law. The interpretation and construction by the Board of any
provision of the Plan, any Grant or any Award Agreement shall be final and
conclusive. As permitted by law, the Board may delegate its authority under the
Plan to a member of the Board or an executive officer of the Company; provided,
however, that, unless otherwise provided by resolution of the Board, only the
Board or the Committee may make a Grant to an executive officer of the Company
and establish the number of shares of Stock that may be subject to Grants with
respect to any fiscal period.
3.2. COMMITTEE.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in SECTION 3.1 hereof and in other applicable provisions of the Plan, as
the Board shall determine, consistent with the Company's certificate of
incorporation, bylaws and applicable law. In the event that the Plan, any Grant
or any Award
4
Agreement provides for any action to be taken or determination to be made by the
Board, such action may be taken by or such determination may be made by the
Committee if the power and authority to do so has been delegated to the
Committee by the Board as provided for in this SECTION 3.2. Unless otherwise
expressly determined by the Board, any such action or determination by the
Committee shall be final, binding and conclusive. As permitted by law, the
Committee may delegate the authority delegated to it under the Plan to a member
of the Board of Directors or an executive officer of the Company; provided,
however, that, unless otherwise provided by the Board, only the Board or the
Committee may make a Grant to a Reporting Person of the Company and establish
the number of shares of Stock that may be subject to Grants during any fiscal
period.
3.3. GRANTS.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority (i) to designate Grantees, (ii) to determine the types
of Grants to be made to a Grantee, (iii) to determine the number of shares of
Stock to be subject to a Grant, (iv) to establish the terms and conditions of
each Grant, including, but not limited to, the Option Price of any Option, the
nature and duration of any restriction or condition (or provision for lapse
thereof, including lapse relating to a change in control of the Company)
relating to the vesting, exercise, transfer or forfeiture of a Grant or the
shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options, (v) to prescribe the
form of each Award Agreement evidencing a Grant, (vi) to make Grants alone, in
addition to, in tandem with, or in substitution or exchange for any other Grant
or any other award granted under another plan of the Company or a Subsidiary,
and (vii) to amend, modify or supplement the terms of any outstanding Grant.
Such authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy or
custom. As a condition to any subsequent Grant, the Board shall have the right,
at its discretion, to require Grantees to return to the Company any Grants
previously awarded under the Plan. Subject to the terms and conditions of the
Plan, any such subsequent Grant shall be upon such terms and conditions as are
specified by the Board at the time the subsequent Grant is made.
The Company may retain the right in an Award Agreement to cause a forfeiture
of the gain realized by a Grantee on account of actions taken by the Grantee in
violation or breach of or in conflict with any non-competition agreement, any
agreement prohibiting solicitation of employees or clients of the Company or any
affiliate thereof or any confidentiality obligation with respect to the Company
or any affiliate thereof or otherwise in competition with the Company, to the
extent specified in such Award Agreement applicable to the Grantee.
Furthermore, the
5
Company may annul a Grant if the Grantee is an employee of the Company or an
affiliate thereof and is terminated "for cause" as defined in the applicable
Award Agreement. The Board may permit or require the deferral of any award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest or dividend
equivalents, including converting such credits into deferred Stock equivalents.
3.4. NO LIABILITY.
No member of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Grant or Award
Agreement.
3.5. APPLICABILITY OF RULE 16B-3.
Those provisions of the Plan that make express reference to Rule 16b-3 under
the Exchange Act shall apply only to Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
4.1. AGGREGATE LIMITATION.
Subject to adjustment as provided in SECTION 18 hereof, the aggregate number
of shares of Stock available for issuance under the Plan pursuant to Options or
other Grants shall be one million four hundred thousand (1,400,000) shares and
shares may be authorized but unissued shares, treasury shares or issued and
outstanding shares that are purchased in the open market. Any shares of Stock
granted under the Plan which are forfeited to the Company because of the failure
to meet an award contingency or condition shall again be available for issuance
pursuant to new awards granted under the Plan. Any shares of Stock covered by
an award (or portion of an award) granted under the Plan which is forfeited or
canceled, expires or is settled in cash shall be deemed not to have been issued
for purposes of determining the maximum number of shares of Stock available for
issuance under the Plan. If any stock option is exercised by tendering shares
of Stock, either actually or by attestation, to the Company as full or partial
payment in connection with the exercise of a stock option under the Plan or any
prior plan of the Company as hereinabove described, only the number of shares of
Stock issued net of the shares of Stock tendered shall be deemed issued for
purposes of determining the maximum number of shares of Stock available for
issuance under the Plan. Shares of Stock issued under the Plan through the
settlement, assumption or substitution of outstanding awards or obligations to
grant future awards resulting from the acquisition of another entity shall not
reduce the maximum number of shares available for issuance under the Plan.
6
4.2. OTHER PLAN LIMITS.
Subject to adjustment as provided in SECTION 18 hereof, the following
additional limitations are imposed under the Plan. The maximum number of shares
of Stock that may be delivered through stock options intended to be Incentive
Stock Options shall be one million four hundred thousand (1,400,000). Subject
to adjustment as provided in SECTION 19 hereof, the maximum number of shares of
Stock that may be issued in conjunction with awards granted pursuant to SECTION
12 and 14 hereof shall be two hundred fifty thousand (250,000); provided,
however, that shares issued in satisfaction of other compensation obligations of
the Company shall not count against this maximum number.
4.3. PAYMENT SHARES.
Subject to the overall limitation on the number of shares of Stock that may
be delivered under the Plan, the Board may use available shares of Stock as the
form of payment for compensation, grants or rights earned or due under any other
compensation plans or arrangements of the Company, including the plan of any
entity acquired by the Company, and such payment shares shall not count against
the limitation on the maximum number of shares specified in SECTION 4.2.
4.4. APPLICATION OF AGGREGATE LIMITATION.
The Board may adopt reasonable counting procedures to ensure appropriate
counting, avoid double counting (as, for example, in the case of tandem or
substitute awards) and make adjustments if the number of shares of Stock
actually delivered differs from the number of shares of Stock previously counted
in connection with a Grant.
4.5. PER-GRANTEE LIMITATION.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act:
(i) no person eligible for a Grant under SECTION 6 hereof may be awarded
Options for purposes of the Plan exercisable for greater than five hundred
thousand (500,000) shares of Stock (subject to adjustment as provided in
SECTION 18 hereof);
(ii) the maximum number of shares of Unrestricted Stock and Restricted
Stock that may be awarded under the Plan (including for this purpose any
shares of Stock represented by Restricted Stock Units) to any person
eligible for a Grant under SECTION 12 and 14 hereof if such Grant is
intended to qualify as performance-based under Code Section 162(m) is two
hundred fifty
7
thousand (250,000) for purposes of the Plan (subject to adjustment as
provided in SECTION 18 hereof);
(iii) the maximum number of shares of Stock that may be the subject of
SARs awarded to any Grantee under SECTION 13 hereof is two hundred fifty
thousand (250,000) for purposes of the Plan (subject to adjustment as
provided in SECTION 18 hereof).
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval of
the Plan by the stockholders of the Company, within one year before or after the
date upon which the Plan was adopted by the Board. Such approval shall be by a
majority of the votes cast on the proposal at a meeting of stockholders,
provided that a quorum is present. Upon approval of the Plan by the
stockholders of the Company as set forth above, all Grants made under the Plan
on or after the Effective Date shall be fully effective as if the stockholders
of the Company had approved the Plan on the Effective Date. If the stockholders
fail to approve the Plan within the time period set forth above, any Grants made
hereunder shall be null and void and of no effect.
5.2. TERM.
The Plan has no termination date; however, no Incentive Stock Option may be
granted under the Plan on or after April 7, 2009.
6. PERMISSIBLE GRANTEES
6.1. EMPLOYEES AND SERVICE PROVIDERS.
Subject to the provisions of SECTION 7 hereof, Grants may be made under the
Plan to any employee of the Company or any Subsidiary, including any such
employee who is an officer or director of the Company, to an Outside Director,
to a Service Provider or employee of a Service Provider providing, or who has
provided, services to the Company or any Subsidiary, and to any other individual
whose participation in the Plan is determined by the Board to be in the best
interests of the Company, as the Board shall determine and designate from time
to time.
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6.2. MULTIPLE GRANTS.
An eligible person may receive more than one Grant, subject to such
restrictions as are provided herein.
7. LIMITATIONS ON GRANTS OF INCENTIVE STOCK OPTIONS
An Option shall constitute an Incentive Stock Option only (i) if the Grantee
of such Option is an employee of the Company or any Subsidiary of the Company;
(ii) to the extent specifically provided in the related Award Agreement; and
(iii) to the extent that the aggregate Fair Market Value (determined at the time
the Option is granted) of the shares of Stock with respect to which all
Incentive Stock Options held by such Grantee become exercisable for the first
time during any calendar year (under the Plan and all other plans of the
Grantee's employer and its affiliates) does not exceed $100,000. This
limitation shall be applied by taking Options into account in the order in which
they were granted.
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, in
such form or forms as the Board shall from time to time determine. Award
Agreements issued from time to time or at the same time need not contain similar
provisions but shall be consistent with the terms of the Plan. Each Award
Agreement evidencing a Grant of Options shall specify whether such Options are
intended to be non-qualified stock options or Incentive Stock Options, and in
the absence of such specification such options shall be deemed non-qualified
stock options.
9. OPTION PRICE
The Option Price of each Option shall be no less than the Fair Market Value
of a share of Stock on the date of grant and stated in the Award Agreement
evidencing such Option; provided, however, that in the event that a Grantee
would otherwise be ineligible to receive an Incentive Stock Option by reason of
the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to
ownership of more than ten percent (10%) of the Company's outstanding shares of
Stock), the Option Price of an Option granted to such Grantee that is intended
to be an Incentive Stock Option shall be not less than one hundred ten percent
(110%) of the Fair Market Value of a share of Stock on the Grant Date. In no
case shall the Option Price of any Option be less than the par value of a share
of Stock.
9
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. VESTING AND OPTION PERIOD.
Subject to SECTIONS 10.2 and 18 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Board and stated in the Award Agreement. For purposes of this
SECTION 10.1, fractional numbers of shares of Stock subject to an Option shall
be rounded down to the next nearest whole number. The period during which any
Option shall be exercisable shall constitute the "Option Period" with respect to
such Option.
10.2. TERM.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and thereafter stated in the Award Agreement relating to such Option;
provided, however, that in the event that the Grantee would otherwise be
ineligible to receive an Incentive Stock Option by reason of the provisions of
Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent (10%) of the outstanding shares of Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its date of grant.
10.3. ACCELERATION.
Any limitation on the exercise of an Option contained in any Award Agreement
may be rescinded, modified or waived by the Board, in its sole discretion, at
any time and from time to time after the Grant Date of such Option, so as to
accelerate the time at which the Option may be exercised.
10.4. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP FOR A REASON OTHER
THAN DEATH OR DISABILITY.
Unless otherwise provided by the Board, upon the termination of a Grantee's
employment or other relationship with the Company and its Subsidiaries other
than by reason of death, "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) or retirement, any Option or portion thereof held
by such Grantee that has not vested in accordance with the provisions of SECTION
10.1 hereof shall terminate immediately, and any Option or portion thereof that
has vested in accordance with the provisions of SECTION 10.1 hereof but has not
been exercised shall terminate at the close of business on the 90th day
following the
10
Grantee's termination of employment or other relationship (or, if such 90th day
is a Saturday, Sunday or holiday, at the close of business on the next preceding
day that is not a Saturday, Sunday or holiday). Upon termination of an Option or
portion thereof, the Grantee shall have no further right to purchase shares of
Stock pursuant to such Option or portion thereof. Whether a leave of absence or
leave on military or government service shall constitute a termination of
employment or other relationship for purposes of the Plan shall be determined by
the Board, whose determination shall be final and conclusive. For purposes of
the Plan, a termination of employment, service or other relationship shall not
be deemed to occur if the Grantee is immediately thereafter employed with the
Company, a Subsidiary or a Service Provider, or is engaged as a Service Provider
or an Outside Director. Whether a termination of a Grantee's employment or other
relationship with the Company and its Subsidiaries shall have occurred shall be
determined by the Board, whose determination shall be final and conclusive.
10.5. RIGHTS IN THE EVENT OF DEATH.
Unless otherwise provided by the Board, if a Grantee dies while employed by
or providing services to the Company, all Options granted to such Grantee that
have not previously terminated shall fully vest on the date of death, and the
executors or administrators or legatees or distributees of such Grantee's estate
shall have the right, at any time within one year after the date of such
Grantee's death and prior to termination of the Option pursuant to SECTION 10.2
hereof, to exercise any Option held by such Grantee at the date of such
Grantee's death.
10.6. RIGHTS IN THE EVENT OF DISABILITY.
Unless otherwise provided by the Board, if a Grantee's employment or other
relationship with the Company is terminated by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Grantee, such Grantee's Options that have not previously terminated shall fully
vest, and shall be exercisable for a period of one year after such termination
of employment or other relationship, subject to earlier termination of the
Option as provided in SECTION 10.2 hereof. Whether a termination of employment
or other relationship is considered to be by reason of "permanent and total
disability" for purposes of the Plan shall be determined by the Board, whose
determination shall be final and conclusive.
10.7. RIGHTS IN THE EVENT OF RETIREMENT.
Unless otherwise provided by the Board, if a Grantee retires under the
terms of any Company retirement plan applicable to the Grantee or as determined
by the Board, the Grantee shall be considered retired and all Options granted to
such Grantee that have not previously terminated shall fully vest on the date of
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retirement, and the Grantee shall have the right, at any time within three years
after the date of such Grantee's retirement and prior to termination of the
Option pursuant to SECTION 10.2 hereof, to exercise any Option held by such
Grantee at the date of such Grantee's retirement.
10.8. LIMITATIONS ON EXERCISE OF OPTION.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
stockholders of the Company as provided herein, or after ten years following the
date upon which the Option is granted, or after the occurrence of an event
referred to in SECTION 18 hereof which results in termination of the Option.
10.9. METHOD OF EXERCISE.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Company of written notice of exercise on any business day, at the Company's
principal office, addressed to the attention of the Board. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares of Stock for which the Option is being exercised. The minimum number of
shares of Stock with respect to which an Option may be exercised, in whole or in
part, at any time shall be the lesser of (i) 100 shares or such lesser number
set forth in the applicable Award Agreement and (ii) the maximum number of
shares of Stock available for purchase under the Option at the time of exercise.
Payment of the Option Price for the shares of Stock purchased pursuant to the
exercise of an Option shall be made (i) in cash or in cash equivalents
acceptable to the Company; (ii) to the extent permitted by law and at the
Board's discretion, through the actual or constructive tender to the Company of
shares of Stock, which shares of Stock, if acquired from the Company, shall have
been held for at least six months prior to such tender and which shall be
valued, for purposes of determining the extent to which the Option Price has
been paid thereby, at their Fair Market Value on the date of exercise; or (iii)
to the extent permitted by law and at the Board's discretion, by a combination
of the methods described in clauses (i) and (ii). The Board may provide, by
inclusion of appropriate language in an Award Agreement, that payment in full of
the Option Price need not accompany the written notice of exercise, provided
that the notice is accompanied by delivery of an unconditional and irrevocable
undertaking by a licensed broker acceptable to the Company as the agent for the
individual exercising the Option to deliver promptly to the Company sufficient
funds to pay the Option Price and directs that the certificate or certificates
for the shares of Stock for which the Option is exercised be delivered to a
licensed broker acceptable to the Company as the agent for the individual
exercising the Option and, at the time such certificate or certificates are
delivered, the broker tenders to the Company cash (or cash equivalents
acceptable to the
12
Company) equal to the Option Price for the shares of Stock purchased pursuant to
the exercise of the Option plus the amount (if any) of federal or other taxes
which the Company may in its judgment be required to withhold with respect to
the exercise of the Option. An attempt to exercise any Option granted hereunder
other than as set forth above shall be invalid and of no force and effect.
10.10. RIGHTS AS A STOCKHOLDER; DIVIDEND EQUIVALENTS.
Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a stockholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the
subject shares of Stock) until the shares of Stock covered thereby are fully
paid and issued to such individual. Except as provided in SECTION 18 hereof, no
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date of such issuance. However, the Board may,
on such conditions as it deems appropriate, provide that a Grantee will receive
a benefit in lieu of cash dividends that would have been payable on any or all
shares of Stock subject to the Grant if such shares of Stock had been
outstanding. Without limitation, the Board may provide for payment to the
Grantee of amounts representing such dividends, either currently or in the
future, or for the investment of such amounts on behalf of the Grantee.
10.11. DELIVERY OF STOCK CERTIFICATES.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
Stock certificate or certificates evidencing such Grantee's ownership of the
shares of Stock subject to the Option.
11. TRANSFERABILITY OF OPTIONS
11.1. GENERAL RULE
Except as provided in SECTION 11.2 hereof, during the lifetime of a
Grantee, only the Grantee (or, in the event of legal incapacity or incompetency,
the Grantee's guardian or legal representative) may exercise an Option. Except
as provided in SECTION 11.2 hereof, no Option shall be assignable or
transferable by the Grantee to whom it is granted, other than by will or the
laws of descent and distribution.
11.2. FAMILY TRANSFERS.
To the extent permitted by the Board and under such rules and conditions as
imposed by the Board, a Grantee may transfer all or part of an Option that is
not an
13
Incentive Stock Option to (i) any Immediate Family Member, (ii) a trust or
trusts for the exclusive benefit of any Immediate Family Member or (iii) a
partnership or limited liability company in which Immediate Family Members are
the only partners or members, provided that (x) there may be no consideration
for any such transfer, and (y) subsequent transfers of transferred Options or
transfers of an interest in a trust, partnership, or limited liability company
to which an Option has been transferred are prohibited except those in
accordance with this SECTION 11.2 or by will or the laws of descent and
distribution. Following such transfer, any such Option shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
the transfer, provided that, for purposes of this SECTION 11.2, the term
"Grantee" shall be deemed to refer to the transferee. The events of termination
of employment or other relationship referred to in SECTION 10.4 hereof shall
continue to be applied with respect to the original Grantee, following which the
Option shall be exercisable by the transferee only to the extent and for the
periods specified in SECTION 10.4, 10.5, 10.6 or 10.7 hereof.
12. RESTRICTED STOCK
12.1. GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS.
The Board from time to time may grant Restricted Stock or Restricted Stock
Units to persons eligible to receive Grants under SECTION 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
12.2. RESTRICTIONS.
At the time a Grant of Restricted Stock or Restricted Stock Units is made,
the Board shall establish a period of time (the "Restricted Period") applicable
to such Restricted Stock or Restricted Stock Units. Unless otherwise determined
by the Board, unless the Grant is being made in consideration of compensation
due under another plan, or unless vesting is subject to performance, the
Restricted Period will be a minimum of three years. Each Grant of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period.
At the time a Grant of Restricted Stock or Restricted Stock Units is made, the
Board may, in its sole discretion, prescribe restrictions in addition to or
other than the expiration of the Restricted Period, including the satisfaction
of corporate or individual performance objectives, which may be applicable to
all or any portion of the Restricted Stock or Restricted Stock Units. Such
performance objectives shall be established in writing by the Board by not later
than the 90th day of the period of service to which such performance objectives
relate and while the outcome is substantially uncertain. Performance objectives
may be stated either on an absolute or relative basis and may be based on any of
the following criteria: earnings per share, total stockholder return, operating
earnings, growth in assets, return on equity, return on capital, market share,
stock price, net income, cash flow, sales growth (in general, by type of
14
product and by type of customer), retained earnings, completion of acquisitions,
completion of divestitures and asset sales, cost or expense reductions,
introduction or conversion of product brands and achievement of specified
management information systems objectives. Performance objectives may include
positive results, maintaining the status quo or limiting economic losses.
Subject to the fifth sentence of this SECTION 12.2, the Board also may, in its
sole discretion, shorten or terminate the Restricted Period or waive any other
restrictions applicable to all or a portion of the Restricted Stock or
Restricted Stock Units. Neither Restricted Stock nor Restricted Stock Units may
be sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such Restricted Stock or
Restricted Stock Units.
12.3. RESTRICTED STOCK CERTIFICATES.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, Stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement
that either (i) the Secretary of the Company shall hold such certificates for
the Grantee's benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such certificates shall bear a
legend or legends complying with the applicable securities laws and regulations
and making appropriate reference to the restrictions imposed under the Plan and
the Award Agreement.
12.4. RIGHTS OF HOLDERS OF RESTRICTED STOCK.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such shares of Stock and the right
to receive any dividends declared or paid with respect to such shares of Stock.
The Board may provide that any dividends paid on Restricted Stock must be
reinvested in shares of Stock, which may or may not be subject to the same
vesting conditions and restrictions applicable to such Restricted Stock. All
distributions, if any, received by a Grantee with respect to Restricted Stock as
a result of any stock split, stock dividend, combination of shares or other
similar transaction shall be subject to the restrictions applicable to the
original Grant.
12.5. RIGHTS OF HOLDERS OF RESTRICTED STOCK UNITS.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a Grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive,
15
upon the Company's payment of a cash dividend on its outstanding shares of
Stock, a cash payment for each Restricted Stock Unit held equal to the per-share
dividend paid on the shares of Stock. Such Award Agreement may also provide that
such cash payment will be deemed reinvested in additional Restricted Stock Units
at a price per unit equal to the Fair Market Value of a share on the date that
such dividend is paid.
12.6. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP FOR A REASON OTHER
THAN DEATH OR DISABILITY.
Unless otherwise provided by the Board, upon the termination of a Grantee's
employment or other relationship with the Company and its Subsidiaries, in
either case other than, in the case of individuals, by reason of death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code), any Restricted Stock or Restricted Stock Units held by such Grantee that
have not vested, or with respect to which all applicable restrictions and
conditions have not lapsed, shall immediately be deemed forfeited. Upon
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have
no further rights with respect to such Grant, including, but not limited to, any
right to vote Restricted Stock or any right to receive dividends with respect to
Restricted Stock or Restricted Stock Units. Whether a leave of absence or leave
on military or government service shall constitute a termination of employment
or other relationship for purposes of the Plan shall be determined by the Board,
whose determination shall be final and conclusive. For purposes of the Plan, a
termination of employment, service or other relationship shall not be deemed to
occur if the Grantee is immediately thereafter employed with the Company or any
other Service Provider, or is engaged as a Service Provider or an Outside
Director. Whether a termination of a Grantee's employment or other relationship
with the Company and its Subsidiaries shall have occurred shall be determined by
the Board, whose determination shall be final and conclusive.
12.7. RIGHTS IN THE EVENT OF DEATH.
Unless otherwise provided by the Board, if a Grantee dies while employed by
the Company or a Service Provider, or while serving as a Service Provider, all
Restricted Stock or Restricted Stock Units granted to such Grantee shall fully
vest on the date of death unless the Board provided otherwise in the Award
Agreement relating to such Restricted Stock or Restricted Stock Units. Upon such
vesting, the shares of Stock represented thereby shall be deliverable in
accordance with the terms of the Plan to the executors, administrators, legatees
or distributees of the Grantee's estate.
16
12.8. RIGHTS IN THE EVENT OF DISABILITY.
Unless otherwise provided by the Board, if a Grantee's employment or other
relationship with the Company or a Service Provider, or service as a Service
Provider, is terminated by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee's then unvested Restricted Stock or Restricted Stock Units shall be
fully vested. Whether a termination of employment, service or other relationship
is to be considered by reason of "permanent and total disability" for purposes
of the Plan shall be determined by the Board, whose determination shall be final
and conclusive.
12.9. DELIVERY OF SHARES AND PAYMENT THEREFOR.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to Restricted Stock or Restricted Stock Units shall lapse, and,
unless otherwise provided in the Award Agreement, upon payment by the Grantee to
the Company, in cash or by check, of the greater of (i) the aggregate par value
of the shares of Stock represented by such Restricted Stock or Restricted Stock
Units or (ii) the purchase price, if any, specified in the Award Agreement
relating to such Restricted Stock or Restricted Stock Units, a certificate for
such shares shall be delivered, free of all such restrictions, to the Grantee or
the Grantee's beneficiary or estate, as the case may be.
13. STOCK APPRECIATION RIGHTS
13.1. GRANT OF STOCK APPRECIATION RIGHTS.
The Board may from time to time grant SARs to persons eligible to receive
grants under SECTION 6 hereof, subject to the provisions of this SECTION 13 and
to such restrictions, conditions and other terms as the Board may determine.
13.2. NATURE OF A STOCK APPRECIATION RIGHT.
An SAR shall confer on the Grantee a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of Stock on the
date of exercise over (B) the grant price of the SAR, as determined by the
Board. Unless the Board provides otherwise in the Award Agreement, the grant
price of an SAR shall not be less than the Fair Market Value of a share of Stock
on the Grant Date.
13.3. TERMS AND CONDITIONS GOVERNING SARS.
The Board shall determine at the Grant Date or thereafter the time or times
at which and the circumstances under which an SAR may be exercised in whole or
in
17
part (including exercise based on achievement of performance objectives or
future service requirements), the time or times at which and the circumstances
under which an SAR shall cease to be exercisable, the method of exercise, the
method of settlement, form of consideration payable in settlement, whether or
not an SAR shall be in tandem or in combination with any other Grant, and any
other terms and conditions of any SAR.
14. UNRESTRICTED STOCK
The Board may, in its sole discretion, grant Stock (or sell Stock at par
value or such other higher purchase price determined by the Board) free of
restrictions other than those required under federal or state securities laws
("Unrestricted Stock") to persons eligible to receive grants under SECTION 6
hereof. Unrestricted Stock may be granted or sold as described in the preceding
sentence in respect of past services or other valid consideration, or in lieu of
any cash compensation due to such Grantee.
15. PARACHUTE LIMITATIONS
If the Grantee is a "disqualified individual" (as defined in Section
280G(c) of the Code), any Option, Restricted Stock, Restricted Stock Unit or SAR
and any other right to receive any payment or benefit under the Plan shall not
vest or become exercisable (i) to the extent that the right to vest or any other
right to any payment or benefit, taking into account all other rights, payments
or benefits to or for the Grantee, would cause any payment or benefit to the
Grantee under the Plan to be considered a "parachute payment" within the meaning
of Section 280G(b)(2) of the Code as then in effect (a "Parachute Payment") and
(ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax
amounts received by the Grantee from the Company under any Award Agreements, the
Plan, and all other rights, payments or benefits to or for the Grantee would be
less than the maximum after-tax amount that could be received by the Grantee
without causing the payment or benefit to be considered a Parachute Payment. In
the event that, but for the provisions of this SECTION 15, the Grantee would be
considered to have received a Parachute Payment under any Award Agreements that
would have the effect of decreasing the after-tax amount received by the Grantee
as described in clause (ii) of the preceding sentence, then the Grantee shall
have the right, in the Grantee's sole discretion, to designate any rights,
payments or benefits under any Award Agreements, the Plan, any other agreements
and any benefit arrangements to be reduced or eliminated so as to avoid having
the payment or benefit to the Grantee under any Award Agreements be deemed to be
a Parachute Payment.
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16. REQUIREMENTS OF LAW
16.1. GENERAL.
The Company shall not be required to sell or issue any shares of Stock
under any Grant if the sale or issuance of such shares of Stock would constitute
a violation by the Grantee, any other person exercising a right emanating from
such Grant, or the Company of any provision of any law or regulation of any
governmental authority, including, without limitation, any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of any shares of
Stock subject to a Grant upon any securities exchange or under any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares of Stock hereunder, no shares of Stock
may be issued or sold to the Grantee or any other person exercising a right
emanating from such Grant unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company, and any delay caused thereby shall in no way
affect the date of termination of the Grant. Without limiting the generality of
the foregoing, upon the exercise of any Option or any SAR that may be settled in
shares of Stock or the delivery of any Restricted Stock or shares of Stock
underlying Restricted Stock Units, unless a registration statement under the
Securities Act is in effect with respect to the shares of Stock covered by such
Grant, the Company shall not be required to sell or issue such shares of Stock
unless the Board has received evidence satisfactory to it that the Grantee or
any other person exercising a right emanating from such Grant may acquire such
shares of Stock pursuant to an exemption from registration under the Securities
Act. Any such determination by the Board shall be final, binding and conclusive.
The Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act. The Company shall not be
obligated to take any affirmative action in order to cause the exercise of an
Option or an SAR or the issuance of shares of Stock pursuant to the Plan to
comply with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that an Option (or SAR that
may be settled in shares of Stock) shall not be exercisable until the shares of
Stock covered by such Option (or SAR) are registered or are exempt from
registration, the exercise of such Option (or SAR) under circumstances in which
the laws of such jurisdiction apply shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
16.2. RULE 16B-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Grants pursuant to the Plan and the exercise of Options and SARs granted
hereunder will
19
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, such provision or action shall be deemed
inoperative to the extent permitted by law and deemed advisable by the Board,
and shall not affect the validity of the Plan. In the event that Rule 16b-3 is
revised or replaced, the Board may exercise its discretion to modify the Plan in
any respect necessary to satisfy the requirements of, or to take advantage of
any features of, the revised exemption or its replacement.
17. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or terminate
the Plan as to any shares of Stock as to which Grants have not been made. Except
as permitted under this SECTION 17 or SECTION 18 hereof, no amendment,
suspension or termination of the Plan shall, without the consent of the Grantee,
alter or impair rights or obligations under any Grant theretofore awarded under
the Plan.
18. EFFECT OF CHANGES IN CAPITALIZATION
18.1. CHANGES IN STOCK.
Subject to SECTION 18.2 hereof, in the event of any merger, reorganization,
consolidation, recapitalization, separation, liquidation, stock dividend,
spin-off, split-up, share combination or other change in the corporate structure
of the Company affecting the shares of Stock, (a) such adjustment may be made in
the number and class of shares which may be delivered under SECTION 4 hereof and
the Grant limits under SECTION 4 hereof, and in the number and class of or price
of shares subject to outstanding Grants as may be determined to be appropriate
and equitable by the Board, in its sole discretion, to prevent dilution or
enlargement of existing rights; and (b) the Board or, if another legal entity
assumes the obligations of the Company hereunder, the board of directors,
compensation committee or similar body of such other legal entity shall either
(i) make appropriate provision for the protection of outstanding Grants by the
substitution on an equitable basis of appropriate equity interests or awards
similar to the Grants, provided that the substitution neither enlarges nor
diminishes the value and rights under the Grants, or (ii) upon written notice to
the Grantees, provide that Grants shall be exercised distributed, canceled or
exchanged for value pursuant to such terms and conditions (including the waiver
of any existing terms or conditions) as shall be specified in the notice. Any
adjustment of an Incentive Stock Option under this SECTION 18.1 shall be made in
such a manner so as not to constitute a "modification" within the meaning of
Section 424(h)(3) of the Code. The conversion of any convertible securities of
the Company shall not be treated as a change in the corporate structure of the
Company affecting the shares of Stock. Subject to any contrary language in an
Award Agreement evidencing a Grant of Restricted Stock, any
20
restrictions applicable to such Restricted Stock shall apply as well to any
replacement shares received by the Grantee as a result of the merger,
reorganization or other transaction referred to in this SECTION 18.1.
18.2. REORGANIZATION, SALE OF ASSETS OR SALE OF STOCK.
Upon the dissolution or liquidation of the Company or upon a merger,
consolidation or reorganization of the Company with one or more other entities
in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another entity, or upon any
transaction (including, without limitation, a merger or reorganization in which
the Company is the surviving entity) approved by the Board that results in any
person or entity (or person or entities acting as a group or otherwise in
concert) owning eighty percent (80%) or more of the combined voting power of all
classes of securities of the Company, (i) all outstanding Restricted Stock and
Restricted Stock Units shall be deemed to have vested, and all restrictions and
conditions applicable to such Restricted Stock and Restricted Stock Units shall
be deemed to have lapsed, immediately prior to the occurrence of such
transaction, and (ii) all Options and SARs outstanding hereunder shall become
immediately exercisable for a period of fifteen days immediately prior to the
scheduled consummation of such transaction. Any exercise of an Option or SAR
during such fifteen-day period shall be conditioned upon the consummation of the
transaction and shall be effective only immediately before the consummation of
the transaction.
This SECTION 18.2 shall not apply to any transaction to the extent that (A)
provision is made in writing in connection with such transaction for the
continuation of the Plan or the assumption of the Options, SARs, Restricted
Stock and Restricted Stock Units theretofore granted, or for the substitution
for such Options, SARs, Restricted Stock and Restricted Stock Units of new
options, stock appreciation rights, restricted stock and restricted stock units
covering the stock of a successor entity, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kinds of shares or units and
exercise prices, in which event the Plan and Options, SARs, Restricted Stock and
Restricted Stock Units theretofore granted shall continue in the manner and
under the terms so provided or (B) a majority of the full Board determines that
such transaction shall not trigger application of the provisions of this SECTION
18.2 subject to SECTION 26 hereof and limited by any "change in control"
provision in any employment agreement or Award Agreement applicable to the
Grantee. Upon consummation of any such transaction, the Plan and all outstanding
but unexercised Options and SARs shall terminate, except to the extent provision
is made in writing in connection with such transaction for the continuation of
the Plan or the assumption of such Options and SARs theretofore granted, or for
the substitution for such Options and SARs of new options and stock appreciation
rights covering the shares of a successor entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and
21
kinds of shares or units and exercise prices, in which event the Plan and
Options and SARs theretofore granted shall continue in the manner and under the
terms so provided. The Board shall send written notice of an event that will
result in such a termination to all individuals who hold Options and SARs not
later than the time at which the Company gives notice thereof to its
stockholders.
18.3. ADJUSTMENTS.
Adjustments under this SECTION 18 related to shares of Stock or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final and conclusive. No fractional shares or other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share.
18.4. NO LIMITATIONS ON COMPANY.
The making of Grants pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.
19. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate thereof, or to interfere in any way with
any contractual or other right or authority of the Company or Service Provider
either to increase or decrease the compensation or other payments to any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company or any affiliate thereof. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise
stated in the applicable Award Agreement or employment agreement, no Grant
awarded under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company. The obligation of the Company to pay any
benefits pursuant to the Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any participant or beneficiary
under the terms of the Plan. No Grantee shall have any of the rights of a
stockholder with respect to the shares of Stock subject to an Option
22
or SAR except to the extent such shares of Stock shall have been issued upon the
exercise of the Option or SAR.
20. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of Stock options
otherwise than under the Plan.
21. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any federal, state
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the exercise of an Option or SAR or the grant of
Unrestricted Stock. At the time of such vesting, lapse or exercise, the Grantee
shall pay to the Company or the Subsidiary, as the case may be, any amount that
the Company or the Subsidiary may reasonably determine to be necessary to
satisfy such withholding obligation. Subject to the prior approval of the
Company or the Subsidiary, which may be withheld by the Company or the
Subsidiary, as the case may be, in its sole discretion, the Grantee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company or the
Subsidiary to withhold shares of Stock otherwise issuable to the Grantee or (ii)
by delivering to the Company or the Subsidiary shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company or the Subsidiary as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this SECTION 21 may satisfy such Grantee's withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirement.
22. CAPTIONS
The use of captions in the Plan or any Award Agreement is for convenience
of reference only and shall not affect the meaning of any provision of the Plan
or such Award Agreement.
23
23. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
24. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form and, the masculine gender shall include the feminine gender, as
the context requires.
25. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be finally
determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
26. POOLING
Notwithstanding anything in the Plan to the contrary, if any action
described in the Plan would cause a transaction to be ineligible for pooling of
interests accounting that would, but for the action under the Plan, be eligible
for such accounting treatment, the Board shall modify or adjust such action so
that the transaction will be eligible for pooling of interests accounting, if
the Company intends to use such accounting in the transaction. Such modification
or adjustment may include payment of cash or issuance to a Grantee of shares of
Stock of equivalent Fair Market Value.
27. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Grants awarded hereunder shall be governed by the laws of the State of
Delaware (without giving effect to the choice of law provisions thereof).
* * * *
24
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 12th day of March, 1999.
The Plan was duly approved by the stockholders of the Company on the 7th
day of April, 1999.
25
Exhibit 4.3
TREX COMPANY, INC.
1999 Stock Option and Incentive Plan
Non-Incentive Stock Option Agreement
Grant Date: ____________ Stock Option Exercise Price: $__________
Last Date to Exercise: _______ /1/
Number of Shares of Common Stock
Covered by Grant of Options: __________________________
We are pleased to inform you that the Board of Directors or the Compensation
Committee of the Board of Directors has granted you an option to purchase Trex
Company, Inc. common stock. Your grant has been made under the Company's 1999
Stock Option and Incentive Plan (the "Plan"), which, together with the terms
contained in this Agreement, sets forth the terms and conditions of your grant
and is incorporated herein by reference. A copy of the Plan is attached.
Please review it carefully. If any provisions of the Agreement should appear to
be inconsistent with the Plan, the Plan will control.
This stock option grant has
been executed and delivered as of
__________ __, ____ on behalf of
Trex Company, Inc.
________________________________
Name:
Title:
ACCEPTED AND AGREED TO:
____________________________
Name of Optionee:
This is not a stock certificate or a negotiable instrument. Transferable only
pursuant to Section 11.2 of the Plan.
__________________
/1/ Certain events can cause an earlier termination of the Option. See
"Exercise" below.
1. Vesting:
Subject to the terms of the Plan, the Option becomes vested as to 25% of the
shares of Stock purchasable pursuant to the Option on the first anniversary of
the date of grant of the Option, if Optionee has been providing services to the
Company or a Subsidiary continuously from the Optionee's date of grant to the
first anniversary of the date of grant (the "Anniversary Date") and, so long as
continuous provision of services has not been interrupted, the Option becomes
vested as to an additional 25% of the shares of Stock subject to the Option on
each of the next three (3) Anniversary Dates.
2. Exercise:
You may exercise this Option, in whole or in part, to purchase a whole number of
vested shares at any time of not less than 100 shares, unless the number of
shares purchased is the total number available for purchase under the Option, by
following the exercise procedures as set forth in the Plan. All exercises must
take place before the last Date to Exercise, or such earlier date following your
death, disability or your ceasing to provide services as described below under
"Service Requirements." The number of shares you may purchase as of any date
cannot exceed the total number of shares vested by that date, less any shares
you have previously acquired by exercising this Option.
3. Service Requirements:
If your services terminate, all further vesting of shares under this grant
stops, and all unvested shares are canceled. You will have ninety (90) days
after your provision of services ceases to exercise your vested options (unless
your services are terminated for "Cause"), and in the event of your death or
permanent and total disability you or your estate will have a period of one year
to exercise any options, whether or not any such option was otherwise
exercisable at the time of your death or permanent and total disability. Your
Option will terminate upon termination of your services for "Cause." Cause
means, as determined by the Board, (i) gross negligence or willful misconduct in
connection with the performance of duties; (ii) conviction of a criminal offense
(other than minor traffic offenses); or (iii) material breach of any term of any
employment, consulting or other services, confidentiality, intellectual property
or non-competition agreements, if any, between Optionee and the Company or any
of its Affiliates. If the Company enters into a transaction which would result
in the Plan being terminated in accordance with Section 18.2 of the Plan, the
Option may be exercised, in whole or in part, during the fifteen-day period
occurring before such termination as the Board in its sole discretion shall
determine and designate, and in any event immediately before the occurrence of
such termination, whether or not such Option was otherwise exercisable at the
time such termination occurs, such exercise being contingent on the transaction
occurring.
4. Taxes and Withholding:
This Option shall not constitute an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended. In the event that
the Company determines that any federal, state, local or foreign tax or
withholding payment is required relating to the exercise or sale of shares
arising from this grant, the Company shall have the right to require such
payments from you, or withhold such amounts from other payments due to you from
the Company, a Subsidiary or an Affiliate.
5. Transferability:
The Option may be transferred in a manner consistent with Section 11.2 of the
Plan.
6. Non-Competition With the Company:
Covenants of the Optionee. By accepting the benefits of this Agreement, the
Optionee acknowledges that (i) the principal business of the Company is the
manufacturing and sale of wood-plastic composite lumber (the "Present
Business"); (ii) the Optionee constitutes one of a limited number of persons who
have developed the Present Business; (iii) the Optionee's work for the Company
has given and will continue to give the Optionee access to the confidential
affairs and proprietary information of the Company not readily available to the
public; and (iv) the agreements and covenants of the Optionee contained in this
Section 6 are essential to the business and goodwill of the Company.
Accordingly, in consideration of the benefits being provided by this Agreement,
the Optionee is subject to the agreements and covenants set forth in this
Section 6.
Covenant Against Competition. While the Optionee is employed by the Company
and for a period of one (1) year after the termination of the Optionee's
employment with the Company for any reason (such period commencing on the date
hereof is hereinafter referred to as the "Restricted Period"), the Optionee
shall not, directly or indirectly, own, manage, operate, join or control, or
participate in the ownership, management, operation or control of, or be a
proprietor, director, officer, stockholder, member, partner or an employee or
agent of, or a consultant to any business, firm, corporation, partnership or
other entity which engages in (A) the Present
1
Business, or (B) any other principal line of business developed by the Company
after the date hereof but prior to the date of termination of Optionee's
employment with the Company (a "New Business") in any state of the United States
and Canada; provided, however, that the Optionee may own, directly or
indirectly, solely as an investment, securities of any business, firm,
corporation, partnership or other entity which are traded on any national
securities exchange or the Nasdaq National Market if the Optionee (A) is not a
controlling person of, or a member of a group which controls, such entity and
(B) does not, directly or indirectly, own 1% or more of any class of securities
of such entity.
Confidential Information. From and after the date of this Agreement, the
Optionee shall not at any time, directly or indirectly, disclose to any person,
business, firm, corporation, partnership or other entity any confidential or
proprietary information concerning the Company, its business, its suppliers or
its customers. All information, whether written or otherwise, regarding the
Company's business, including, but not limited to, information regarding
customers, customer lists, costs, prices, earnings, systems, operating
procedures, prospective and executed contracts and other business arrangements,
and sources of supply are presumed to be confidential information of the Company
for purposes of this Agreement. The Optionee shall return to the Company all
books, records, lists and other written, typed or printed materials, whether
furnished by the Company or prepared by the Optionee, which contain any
information relating to the Company, its business, its suppliers or its
customers, promptly upon termination of the Optionee's service with the Company,
and the Optionee shall neither make nor retain any copies of such material
without the prior written consent of the Company.
Cumulative Provisions. The covenants and agreements contained in this Section
6 are independent of each other and are cumulative.
Acknowledgments. By accepting the benefits this Agreement, the Optionee
acknowledges the broad scope of the covenants contained in this Section 6, but
agrees that such covenants are reasonable in light of the scope of the
Optionee's duties and knowledge of the Company. The Optionee further
acknowledges and agrees that the covenants contained in this Section 6 do not
unreasonably restrict his employment opportunities or unduly burden or deprive
the Optionee of a means of earning a livelihood.
Remedies for Breach. By accepting the benefits of this Agreement, the
Optionee acknowledges and agrees that his obligations to the Company are unique
and that any breach or threatened breach of such obligations may result in
irreparable harm and substantial damages to the Company. Accordingly, in the
event of a breach or threatened breach by the Optionee of any of the provisions
of this Section 6, the Company shall have the right, in addition to exercising
any other remedies at law or equity which may be available to it under this
Agreement or otherwise, to obtain ex parte, preliminary, interlocutory,
-- -----
temporary or permanent injunctive relief, specific performance and other
equitable remedies in any court of competent jurisdiction, to prevent the
Optionee from violating such provision or provisions or to prevent the
continuance of any violation thereof, together with an award or judgment for any
-------- ----
and all damages, losses, liabilities, expenses and costs incurred by the Company
as a result of such breach or threatened breach including, but not limited to,
attorneys' fees incurred by the Company in connection with, or as a result of,
the enforcement of these covenants. The Optionee expressly waives any
requirement based on any statute, rule or procedure or other source that the
Company post a bond as a condition of obtaining any of the above-described
remedies. In addition to the foregoing remedies, if the Optionee should take
actions in competition with the Company, as specified in this Section 6, the
Company shall have the right to cause a forfeiture of the rights of the
Optionee, including, but not limited to, the right to cause the Optionee to
forfeit: (i) any outstanding Option, and (ii) any gain recognized by the
Optionee upon the exercise of an Option during the period commencing twelve (12)
months prior to the Optionee's termination of employment or other relationship
with the Company due to taking actions in competition with the Company and
ending twelve (12) months following such termination of employment or other
relationship.
Divisibility. By accepting the benefits of this Agreement, the Optionee
agrees that the provisions of this Section 6 are divisible and separable so that
if any provision or provisions hereof shall be held to be unreasonable, unlawful
or unenforceable, such holding shall not impair the remaining provisions hereof.
If any provision hereof is held to be unreasonable, unlawful or unenforceable in
duration, geographical scope or character of restriction by any court of
competent jurisdiction, such provision shall be modified to the extent necessary
in order that any such provision or portion thereof shall be legally enforceable
to the fullest extent permitted by law, and the parties hereto do hereby
expressly authorize any court of competent jurisdiction to enforce any such
provision or portion thereof or to modify any such provision or portion thereof
in order that any such provision or portion thereof shall be enforced by such
court to the fullest extent permitted by applicable law.
2
Definition of the Company. For the purposes of this Section 6 only, any
reference to the "Company" shall be deemed to include the Company, any division,
affiliate or subsidiary of the Company and any and all subsidiaries, divisions
or affiliates acquired or formed by any of such entities after the date hereof.
Non-Integration. The provisions of this Section 6 shall be independent of any
similar provisions contained in any employment agreement, stock option agreement
or other agreement between an Optionee and the Company.
* * * * *
3
EXHIBIT 5.1
[LETTERHEAD OF HOGAN & HARTSON L.L.P. APPEARS HERE]
April 22, 1999
Board of Directors
Trex Company, Inc.
20 South Cameron Street
Winchester, Virginia 22601
Gentlemen:
This firm has acted as special counsel to Trex Company, Inc., a
Delaware corporation (the "Company"), in connection with its registration,
pursuant to a registration statement on Form S-8 (the "Registration Statement"),
of 800,000 shares (the "Shares") of common stock, par value $.01 per share, of
the Company, issuable under the Trex Company, Inc. Plans (as defined below). Of
such Shares, 300,000 shares are issuable under the Trex Company, Inc. 1999
Employee Stock Purchase Plan (the "Stock Purchase Plan") and 500,000 shares are
issuable under the Trex Company, Inc. 1999 Stock Option and Incentive Plan (the
"Stock Incentive Plan" and, together with the Stock Purchase Plan, the "Plans").
This letter is furnished to you at your request to enable you to fulfill the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. (S)229.601(b)(5), in
connection with such registration.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. A copy of the Stock Purchase Plan, as certified by an officer
of the Company on the date hereof as then being complete,
accurate and in effect.
3. A copy of the Stock Incentive Plan, as certified by an officer
of the Company on the date hereof as then being complete,
accurate and in effect.
4. The Restated Certificate of Incorporation of the Company, as
certified by an officer of the Company on the date hereof as
then being complete, accurate and in effect.
5. The Amended and Restated By-Laws of the Company, as certified by
an officer of the Company on the date hereof as then being
complete, accurate and in effect.
6. A certificate of good standing of the Company issued by the
Secretary of State of the State of Delaware dated April 13, 1999.
7. Resolutions of the Board of Directors of the Company adopted on
March 12, 1999, as certified by an officer of the Company on
the date hereof as then being complete, accurate and in effect.
8. Resolutions of the stockholders of the Company adopted on March
12, 1999 and April 7, 1999, as certified by an officer of the
Company on the date hereof as then being complete, accurate and
in effect.
9. A certificate of an officer of the Company, dated April 22, 1999,
as to certain facts relating to the Company.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity, accuracy and completeness of all documents submitted to us as
originals, and the conformity with the original documents of all
Board of Directors
April 22, 1999
Page 2
documents submitted to us as certified, telecopies, photostatic, or reproduced
copies. This opinion letter is given, and all statements herein are made, in the
context of the foregoing.
This opinion letter is based as to matters of law solely on Delaware
corporate law. We express no opinion herein as to any other laws, statutes,
regulations, or ordinances.
Based upon, subject to, and limited by the foregoing, we are of the
opinion that the Shares, when issued and delivered in the manner and on the
terms contemplated in the Registration Statement and the Plans (with the Company
having received the consideration therefor as specified in the Plans, the form
of which consideration is in accordance with applicable law), will be validly
issued, fully paid and non-assessable under Delaware corporate law.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on or about the date of this opinion letter, and should not be quoted
in whole or in part or otherwise be referred to, nor be filed with or furnished
to any governmental agency or other person or entity, without the prior written
consent of this firm.
We hereby consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement. In giving this consent, we do not thereby admit
that we are an "expert" within the meaning of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
HOGAN & HARTSON L.L.P.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-8 pertaining to the Trex Company, Inc. 1999
Employee Stock Purchase Plan and the Trex Company, Inc. 1999 Stock Option and
Incentive Plan and to the incorporation by reference therein of our reports with
respect to the financial statements of: Trex Company, Inc. dated January 27,
1999 (except for the first paragraph of Note 1, as to which the date is March
22, 1999); TREX Company, LLC dated January 21, 1999 (except for Note 11, as to
which the date is April 7, 1999, and Note 12, as to which the date is February
8, 1999); and the Mobil Composite Products Division of Mobil Oil Corporation
dated June 24, 1998 included in Amendment No. 5 to the Registration Statement
(Form S-1 No. 333-63287) and related Prospectus of Trex Company, Inc., filed
with the Securities and Exchange Commission on April 8, 1999.
/s/ Ernst & Young, LLP
April 20, 1999
Vienna, Virginia
